Rupee movement, trade tensions to set course of equity indices

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Mumbai: Escalating geo-political tensions following further trade protectionist measures, coupled with high crude oil prices and the rupee’s movement against the US dollar will determine the trajectory of the Indian equity markets in the coming week, analysts said.

According to market observers, other factors such as the direction of foreign fund flows along with healthy GDP growth numbers and the upcoming macro-data points are also expected to influence investors’ sentiments.

“The higher GDP growth rate numbers is likely to buoy the sentiments in the markets, though the infrastructure output slowed down and fiscal deficit rose,” Devendra Nevgi, Delta Global Partners Founder and Principal Partner, told IANS.

“The PMI (Purchasing Managers’ Index) and the auto numbers will be closely watched, after the higher GDP growth rate.”

Apart from last week’s GDP growth numbers, trends in global markets and the rupee’s movement against the US dollar will dictate trend of key indices.

“Macro-economic data, trend in global markets, the movement of rupee against the US dollar and crude oil price movement will dictate trend on the bourses in the near term,” SMC Investments and Advisors’ Chairman and Managing Director D.K. Aggarwal told IANS.

In recent days, geo-political developments have pulled the Indian rupee to fresh intra-day and closing lows.

On Friday, the Indian rupee plunged to over 71 — the lowest-ever mark — against the greenback, surpassing the previous record low of 70.85 to a US dollar.

The Indian currency closed last Friday’s trade at a new record low of 70.99-71 per dollar, 25 paise weaker than its previous close of 70.74 per greenback.

Rushabh Maru — Research Analyst at Anand Rathi Shares and Stock Brokers — told IANS: “Strong reading of India GDP data may provide some relief to rupee. However, any appreciation in the rupee would be temporary as importers may rush to cover their unhedged exposure on any appreciation opportunity.

“Exporters are likely to refrain from selling US dollars at this juncture as there are talks of rupee moving towards 72-73 levels.”

Besides the rupee, the direction of foreign fund flows will also set the course for the key indices.

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrips worth Rs 2,028.47 crore during August 13-16.

“Domestic market may see some more consolidation in the near term given sharp rally in last two weeks,” said Vinod Nair, Head of Research at Geojit Financial Services.

“However, we expect the downside is limited given improvement domestic macros and revival in corporate earnings.”

Last week, firm global cues lifted the Indian equity market for the sixth consecutive week as both S&P BSE Sensex and NSE Nifty50 rose by over one per cent.

Accordingly, the S&P BSE Sensex closed at 38,645.07 points, higher 393.27 points or 1.03 per cent from its previous close.

Similarly, the wider Nifty50 on the National Stock Exchange ended last Friday’s trade session at 11,680.50 points, higher 123.40 points or 1.07 per cent from the previous week’s close.