Indian Markets Outlook for the week – 16 to 20.Jun.2014
Global developments will be key for
Indian share indices next Week as geopolitical
tensions in Iraq triggered a selloff
across global equities yesterday. We will also take
cues from the outcome of US Federal
Open Market Committee's two-day policy meeting
on Tuesday and Wednesday. The week
will begin with the release of Wholesale Price
Index-based inflation data for May on
Monday.
According to a Cogencis poll, the WPI
inflation rate is likely to rise to 5.3% from 5.2% in
April, due to statistical impact of a
low base and lingering effects of high food prices.
The 1.09-rupee-per-ltr increase in
diesel prices during May will also intensify upward
pressure on inflation. Yesterday
'Friday the 13th', equities witnessed across-the-board
selloff, bogged down by the rupee,
which hit a one-month low and global crude oil
prices, which rose to a nine-month
high amid the civil war in Iraq. If the tensions in Iraq
show no signs of abating, indices may
see some more selling. Indices are likely to
remain under pressure depending on
how long the Iraq crisis lasts. The market has run
up ahead of fundamentals in the last
few months and so, such corrections happen.
That's when the convictions surrounding
expectations get challenged.
Indices had run up over 20% since
March on India election-related euphoria and hopes
that the new government will push
economic reforms. With the markets having
witnessed sharp gains, the scope for
compression in multiples is very large. For further
gains, it is very important for the
index to cross the 7700 mark decisively. Yesterday, the
Nifty ended at 7542.10, down 107.80
points or 1.4%. Intraday, the index fell 1.6% to
touch a low of 7525.35 and rose
substantially to touch a high of 7678.50. The S&P BSE
Sensex closed at 25228.17, down
348.04 points or 1.4%, after hitting intraday low of
25171.61 and a high of 25688.31.
Rate-sensitive stocks may witness
further profit-booking next week while defensive
stocks may gain if the rupee weakens
further. Monday, stocks of Idea Cellular may rise
as the Reserve Bank of India has said
that foreign institutional investors can now buy up
to 49% in the telecom
company.