Q1 earnings, F&O expiry among key factors that may guide market next week

NEW DELHI: No-confidence motion against the Modi government, fresh fall in the rupee, poor macro data in the form of rising inflation as well as widening trade deficit and global trade war tensions influenced market sentiment in the week gone by.

Volatility persisted with equities witnessing see-saw trade, although, in the end bears had the last laugh.

On a weekly basis, the BSE Sensex lost 0.12 per cent while NSE's Nifty50 index shed 0.07 per cent to settle at 36,496 and 11,010, respectively.

Let's take a look at the major factors that are likely to steer market in the week ahead:

Next batch of earnings: A slew of big names are slated to release their Q1 report cards during the week.

ACC, Hindustan Zinc and Granules India are slated to release their numbers on Monday. Asian Paints, Borosil ans Symphony will announce their numbers on Tuesday. BHEL, Canara Bank, HCL Infosystems, Hero MotoCorp and PVR will announce theirs on Wednesday.

Telecom major Bharti Airtel, Biocon, Dr Reddy's, ITC, Maruti Suzuki, Tata Power, Tata Coffee and YES Bank are scheduled to announce their June quarter earnings on Thursday. Bank of Baroda, HCL Tech, ICICI Bank, M&M Finance will declare theirs on Friday.

F&O expiry: Trading is expected to be volatile as traders will roll over positions in the F&O segment from the near month July 2018 series to August 2018 series. The July 2018 F&O contracts will expire on Thursday.

Brokerage Emkay Global in a report said, FII positioning has been reduced, and they have increased their Long position by 59 per cent and have reduced Short position by 21 per cent. Also, Nifty FII long short ratio is 1.15 times against 0.64 times of beginning of July series. FIIs have covered their short positions and decent long position is still there. Considering these, it expects Nifty roll level to go up from here.

GST-linked stocks: The GST Council on Saturday slashed tax rates on a number of products, ranging from paints, white goods to footwears. The Council, headed by Interim Finance Minister Piyush Goyal, lowered indirect tax slab on products such as paints, leather goods, bamboo flooring, stoves, televisions and washing machines from the highest rate of 28 per cent to mostly 18 per cent.

The tax rate on ethanol blended with petrol, footwear costing up to Rs 1,000 and fertiliser grade phosphoric acid has been cut to from 12 to 5 per cent, Goyal said.

This apart, the minister announced that sanitary napkins will be exempt from GST. Sanitary napkins are taxed 12 per cent tax under the one-year old GST regime, which attracted serious criticism from different quarters.

Rupee: Movement in the rupee will be keenly watched by the investors. On Friday, the currency hit a fresh record low of 69.12 against the US dollar before recovering 21 paise to close at 68.84. Deteriorating domestic macro scenario coupled with global uncertainty shocks could continue to keep the rupee under severe pressure in near term.

Impact of no-confidence vote: Stocks are likely to react positively after the government comfortably defeated the no-trust vote in the Parliament late Friday. The motion was defeated with 325 votes against it while 126 voted in favour.

HDFC AMC IPO: The much-awaited IPO by HDFC AMC will be open for subscription during July 25-27. The company has fixed a price band of Rs 1,095-1,100 per share for its initial public offering (IPO), through which it is estimated to garner Rs 2,800 crore. HDFC AMC operates as a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments.

ECB policy meet: The European Central Bank (ECB) is slated to meet for monetary policy next week with decision due on Thursday. It is widely expected to leave rates unchanged. Reports say ECB chief Mario Draghi could speak on the ongoing trade spat and its possible impact on both European and global growth during his presser.

US GDP data: The GDP data for the second quarter will be released on Friday. Recent US Federal Reserve minutes highlighted that the US economy continued to look strong. Economists predict GDP expanded at a 4.2 per cent annualised rate, compared with a 2 per cent increase at the start of the year, Financial Times reported.

Tech chart: The Nifty, in the week gone by, traded in a rangebound manner and ultimately posted a negative weekly close. In terms of the bar patterns, it formed an Inside bar along with a Doji pattern on the weekly chart. This shows indecision in the minds of market participants, say experts.

"The detailed structure shows that the index has formed a flat correction over last few sessions. Alternately, the structure can take the form of a triangular pattern if the consolidation continues going ahead," says Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas.

Nevertheless, the outlook continues to be positive from short-term perspective with 11,078-11,100 as a key target area. On the downside, 10,935-10,925, which is the lower end of the consolidation, shall be the crucial support zone to watch out for, Ratnaparkhi says.

Other factors: Progress in the monsoon, global markets trends, trade war tensions, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) and crude oil prices movement will also dictate the trend on the bourses next week.