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India’s stock markets are looking to consolidate and find its level after a heady surge in recent weeks that led to the benchmark Sensex hitting all-time highs around Diwali. Macroeconomic data expected this week will be keenly watched.
“The markets have touched a new high and some near-term consolidation is likely,” says Vaibhav Agrawal, vice-president of research, Angel Broking, about the possible course of equities.
Last week, the Sensex fell for all of the four trading sessions after closing at a lifetime high of 21,239 points last Sunday in a special trading session to usher in Samvat 2070, going by the Hindu calendar.
In the last four sessions, the Sensex came off by 573 points between the 21,239 points at the start of the week and the 20,666 level the benchmark index closed on Friday, a fall of 2.7% over the week.
“I think that there will be volatility in the broader markets,” says Dipen Shah, head of private client group research, Kotak Securities, about market movement going forward.
A lot will depend on macroeconomic data concerning India’s growth and exports amid political uncertainties ahead of elections. The high fiscal deficit is a worry for international credit agencies.
Global rating agency Standard & Poor’s on Thursday affirmed its sovereign credit rating on India, but retained its negative outlook on the economy. S&P has noted that it may lower the rating to speculative grade next year if the government that takes office after the general election does not appear capable of reversing India’s economic slowdown through measures involving fiscal discipline.
On the macroeconomic front, the government is due to unveil industrial production data for September 2013 and inflation figure based on the consumer price index for October 2013 on Tuesday, while foreign trade data are expected on Monday.
“Upcoming data on trade, production and inflation during the week is expected to determine market direction,” says Agrawal.
The sentiment in the equity markets is likely to be further supported by indications on global liquidity remaining benign as the European Central Bank has reduced its policy rate further on the heels of US Fed’s postponement of its tapering of QE3.
Shah feels that investors may consider stocks in IT, media and private sector banks as investment options.