Indian Markets Outlook for the week – 19.Sep.2016 to 23.Sep.2016
(Positive next week; Fed, Bank of Japan policy meets eyed)
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Share indices are seen positive next week, even as investors wait for the monetary policy decisions of
the US Federal Reserve and the Bank of Japan. Expectations of a rate hike by the US Federal Reserve
at its Sep 20-21 meet have come down to less than 50% after data in the world's largest economy
showed a decline in US retail sales and factory output for August. "If the US hikes rates, we are
looking at a 1-day fall in (the) Indian share market. The Nifty (50) may tank by 100-150 points but
will recover then. While the impact of the US Federal Reserve's two-day policy meeting on Indian
markets will be seen on Thursday, the effect of Bank of Japan's policy will be seen on Wednesday.
Views on the course of action that may be adopted by the Bank of Japan, are mixed. Some traders
expect the bank to launch fresh monetary stimulus, but another section of the market does not see it
easing its accommodative stance further. Yesterday, the Nifty 50 ended at 8779.85, up 37.30 points
or 0.4% from the previous close, and the Sensex closed at 28599.03, up 186.14 points or 0.7%. Next
week, stocks of rate-sensitive sectors such as automobiles and banks, are likely to see buying as the
next Reserve Bank of India's monetary policy draws closer. The central bank is expected to cut
interest rates in October, owing to lower-than-estimated inflation for August and expectations of
normal monsoons this year.
In the Jun-Sep monsoon season so far, the country has received 771.8 mm weighted-average
rainfall, 5% below the normal of 814.2 mm for the period, according to data from the India
Meteorological Department. Automobile and auto-ancillary stocks may also gain as demand is seen
growing during the festival season. Yesterday, the sector was the leading gainer with the Nifty Auto
index ending up 0.5%. Activity in the domestic stock market may be subdued over the next two
weeks owing to the Pitru Paksha period. This is usual for markets and trade is a little subdued during
Pitru Paksha. Pitru Paksha is a 16-day period in the Hindu calendar that is considered inauspicious.
Another sector that might see traction is the pharmaceutical sector. Sentiment for the sector is
positive given the resolution of various regulatory issues, and on account of investors shifting
allocations between sectors. Pharmaceutical companies have been in the limelight and the Nifty
Pharma gained over 2% this week, compared to a near 1% fall in the Nifty 50.
