Stock market weekly preview: Global events to dictate trends in F&O expiry week

 Mahesh Nayak        Last Updated: October 26, 2015  | 08:40 IST

Mahesh Nayak, Senior Associate Editor, Business Today
In the past couple of months, there has been a sell-off across all emerging markets by global funds. This clearly indicates reducing risk appetite towards equities, especially because of the slowdown in China, and concerns over US Fed increasing rates.

However, last week's announcement a quantitative easing (QE) by the European Central Bank (ECB) has brought some hope that the rate hike in the US is not round the corner.

Usually, central banks across the globe are on the same page and it's unlikely that the US would raise rates when others are cutting rates and announcing stimulus to give a push to their struggling economies.

Even if the US increases rates, it would just be a token hike and it would be a long staggered rate hike. Though the market doesn't expect the US Fed to hike rates this time round, it will keep a close eye on the Fed chairperson's statement on when it plans to raise rates.

In fact, some quarters in the market feel that until the US Presidential election (scheduled in November 2016), the US won't see a hike in rates. The US Fed meets on Tuesday and Wednesday - October 27 and 28, 2015 - to deliberate on the interest rate decision.

The markets will also react to the news of China easing its policy further by cutting its lending and deposit rate by 25 basis points (bps) with the aim to support its slowing economy. It will also keep an eye on China's fifth plenum from October 26 to 29, 2015, where leaders will announce a draft of their 13th Five Year Plan, a sprawling blueprint that sets the direction for China's economic and social development.

The market will also keep an eye on Bank of Japan's (BOJ) meeting on interest rate decision, which will be held on Friday, October 30, 2015.

Currently, China's slowdown is the biggest concern, and hopes are that central banks worldwide will keep the liquidity tap on to prop up economies around the world.

If the liquidity tap is on, then risk-on sentiment comes back into the market. Already, concerns of liquidity drying up have seen bond yields in Euro-zone trading in negative zone. Foreign institutional investor (FII) flows are the lifeline of the Indian market. If liquidity flows dry up despite strong fundamentals, then Indian equity too will face the brunt and will go down along with its peers in other emerging markets. But today, hopes of stimulus around the globe are expected to keep ample liquidity in the system, thus helping the overall equity market.

The initial public offering (IPO) of Interglobe Aviation, which runs Indigo Airlines, of Rs 3,000 crore and S.H. Kelkar of Rs 500 crore will also be a litmus test for the market.

This week the market is expected to remain volatile ahead of the F&O contract expiry on Thursday, October 29, 2015. Stocks of companies like Bharti Airtel, HDFC, Axis Bank, Lupin, Maruti Suzuki, Ambuja Cements, Dr Reddy's Lab, Vedanta, NTPC and Kotak Bank will remain in focus as they declare their September 2015 ended quarterly results.

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