FIIs outpace DIIs since election results; what to expect after Budget and key factors to guide the market next week?

Last week, the Indian equity markets ended with limited gains amid profit booking ahead of the budget and mixed economic data. The coming week will have the mega event of Union Budget, which will keep the markets buzzing through the week.  

There will be lot of sector-specific moves based on the Budget announcements with lot of expectations from the finance minister. The Monsoon Session will start on July 22 and the Union Budget will be presented by Finance Minister Nirmala Sitharaman on July 23.  

Foreign investments trends: Data available with ACE Equity shows that on Friday (July 19), DII have sold equities worth Rs 461.5 crore, on the other hand FIIs have invested Rs 5,053 crore in the Indian stock markets. 

The data also highlighted a key trend that since June 4 when the election results came, FIIs have invested Rs 55,160 crore in Indian equities till July 19. While DIIs have invested Rs 27,498 crore in the same duration. 

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “FPIs were consistent buyers in July so far with buying picking up during the week ended July 19. Till July 19, FPIs have invested in equity worth Rs 30,771 crore. Investment in debt during this period stood at Rs 13,573 crore.   

During the fortnight ending July 15 FPIs were buyers in autos, capital goods, healthcare, IT, telecom and oil and gas, he added. A notable trend was the lack of buying in financial services, which partly explains the poor performance of financial services in July so far. 

“If the recent trend of weakness in dollar and bond yields persist FPIs are likely to continue their buying in the market. Domestic and foreign investors are keenly watching for possible tweaks in the long-term capital gains tax in the Budget to be presented on July 23,” Vijayakumar said. 

Key economic releases next week: HSBC Composite PMI Flash, HSBC Manufacturing PMI Flash, HSBC Services PMI Flash data will be released on July 24. F&O July series expiry is slated on July 25. Market participants will also be eyeing Bank Loan Growth, Deposit Growth and Foreign Exchange Reserves data on July 26.  

Major quarterly results: Further, in the ongoing earning season, investors would first react to results of Coforge, Bajaj Finance, Hindustan Unilever, Mahindra and Mahindra Financial, Axis Bank, Bajaj Finserv, Bajaj Holdings, CG Power and Industrial Solutions, Jindal Steel and Power, Larsen and Toubro, Adani Green Energy, Ashok Leyland, Cyient, Nestle India, Tech Mahindra, Cipla, Indusind Bank, Dr Reddy's Laboratories, ICICI Bank etc. 

Market outlook: Prashanth Tapse, Senior VP (Research) at Mehta Equities said, “Markets plunged in the last hour of trade as key benchmark indices fell 1% on broad-based profit-taking. Going ahead a high amount of volatility is expected given the fact that we have the budget rollout and F&O expiry rollover next week. Technically, Nifty has support at 24,325-24,185 levels, while it faces resistance at 24,840-25,001 zones 

US market data: On the global front, investors would be eyeing few economic data from world’s largest economy the US, starting with Chicago Fed National Activity on July 22 followed by Redbook, Existing Home Sales, on July 23, S&P Global Composite PMI Flash, S&P Global Manufacturing PMI Flash, S&P Global Services PMI Flash, on July 24, Durable Goods Orders, Initial Jobless Claims, on July 25, Core PCE Price Index, Personal Income, Personal Spending, and Baker Hughes Oil Rig Count on July 26. 

Budget expectations: According to Sanjay Sinha, Founder at Citrus Advisors, this budget is expected to outline the 5-year vision of the Government and a roadmap to achieve it. It is expected that there will be a lot of emphasis on infrastructure and job creation. 

All eyes will be on the allocation for defence, roads, railways and ports. The recent sectoral rally indicates that a lot of expectations have already built up around this space. A let down could bring the markets down in general and these sectors in particular.  

“The market is also praying that the capital gains and STT will not be tinkered with.  On the positive side, there is a very strong possibility that the income tax slabs will be raised and maybe some more relief will be granted via raising the amount of standard deduction and relief on home loan interests” Sinha said.