Indian equities have risen recently, enjoying a swift recovery from its March lows, tracking positive trends from global markets. Increasing optimism over a safe and effective COVID-19 vaccine and progress of vaccine trials also helped ease traders' concerns. Investor sentiments were further boosted by a revival in key economic data globally, indicating that economic activity might be stabilising.
Sensex and Nifty extended gains for the third straight session and closed higher on Friday. Where Sensex ended at 36,021 points on Friday with a gain of 2.4 per cent during the week, Nifty closed with a gain of 2.17 per cent at 10,607. Sensex gained 1,104 points in the last 3 sessions, while Nifty climbed 305 points.
In line with the equity market, the rupee appreciated and closed at three months high of 74.64 against the US dollar, tracking weakness in the greenback and gains in the domestic equity market.
Expressing views over the trends investors will focus in the coming week, Ajit Mishra, VP-Research, Religare Broking said," Participants will be eyeing key macro indicators like IIP data, CPI and WPI inflation. Besides, the progress of monsoon and developments on the COVID front will also be in focus."
Here are the top 10 factors that will lead the stock market in the upcoming week:
1. Global cues
Global market trends will continue to dictate the domestic markets, in the absence of any major domestic event. Where Wall Street ended on a positive note before its holiday weekend, concerns over rising US coronavirus cases took a toll on European indices that closed in the red. Ahead of holiday due to US Independence Day, US futures were trading mildly in red.
Asian counterparts, barring SGX Nifty, closed the week higher amid upbeat jobs and economic data.
2. FPI Data
On the back of profit booking and appreciation in the rupee over the last few weeks, foreign portfolio investors have withdrawn a net sum of Rs 3,959 crore from the equities but invested a net Rs 218 crore in debt segment between July 1-3. This translated into a total net withdrawal of Rs 3,741 crore during the period under review.
3. Monsoon trend
Traders said investors will also monitor the movement of monsoon winds and its progress of domestic grounds.
"Out of the 36 sub-divisions across India, till date, 4 have received deficient rainfall, 18 have received normal rainfall, and 14 have received excess rainfall," Kotak Institutional Equities said in its note. "Till July 1, cumulative rainfall was 15.8 per cent above long-term average with the weekly rainfall 0.7 per cent below the long-term average."
4. Key Economic data
Participants will also track macroeconomic signals scheduled to be announced during the week. Investors are likely to watch out and react over India's manufacturing production and industrial production data, scheduled to be released on July 10, 2020.
5. Technical outlook
Nifty has been consistently moving higher in the last few sessions, making higher tops and higher bottoms. As per technical indicators, the support for the index is placed around 10,500 to 10,350 level, its resistance is now at 10,750 and 10,820 levels.
Mishra of Religare Broking said, "It turned out to be a good week for the bulls as the Nifty index surpassed the major hurdle at 10,550 (200 EMA) on the daily chart. We could see some hesitation in the first two sessions but the tone changed as the week progressed, thanks to upbeat global markets."
He added, "We expect Nifty to take a breather around 10,750 level, after the three successive weeks of advances. Though the benchmark is inching higher gradually, the underperformance of the banking pack is still a major concern."
Nifty has retraced 68.2 per cent of the sharp fall seen between January-March 2020, said HDFC Securities in its monthly outlook and added that "On its weekly timeframe, Nifty shows intermediate uptrend intact, however, trades near multiple resistances."
6. Quarterly earnings
On the earnings front, while most of the major result announcements have been published for the quarter ended March 2020, investors will keep an eye on the shares of Indian IT major Tata Consultancy Services that will be reporting its March quarter results on July 9.
"Interestingly, the stock has witnessed tremendous buying interest in the last two weeks and reached closer to its record high before the results," said Mishra of Religare Broking.
"It is expected that a definitive movement in markets may be visible once India Inc. unveils its Q1 FY21 earnings performance with its first-hand analysis of ground-level reality," said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote.
7. COVID-19 trend
In recent trades, the equity markets worldwide expressed optimism on news of vaccine development and better-than-expected economic data across countries. Although, the challenges with respect to rising COVID-19 cases and recovery of economic growth and any extension or resetting of lockdown measures will continue to add worries.
India's COVID-19 tally climbed to 6,48,315 on Saturday with 442 new fatalities, despite India's recovery rate improving to 60.81 per cent. The nation has reported 24,850 new COVID-19 cases and 613 deaths in the past one day.
Meanwhile, WHO reported a record increase in global coronavirus cases on Saturday, with the total rising by 212,326 in 24 hours. Worldwide, the total tally has exceeded 11.1 million on Sunday.
8. Industry monthly outlook
While India's decision for a complete lockdown aggravated both the health and economic crises, the country is slowly coming out of the much-required restrictions. With the lockdown being lifted in a phased manner from June, limitations remain only in containment zones. This should help in recovery in the coming months, suggest experts.
As per industry analysts, nearly all industry indicators rose on a monthly basis in May from record lows of April. Although industry indicators have shown month-on-month improvement with many companies reporting production normalisation, experts still fear slower normalisation of the consumption improvement pace.
9. Economic relief
Besides tracking global cues, investors are also expecting that RBI may unveil more relief measures for some of the stressed sectors of the economy, to help them emerge from the bruising impact of the lockdown.
10. Geopolitical tensions
Experts suggest that geopolitical tensions will also provide more directional moves for the domestic benchmarks. Besides worries of the second wave of COVID-19, US-China trade deal and uncertainties around the Hong Kong issue have led to the fall in demand for equities in recent times and thus, will be crucial for any directional move in the benchmarks. This, along with the India-China border dispute and any fresh escalation in that matter will continue to keep affecting the domestic equity markets.