The South Asian Times

16 July 2019 20:45 PM

Equity indices to remain volatile as India votes

By ROHIT VAID

Mumbai, April 14: The Indian equity markets is expected to face a volatile week ahead as the ongoing general election season progresses and India Inc comes out with fourth quarter (Q4) earning numbers.

"India VIX (volatility index) has climbed above 20 levels anticipating higher incoming volatility due to the general election. However realised volatility remains much lower. This means market participants are preparing for stock indices move wildly in the coming weeks," said Sahil Kapoor, Chief Market Strategist-Research, Edelweiss Wealth Management.

"We believe any correction, therefore, is going to be an opportunity to buy. The Indian economy is now bottoming out and monetary policy coupled with better fiscal management will lead to better outcomes ahead."

The second phase of the general election will be held on April 18, when 97 constituencies spread across 13 states and union territories will go to the polls.

"Expectation of present government coming back to power will continue to boost sentiment," said D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors.

But, Aggarwal said, "volatility will continue to rule the domestic market."

Besides the general election, investors will look out for the upcoming Q4 results. Companies such as Reliance Industries, Wipro, Mindtree, HDFC Bank and CRISIL are expected to announce their Q4 earning results in the coming week.

"The current liquidity-driven rally in domestic market may get extended as market is hoping for a continuity in reforms implemented by the last government, benign inflation and increase in scope for further rate cuts," said Vinod Nair, Head of Research at Geojit Financial Services.

"However, a downward revision in GDP forecast by RBI, higher oil prices, global factors and elections will add volatility in market. Additionally, Q4 earnings will also weigh on investor sentiments, consensus expects strong double-digit growth led by financials."

Apart from the Q4 results, investors will look out for the upcoming macro-economic data points -- Wholesale Price Index -- on Monday. The Balance of Trade figures will also influence sentiments. The trade data was released after the close of market hours on Friday.

Even the movement of rupee against the US dollar ie expected to influence trends on the bourses next week. The rupee on a weekly basis stregthened to 69.15-16 per greenback.

"The rupee closed at 69.15 after a see-saw move touching 69.38 on news of Arcelor mittal essar steel money being delayed," said Sajal Gupta, Head Forex and Rates, Edelweiss Securities.

"Crude still remains a key risk amid Libya instability and OPEC cuts. Expect rupee to be a bit weaker going forward and can trade between 68.90 to 69.80."

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors bought scrip worth Rs 4,246.20 crore during the week.

On technical levels, Deepak Jasani, Head of Retail Research for HDFC Securities said: "Technically, with the Nifty bouncing back after recently testing a low of 11,549 points, traders will need to watch if the index can now cross the immediate resistance of 11,710 points for the intermediate uptrend to continue in the coming week."

"A break of 11,549 could take the Nifty down to 11,395-11,456 band," said Jasani.

 

Update: 14 April, 2019

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