Market Factors: Dalal Street, Next Week: Rupee Fighting, CAD and Global Indices

NEW DELHI: The domestic stock market ended the week on a positive note, supported by sound macroeconomic figures and reports that the government would soon take steps to support the deterioration of the rupee and control the current account deficit.

On Friday, the Sensex of 30 stocks jumped 373 points, or 0.99%, to settle at 38,090 while the Nifty50 jumped 145 points, or 1.28%, to close at 11,515.

On a weekly basis, stock indexes posted losses for the second week in a row; the Sensex slipped 299.18 points, or 0.78%, to 38,090 points, and the Nifty 50-stock index of 73.90 points, or 0.64%, to 11,515 points.

The coming week will be truncated. The stock, commodity and currency markets will remain closed on Thursday because of Muharram.

Macroeconomic factors, world indices and rupee movements will be the key factors influencing market developments over the coming week.

"Global market trends in the midst of the trade war, rising crude oil prices and rupee circulation will determine the near-term momentum of the domestic market. However, the long-term outlook remains positive. With GDP growth of 8.2% in the last quarter, a near-normal monsoon and the start of the holidays will boost consumer demand, "said Hemang Jani, head of Sharekhan's board of directors at BNP Paribas.

Here is a list of important factors that will drive Dalal Street throughout the next week:

Stages of the government to curb the fall of the rupee

Last Friday, the government announced measures to limit the fall of the rupee and control the current account deficit. The five measures announced Friday following a meeting chaired by Prime Minister Narendra Modi to review the state of the economy include the removal of the withholding tax on masala bonds – debt denominated in rupee sold abroad – and easing of the external debt regime. The measures unveiled to stimulate capital flows include a review of the mandatory coverage conditions for infrastructure loans and the opportunity for manufacturing entities to avail themselves of external commercial borrowing up to $ 50 million with maturity minimum of one year. The removal of mandatory coverage will reduce demand for dollars for the time being. On Saturday, Finance Minister Arun Jaitley said the government would end the current fiscal year without any cuts to budgeted spending because it is extremely necessary for economic growth. As inflation is generally under control, the government is convinced that its growth rate will be higher than forecast, he said.

The health of the rupee under surveillance

A series of measures announced by the government to control the slippage of the rupee and reduce the current account deficit are positive for the market, but it would be good to wait for more clarity, warned analysts. The market will watch closely the effectiveness of the measures taken by the government in the coming days. The rupee has fallen 11.1% so far this year and hit a record low of 72.92 last week, causing panic in the government and the market. The country's foreign exchange reserves were less than $ 400 billion as of September 9 because of the RBI's efforts to reduce the fall of the rupee. The trade deficit reached its highest level in nearly five years ($ 18 billion in July), but declined slightly to $ 17.4 billion in August.

Trade between the United States and China

Optimism over US-China trade talks collapsed after reports indicate that US President Donald Trump is expected to announce new tariffs on Chinese imports of about $ 200 billion on Monday. Reuters reported. Earlier, Trump said Beijing could have new tariffs on $ 267 billion worth of goods, in addition to what will be targeted this week. If the United States adopts this plan, virtually all imports from China will be subject to tariffs. Until now, attempts to mitigate the trade war have not succeeded. What happens when Donald Trump and Xi Jinping see each other at the UN General Assembly in New York later this month will be a major signal for markets around the world.

Global macroeconomic indices

The decision of the Bank of Japan (BoJ) is expected Wednesday. According to forecasts, the BoJ could maintain its short-term interest rate target at minus 0.1 percent and commit to steering long-term rates around zero percent. In August, core CPI and CPI data for the euro area and the United Kingdom will be released on Monday and Wednesday, respectively.

Technical Outlook: Nifty seems bullish

The Nifty50 formed a bullish bull on the daily chart on Friday. The fact that she maintained her opening gap one day after forming a Hammer model can inspire confidence in traders. "The Nifty50 rode the 11,394 trough, allowing the bulls to stretch their arms for a deeper retracement. Thus, the index can go up to a 61.8% retracement of the previous fall, or 11,565. This will be a key level to monitor potential reversals. Regarding the wave structure, the whole correction is complex. The current withdrawal is part of a corrective structure and should be followed by a downward trend. In contrast, the gap between 11,380 and 11,430 levels will provide key support in a short-term perspective, "said Gaurav Ratnaparkhi, technical analyst at Sharekhan at BNP Paribas.