This month, the market remained flat.
These were driven by multiple factors:
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What Were the Factors?
1. RBI’s monetary policy committee unanimously voted for interest rate hike but with a neutral stance, which boosted up the beginning of the month
However, due to muted numbers for domestic activity, the cheer could not continue for long and the weakening rupee against the dollar started to erode.
2. As the month progressed, investors started to become more cautious.
Organization of the Petroleum Exporting Countries (OPEC) had a meeting to decide the roadmap for oil production output and this gained renewed interest from institutional investors, as it provided relief to the beaten-down stocks.
3. Volatility in the rupee and crude price, along with pressure in the small and mid-cap space continued and got intensified with a new chapter of trading tension between the US and China.
This resulted in bears taking charge of the market during the last week.
What Do We Predict?
We believe the trade tension along with the uncertainty around 1Q financial performance of India Inc, will continue to make the market volatile.
From the IPO market, the upcoming month will witness listing of fresh stocks, namely- chemical manufacturer Fine Organic Industries and railways consultancy firm RITES.
In addition, here are some of the factors that will keep investors and traders busy over the coming weeks:
The rupee (INR) has gone down from the past couple of weeks and touched a new low of 69.09 against the United States Dollar (USD) on account of rising crude oil price and stronger demand from exporters and banks.
We believe that the rising crude price, political risk in the pre-election year and concerns relating to inflation with slipping fiscal deficit is likely to hurt the rupee which could have a high impact on the equity market.
With the recent increase in supply by OPEC and its allies at their recent meeting, crude oil prices are expected to increase.
However, with unplanned disruption in Canada, Libya and Venezuela, crude oil prices may rebound to higher levels.
India is the world’s third-largest consumer of oil after USA and China and over three-fourths of the oil consumed by India, is imported.
Thus, soaring oil price is likely to impact the price of raw materials for most industries that are likely to impact equities.
3. Automobile Sales Data
Automobile companies such as Maruti Suzuki, Tata Motors, TVS Motor, Ashok Leyland, Bajaj Auto, etc. are likely to release their sales data for 1QFY19 in the first week of July 2018.
These numbers are likely to impact the price of stocks and the overall market, as it indicates consumer perception to a great extent.
4. Macro Data
Macroeconomic data such as Nikkei Manufacturing Purchasing Managers’ Index (PMI), along with consumer inflation for the domestic economy in USA is likely to be released during July 2018.
This will mostly keep the market volatile over the month.
What Does the Technical Outlook Say?
The Nifty 50 index closed the June series below 10,600 levels on Thursday (June 28, 2018).
The July series started with a bang when Nifty sharply increased over 10,700 on Friday (June 29, 2018). While it was a brilliant start to the month, the bears continue to dominate the market.
Technically, we believe that the market could see a strong rise beyond 10,900-11,000 level, but until then, the market is likely to remain in the range of 10,500 – 10,900.
Global Point of View
Lastly, from the perspective of global market manufacturing, The Purchasing Managers Index (PMI) for countries like Japan, China, Europe and USA for June is likely to increase during the first week of July, which could show some sign of volatility.
In addition, data such as USA Auto Sales, along with US FOMC minutes are likely to be released, which may add to global volatility and impact our economy as well
In times of uncertainty, we advice investors to invest in quality stocks or shift their focus to mutual funds, that are fundamentally sound.
Disclaimer: The views expressed here are of the author and do not reflect those of Groww.