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Informist, Friday, Nov. 8, 2024

By Anjali Singh

MUMBAI – Headline equity indices are likely to move in a range next week as major triggers such as the monetary policy outcomes of two major global central banks and the US presidential elections are behind, analysts said. Some analysts are also unsure about the direction of the market as investors are factoring in weak domestic cues such as expensive valuations and the slowdown in earnings growth.

On Friday, the Nifty 50 ended at 24148.20 points, down 51.15 points, or 0.2%, and the BSE Sensex ended at 79486.32 points, down 55.47 points, or 0.1%. The Nifty 50 is seen moving between 23800 points and 24500 points next week, Nandish Shah, a senior derivatives analyst at HDFC Securities said. "We will pay close attention to the India VIX, as a close below 13 levels will likely accelerate positive momentum," Brijesh Ail, head of technical and derivatives at IDBI Capital Markets and Securities, said. The India VIX closed 3.2% lower at 14.47 Friday.

After the US elections, investors are assessing the changes in the policies that may come under US President-elect Donald Trump. There are expectations Trump's re-election may result in higher US earnings through likely corporate tax cuts, higher tariffs on imports into the US, and higher US fiscal deficits, Kotak Institutional Equities said in a report. "The former two will be a negative for (equity markets) in general, and the latter will result in eventual US dollar weakness after the initial euphoria," the brokerage said.

The consistent selling by foreign investors after the record outflows in October will keep investors cautious. FIIs have net sold equities worth nearly INR 200 billion in November so far. This, along with a slowdown in earnings and the disappointing outlook by companies has held back the domestic market from rising unlike some of its global peers. Some global indices rose Friday after the US Federal Open Market Committee and the Bank of England cut their respective key rates by 25 basis points each. Rate cuts are positive for emerging markets like India in the long run, but they would remain sluggish in the short term due to the continuous outflow of foreign funds, Ajit Mishra, senior vice-president of research at Religare Broking, said.

"The US Fed rate cut failed to enthuse local investors as the undertone remains caution with a negative bias," Prashanth Tapse, senior vice president of research at Mehta Equities said in a note. A sudden and sharp rise in the 10-year US Treasury yield Wednesday also weighed on sentiment. Though the 10-year US Treasury yield eased by 13 basis points to 4.30% from Wednesday, analysts believe it is still high and is concerning for the market. 

Market watchers await the Jul-Sept earnings of Asian Paints, due Saturday. The September quarter is likely to be the third successive challenging quarter for the paint maker, as a prolonged monsoon season reduced retail demand for premium decorative paints. The subdued demand and pricing pressure led to weaker sales realisations and this could be reflected in Asian Paints' bottom line for the quarter.

Investors will also assess China's fiscal policy announced Friday. The announcements were disappointing, Wall Street Journal said, quoting Allan von Mehren, chief economist at Danske Bank. Beijing announced a 6 trillion yuan local government debt swap programme aimed at getting hidden debt on balance sheets to improve transparency and lower debt-servicing costs, von Mehren said. Officials said local governments' hidden debt will decline to 2.3 trillion yuan from 14.3 trillion yuan due to these measures. China may still be awaiting signals from the US on the tariff front, von Mehren said.  End

Edited by Saji George Titus

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