Subdued consumer sentiment, lower growth, credit crunch due to tight liquidity conditions and rising stress, especially in NBFCs, will continue to hurt sentiment
Domestic equities may stay volatile in the truncated week as the overall trend in the short-term remains bearish despite key benchmark indices staging a smart recovery in the previous week, say market participants.
Stock markets will remain shut for trading on Monday (August 12) and Thursday (August 15) for Eid and Independence Day.
Anoop Bhaskar, head – equity, IDFC AMC, said the overall sentiment, on the domestic front, remains negative on account of subdued consumer sentiment, lower growth, a credit crunch due to tight liquidity conditions and rising stress, especially in NBFCs.
TOUGH MARKET
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- Subdued consumer sentiment, lower growth, credit crunch due to tight liquidity conditions and rising stress, especially in NBFCs, will continue to hurt sentiment
- The market is waiting for the government to provide some relief with regards to FPI surcharge and stimulus for the auto sector
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"Indian equities corrected meaningfully post the Union Budget 2019 announcement on July 5, given the uncertainty emanating from a couple of proposals. The monsoon season has been disappointing with June-July deficit at 9% of long-period average (LPA), albeit improving from nearly 33% deficit in end June. Despite the doom and gloom, the only silver lining for investors is reasonable valuations, especially for small and mid-caps," Bhaskar said.
After four consecutive weeks of decline, the markets witnessed a rebound last week, bolstered by a 35 bps rate cut decision by the RBI and reports of the government likely to hold discussions with foreign portfolio investors on a possible rollback of higher taxes and LTCG on equity held for three years.
Mustafa Nadeem, CEO, Epic Research, said, the volatility may continue to hurt while the trend overall is still bearish in the short term.
"It is important to see if this rebound can sustain domestic and global headwinds. We maintain a cautious stand on the rebound," he added.
Analysts are also of the view that the US-China trade war remains a major concern on the global front, which does not seem to get resolved soon. The US Fed cut rates for the first time in a decade, but the street was disappointed by the quantum of 25 bps and relatively hawkish commentary. Besides, the continued tension in the Gulf region is putting pressure on the world market.
Romesh Tiwari, head of research, CapitalAim, said "The market is waiting for the government to provide some relief with regards to FPI surcharge and stimulus for the auto sector. For the week, auto, real estate, pharma and FMCG stocks could move upward."
Dharmesh Shah, head – technical, ICICI Direct, too, is of the view that in the truncated week, the index is expected to consolidate in a broad range of 10900-11300 levels with stock specific action.
"Any throwback towards 11000 levels, therefore, should be used as an incremental buying opportunity to accumulate quality mid-cap stocks to ride up move towards 11300," Shah said.
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"Indian equities corrected meaningfully post the Union Budget 2019 announcement on July 5, given the uncertainty emanating from a couple of proposals. The monsoon season has been disappointing with June-July deficit at 9% of long-period average (LPA), albeit improving from nearly 33% deficit in end June. Despite the doom and gloom, the only silver lining for investors is reasonable valuations, especially for small and mid-caps," Bhaskar said.
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