RBI policy, politics and global cues among 9 top factors steering D-Street in the week ahead

NEW DELHI: Strong FII inflows, improving global sentiment on US-China trade talks, steady commodity prices and hope of a rate cut by RBI helped Indian market log gains during the week gone by.

While financial year 2018-19 turned out to be the best in four years, with Sensex logging 17 per cent gain, the equity benchmarks are now eyeing their all-time high levels.

Going into the new week, RBI's policy review and macroeconomic data will be two key factors for the market. “One should keep an eye on Nikkei Manufacturing PMI and RBI’s monetary policy. Auto stocks will be in focus as auto sales numbers for March will be out next week," said Debabrata Bhattacharjee, Head of Research, CapitalAim.

Here is a look at the key factors that can guide the market in the week ahead.

RBI's money policy review
The six-member monetary policy committee of RBI will decide on policy rate next Thursday after its first bi-monthly policy meet of the new financial year. The market is expecting another rate cut as retail inflation remains below RBI's four per cent target. If rates are slashed, bank, auto and realty stocks may see a rally.

Political wind to influence market
Political temperature is soaring as India is set to vote in the general elections in just a few days. While the Narendra Modi-led NDA appears to be enjoying an advantage, recent surveys showed the tide may be ebbing some bit. Citing pollster C-Voter, a Reuters report said the national sentiment graph eased to 15 per cent from the peak at nearly 29 per cent in early March after India retaliated the attack by Pakistan-based terrorists. The report said the agrarian crisis and unemployment issue are back to dominate the political discourse. The prospects of a Modi-led government was the biggest factor that has given a boost to market sentiment in recent weeks. If this belief is dented, it will not augur well for the market.

Pulse of the economy
Nikkei Markit Manufacturing PMI and services PMI for March will be released on Tuesday and Thursday, respectively. The Markit Manufacturing PMI Index rose to 54.3 in February to touch a 14-month high thanks to an acceleration in sales, output and employment. In PMI parlance, a print above 50 means expansion while a score below that denotes contraction.

US-China trade talks
Markets are watching the developments in the US-China trade talks with a lot of interest. When the world is trying to ward off fears of a US recession, an amicable resolution to the US-China trade dispute can offer relief to markets across the globe.

FPI inflows
Recent trend shows FPIs have shown strong faith in Indian equities. As per available data with NSDL, FPIs pumped Rs 48,751 crore into Indian debt and equity markets in March. If the trend sustains, the market may soon top its all-time high levels.

Auto sales numbers
Domestic automobile companies will release their sales numbers for March from April 1. Analysts expect the numbers to remain subdued because of weakness in demand and liquidity crunch. Some companies have increased prices on select models with effect from April 1.

Global macros
Several sets of macroeconomic prints, including eurozone's inflation numbers, China's manufacturing prints and US unemployment data will tell us the health of the global economy. Positive signals from these numbers will bolster the mood of markets.

Crude's course
The biggest factor that influences India's fiscal math- crude oil prices- will be in focus next week as the prices climbed about 1 per cent on Friday, posting their biggest quarterly rise in a decade. Other than the Opec-led supply cuts, US sanctions on Iran and Venezuela helped oil prices rise despite the overhang of a hit on global oil consumption due to a slowdown in global economic growth.

Technical readings
Even though weekly charts indicate that the bulls are holding a tight grip on the market, analysts are advising caution. “Friday’s price action can be read as a cautious sign, but as it is not backed by any sell signal on the lower timeframe charts, things still look advantageous for the bulls as Nifty formed a strong bullish candle on the weekly chart,” said Mazhar Mohammad of Chartviewindia.in.

"Nifty has bounced back strongly from the base made near 10,585, gaining almost 8 per cent, and currently it is in an overbought zone, from where the chances of a small correction or consolidation cannot be ruled out," said Vaishali Parekh, senior technical analyst at Prabhudas Lilladher. BankNifty, too, gained a solid 14 per cent during the month, and is near 30,450. So one needs to be cautious, says she.