US-China trade deal, RBI policy to set mood for market this week

NEW DELHI: The freshly-minted agreement between the US and China to halt tariffs in all probability will set the mood for the market this week.

Last week, the build-up of expectations of a trade truce, Fed chief's dovish undertone on rate hikes, softer oil prices and a stronger rupee gave enough fodder to the bulls.

The Sensex and the Nifty posted gains in all five sessions just gone by, climbing 3.47 per cent and 3.32 per cent, respectively, on a weekly basis.

With this, November turned out to be the best month for the BSE and NSE benchmarks since July, with a monthly gain of 5.09 per cent and 4.72 per cent, respectively.

The coming week will see some key events and macro numbers setting course of the market for the near term. Let's take a quick look.


Trump-Xi smoke peace pipe: Finally, they did. US President Donald Trump and Chinese President Xi Jinping agreed to halt new tariffs as both nations worked on the goal of reaching an agreement within 90 days, the White House said on Saturday. Trump agreed not to boost tariffs on $200 billion of Chinese goods to 25 per cent on January 1 as announced earlier, as China agreed to buy an unspecified but “very substantial” amount of agricultural, energy, industrial and other products, according to a Reuters report.

Both the leaders held high-stakes talks at the G20 summit in Argentina. The White House also said China “is open to approving the previously unapproved Qualcomm Inc NXP deal should it again be presented”.

Trade frictions had emerged as one of the major sticking points for financial markets the world over market in recent times and played a key role in triggering a spell of weakness in emerging markets.

RBI monetary policy: The monetary policy committee of the Reserve Bank of India will meet on December 3-5 for its fifth bi-monthly review of this fiscal to decide on rates. Analysts believe that the central bank may take a pause on hiking rates, considering a slump in crude oil prices and a stronger rupee.

Powell's testimony: Fed chairman Jerome Powell, whose dovish remarks last week came as a big shot in the arm for the market, will appear before the Joint Economic Committee of Congress on Wednesday to testify on the economic outlook. Investors will be clued in to what he says and whether his tone echoes his previous views, which were lapped up as a sign of a softer Fed rate regime ahead.

PMI prints: The Nikkei Markit Manufacturing PMI for November will be out on Monday, with services PMI on Wednesday. Both are important macro indicators that can have a bearing on market sentiment. Manufacturing PMI slightly improved in October to 53.1 from 52.2 in September while that of services rose to 52.2 in October from 50.9 in September. A print above 50 means expansion while a score below that denotes contraction.

Global macros: China's Caixin Manufacturing PMI, Japan's and US' manufacturing data points are some of the other global macro indicators that may have a say in the market direction this week.

Opec meet: Opec and its oil market allies will meet in Vienna on Thursday to decide on the pace of production amid concerns of a supply glut that has kept oil prices on a bumpy track of late. With Saudi Arabia and Russia pumping at record rates, US output surging and forecasts pointing to lower demand in 2019 due to a slowing economy, some analysts are sceptical that the producers will avoid generating a surplus, Reuters reported.

Auto sales numbers: Auto stocks will be in focus this week because of their November sales data. High insurance cost, a rise in vehicle price and liquidity crunch in the NBFC space hit domestic passenger vehicle demand in November. With a marginal growth of less than one percent, the overall passenger vehicle market remained flat for the fifth straight month, ET reported.

Technical outlook: The Nifty on Friday formed a small bearish candle on the daily chart, which resembled an indecisive ‘Spinning Top’. A long bull candle on the weekly timeframe has nullified the bearish candlestick pattern of the past week. This is a positive indication as per the larger timeframe, Nagaraj Shetti, technical research analyst at HDFC Securities said.

"The trend of all periodicities are up with Nifty comfortably surging high above 200-DMA. The supporting indicators are also showing the scope of further upmove now with pharma sector, too, showing signs of reversal. Midcap sector has been consolidating. It is about time we see some participation from the same. The support for the week is seen at 35,640/10,680 & resistance is seen at 36,730/11,050. Bank Nifty would have a range of 26,240-27,400," said Vaishali Parekh, Senior Technical Analyst at Prabhudas Lilladher.