Mumbai, Dec 31: The stock market would be guided by macroeconomic data and auto sales numbers during the first week of the New Year, say experts. Investors will also be tracking companies’ third quarter results, they added. “The underlying positive fundamentals in domestic market will continue to support the valuations while investors are also looking for the unveiling of Q3 results to see any upgradation in earnings growth.
“On the global front investors will look forward to the movement of oil price and Fed’s forecast of three additional rate hikes in 2018. Focus on upcoming Union budget and government’s reforms will direct investors to turn sector/stock specific. Additionally, any pick up in capacity utilisation and recovery in capex cycle will add impetus to the market,” said Vinod Nair, Head of Research, Geojit Financial Services.
PMI data for the manufacturing and services sectors which are due this week would play a key role in setting the market trend. “Automobile sales data will be out and markets will be critically examining the same since it can further lead the momentum,” said Mustafa Nadeem, CEO, Epic Research. For 2018, one of the most important aspects will be the quarterly results, Nadeem added.
“Post state elections, all eyes are on Budget 2018. The next budget is expected to be focused on improving rural economy and would be an ideal opportunity for the government to set its roadmap for alleviating rural distress,” said Arun Thukral, MD and CEO, Axis Securities.
Meanwhile, Overseas investors have pulled out close to Rs 5,900 crore from domestic equities this month, with widening fiscal deficit and higher crude prices making market participants cautious on macro-economic front.
In spite of December performance, foreign portfolio investors (FPIs) ended the year with a net inflow of over Rs 51,000 crore.
Market experts, however, believe FPIs may not be able to repeat this showing in 2018 as withdrawal of liquidity and rate hikes in developed economies pick up.
According to the depositories data, FPIs withdrew a net Rs 5,883 crore from equities during December.
However, such investors had put in Rs 2,350 crore in the debt markets during the period under review.
The outflow comes following an eight month high inflow of Rs 19,728 crore in November, mainly on account of the government’s plan to recapitalise PSU banks and surge in India’s ranking in the World Bank’s ease of doing business.
This also marked the highest net investment by FPIs since March, when they had poured in Rs 30,906 crore in the equity market.
“Rising crude prices and widening fiscal deficit have prompted them to adopt a cautious stance. In addition to that, appreciating rupee and rising domestic markets too provide a good profit booking opportunity to them, especially before Christmas and New Year,” said Morningstar India’s senior analyst manager (research) Himanshu Srivastava.
As per the recently released data, India’s fiscal deficit rose to 96.1 per cent of the full-year target by the end of October. The fiscal deficit data, which was released on November 30, overshadowed a resounding GDP growth of 6.3 per cent for September quarter, which was also released on the same day.
Overall, it has been a tremendous journey for the Indian equity markets in the calendar year 2017. After taking a break from buying into Indian equities in the months of August and September and returning cautiously in October, FPIs’ bought Indian equities in abundance in the month of November. However, they withdrew funds in this month.
“Given 2019 would not be far, the expectation of some other economic reforms from the government would be high. But the major for FPIs going ahead would be to see growth coming back in the domestic economy, which has not yet picked up contrary to the expectation,” Srivastava added.