Mumbai, The key Indian equity indices may slide further in the coming week as the prevailing India-Pakistan tensions along with high global crude oil prices are expected to weigh heavy on investors’ sentiments.
Analysts predict, continuation of investors’ negative reaction to the rising India-Pakistan tensions after a major terror strike took place in Jammu and Kashmir and any further outflow of foreign funds.
In addition, the rupee’s depreciation against the US dollar and dynamics of the emergency declared by President Donald Trump over the funding of a southern border wall will hamper any upmove.
“Geo-political tensions within our neighbourhood will keep the market on edge,” said Deepak Jasani, Head of Retail Research for HDFC Securities.
“Though terrorist attacks produce mildly negative price effects, markets typically recover the lost ground soon, unless there is an increase in hostilities.”
According to Sahil Kapoor, Chief Market Strategist, Research, Edelweiss Wealth Management: “Nifty is now nearing a crucial support at 10,600-10,650 points range, a breakdown of this range can result in a fall towards 10,350 points levels.
“Global rally has provided little support with Indian markets grappling with its own set of problems in a once again deteriorating trade deficit, fumbling fiscal revenues and tight liquidity. Expect some consolidation which will be succeeded by further down move.”
Apart from the India-Pakistan tensions, crude oil prices which have lately been around the $62-65 per barrel-range are expected to impact investor sentiments.
Further rise in oil prices have potential to inflate India’s import bill. The surge has already pushed the cost of petrol in the national capital to Rs 70.60 per litre.
“Crude oil prices will be in focus as any further rise in prices is expected to escalate macro concerns of the country,” said Vinod Nair of Geojit Financial Services.
“Expecting the current volatility in the market to continue further with no major positive triggers due for next week and 10,500 to act as a crucial support zone for the market.”
Besides, the rupee’s price movement against the US dollar will also be crucial for the market, especially in the backdrop of a continuous outflow of foreign funds.
“Geo-political risk premium (India-Pakistan tensions) post Pulwama terrorist attack along with high crude oil prices and trends of oversees Dollar will impact the rupee-dollar equation next week,” Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.
“Currently, all these factors are negative for the rupee which could see depreciations over 71.80-mark, after which we can expect an intervention by the Reserve Bank of India (RBI).”
The rupee is expected to be in a range of 71-71.80 in the coming week.
On a weekly basis, the rupee appreciated by 9 paise to close at 71.22 against the US dollar from its previous close of 71.31 per greenback.
Foreign fund outflows during the week also weighed the equity indices. Foreign institutional investors (FIIs) sold stocks worth Rs 2,485.09 crore in the week ended Friday.
Additionally, global cues like the US-China trade talks, declaration of a national emergency in the US and international macro-economic data points will further steer the Indian markets.
On technical charts, Nifty might correct further to the immediate support levels of 10,613-10,583 points.
“The 10,583 points support will be a crucial level to watch in the coming week as a close below that could lead to a sharp fall towards the next support of 10,333 points,” Jasani said.
Last week, both the key Indian equity indices — S&P Bombay Stock Exchange (BSE) Sensex and the NSE Nifty50 — declined sharply on the back of foreign fund outflows and rise in crude oil prices.
Consequently, the S&P BSE Sensex declined 737.53 points, 2.02 per cent, over the week to end at 35,808.95 points.
The broader NSE Nifty50 finished at 10,724.40, down 2 per cent or 219.2 points from its previous week’s close.
