Indian Markets Outlook for the week – 23 to 27.Jun.2014
(For Sectorwise Weekly Outlook Watch: www.rupeedesk.in)
Trade in equities is expected to be volatile next week as rollover of positions to the July
series will begin with the current month derivatives series expiring on Thursday. On
Monday, the market will react to the hike in freight rates and passenger fares announced
by the government after market hours yesterday. Effective Jun 25, the government has
increased passenger rail fares by 14.2% and freight rates by 6.4%.
Although the hike in fares and freight rates will impact inflation, market participants view this move as a positive because it will help improve the financial situation of Indian
Railways. WPI inflation is likely to see a marginally larger impact (the railway accounts
for around 35% of freight traffic in India) as the cost of transporting goods such as coal,
cement, oil, steel and food grains will rise.
However, the hikes will improve the profitability of the railways, and hence they are a
move in the right direction. However, a few see the contract expiring closer to 7600
levels provided. National Stock Exchange's Nifty sustains above 7500. "7500 is a very
strong support for Nifty and if this is broken then a sell-off is likely," Traders may not
aggressively roll over their positions as the (Union) Budget is due next month and they
would want to see what the government does. If the index manages to sustain above
7500, then a short covering rally can be seen which will help the index futures expire
close to 7600 levels,
Yesterday, the Nifty ended at 7511.45, down 29.25 points or 0.4% from Thursday.
Intraday, the index briefly slipped below the 7500-mark to touch a low of 7497.30. The
high for the day was 7560.55. S&P BSE's Sensex closed at 25105.51, down 96.29 points
or 0.4%. The 30-stock index hit a low of 25056.18 and high of 25276.31 intraday.
The hike in freight rates is expected to drag down shares of cement, mining and metal, oil
and gas, fertiliser, and logistics companies. Market participants expect the stocks to
witness a knee-jerk reaction as companies may not be able to pass on the hike to
consumers immediately. For cement companies especially, it will be difficult given the
weak demand, but market participants expect the impact to get neutralised over the next
few months as demand picks up.
Banks are expected to trade with a positive bias next week and buying may emerge in
private sector banks. But Kotak Mahindra Bank may take a hit on Monday as MSCI will
exclude it from the Global Standard Index from Jul 8.
(For Sectorwise Weekly Outlook Watch: www.rupeedesk.in)
