We expect Indian markets to remain impulsive during the week reacting to the announcements of domestic Services and Manufacturing PMI numbers. Rise in Chinese PMI has already enthused the Indian markets in the previous week. PMI numbers above 50 for India would provide a breather for the Indian bourse that were reeling under pressure last week. The manufacturing PMI in May was at 51.4 while Services PMI stood at 50.2. Overall, we expect the markets to remain range bound for the week. A pre-budget rally in certain sectors is also likely. Markets will also react to how circumstances in the Middle East and North Korea unfold.
The Financial Stability Report by the RBI warned of higher NPA risk for the domestic banking sector for FY15 compared to FY14 due to a slower moving economy amidst high inflation. This could put the banking stocks under pressure. Consequently we could see some corrections in this sector, especially in the PSU segment.
Engineering exports are expected to cross $70Bn in FY15, increasing by 15% over the previous year, as demand in key markets such as the US and the UAE is on a rise. This will be positive for the Engineering & Construction stocks.
The extension of excise duty concessions on auto and consumer durables are likely to translate into positive movement for auto, auto ancillaries and consumer durable stocks. Oil and Gas stocks are likely to remain under pressure as the decision on gas price hike and LPG subsidy are not expected any time soon.
On the global front, the hopes of US economic recovery are expected to keep the markets in the positive zone. The rise in China’s Preliminary Manufacturing PMI showing fresh signs of strength in June, has already impacted the Asian and western markets positively. The positive effect on Asian stocks is likely to continue. Japanese stocks are expected to remain firm on stronger-than-expected domestic consumption offsetting the impact of a sales tax hike amidst lift in sentiments due to recovering U.S. economy.
However, situation in Iraq continues to remain a cause of concern. Besides, the new developments in North Korea on weaponry front could increase its tension with the US. All these have the potential to spook the investors and keep the world markets volatile. Under such conditions, the courses of the global markets will be determined by an array of important economic data announcements across the globe, that are expected during the week. Some of the important data announcements include the US Initial Jobless Claims and Unemployment Rates, US Manufacturing and Services PMI, EU Unemployment Rates, EU GDP growth, UK Mortgage Lending Rates and Japan’s Industrial Production. All of these will determine how the world markets take shape in the coming week
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(Working as Head-Research at Eastern Financiers Ltd, am a post graduate in commerce from Calcutta University, and have gained wide experience in the last 18 years. Prior to joining Eastern Financiers, I have gained in depth knowledge of the Financial Markets while working with Capital Market Publishers, Lohia Securities & CD Equisearch. As head of the Equity Research Wing, I appear regularly as Guest Analyst at CNBC, Awaaz, CNN-IBN, NDTV Profit , Zee Business,Bloomberg UTV, ET Now & R Plus.)