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Markets Next Week: Indices May Fall On Poor GDP Numbers

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The markets ended the week higher, thanks to the sharp rally on Monday, following a host of measures by Finance Minister Normala Sitharaman the previous week.

Global markets too were volatile, but, markets got a boost on Thursday and Friday, when there were increasing hopes that China and the US would once again engage over trade talks.

Much of the market movement over the last few weeks has largely had to do with trade talks between the US and China. Each time the US has raised tariffs on Chinese good, stock markets across the world have fallen sharply.

Markets Next Week: Indices May Fall On Poor GDP Numbers
 

In India, there has been significant selling pressure from Foreign Portfolio Investors, which has failed to subside, despite withdrawal of tax surcharge on these investors. They have constantly net sold in the Indian markets in the cash segment, every single day since the Union Budget was announced.

As and when there is some buying from these institutions we could see a sharp rally in stock.

Truncated week to add to volatility

It is also a truncated week as Monday is a holiday for our markets. This means there could be some additional volatility. In all probability the markets would continue to trade in a range for the next few weeks. However, much would depend on global cues. The Nifty has been trading in that range of 10,900 to 11,100 points for some weeks now.

It is unlikely that we will see a break from that range. Global cues would hold the key, especially the trade tariff negotiations between China and the US.

Markets to react to GDP numbers

Indian markets would also react to the GDP numbers, which were not very great. In fact, it was way below analysts expections of 5.7 per cent. At 5%, it was the slowest in 6 years. The government would have to announce some stimulus measures to keep the economy going. There were hopes that some new measures for the real estate and construction sector would be announced sometime this week, however, the same did not fructify.

 

It would not be a surprise, if some additional measures are announced later next week for the housing, real estate and construction sector. This remains a very important sector for employment generation.

Stock that were in the news

Many stocks reacted to news during the week. The shares of IndiaBulls Housing Finance dropped, following the exclusion of the company from the Nifty stocks in Sept. Yes Bank too, which had initially rallied substantially gave-up significant gains, following a downgrade of ratings by Moody's.

Shares of Gruh Finance jumped almost 9 per cent, following reports of a stake sale of 9.2 per cent in the company by HDFC. Shares of Coal India too reacted initially to reports of the government allowing 100 per cent FDI in mining, but later recovered to the latter part of the week.

Overall, we might see markets trading in a range. It would not be a bad idea to deploy cash in select stocks, given the way prices have collapsed. Some of the dividend yielding stocks are now available at very attractive prices.

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