Markets Next Week: MPC Outcome, Earnings, Macro Data To Give Direction

Indian markets have witnessed first decline in seven weeks for the week ended July 31, 2020 and from the March bottom have recovered a huge 50%, so how will the markets fare in the week to August 7, 2020 shall largely be based on the below factor:

Also, it is worth mentioning that the vaccine hopes have further triggered buying by FPIs in the Indian markets for the second consecutive month in July, with investment estimated at Rs. 3301 crore.

1. Auto sales number:

Markets would first react to sales by auto companies, which have now shown recovery for the month of July when whole of the country is now going through Unlock phase despite rising corona cases which has surpassed 17.5 lakh mark alone in the country.

2. MPC meet:

The RBI's monetary policy committee meet is scheduled from 4th to 6th and there have been mixed opinion on rate cut aspect. There is one view that economic recovery is now the priority and there can be policy rate cut considering that, another view suggest no rate cut as the CPI for the recent month came in higher than the RBI's comfort target, which may nudge the central bank to maintain status quo.

Also, there can be a more likely call made on the loan moratorium or one time loan recast which can be extended for some of the beleaguered sectors if not for all borrower kinds. This would result in volatility for the financial sector stocks, with bank nifty underperforming for some time.

3. Macro economic data:

PMI manufacturing and services data due to be released at the start of the week shall also be tracked.

4. Earnings outcome:

Earnings outcome by some of the large companies such as Tata Steel, Bharti Airtel will also result in stock-specific action.

"We expect market volatility and stock-specific action to continue for a while. Investors would watch out for quarterly results for stock-specific action and development over US fiscal stimulus which could provide some cheer to the markets," Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said.

5. Covid situation on the global front:

Though the market off late has not been paying much heed to Covid 19 situation globally and lately too vaccine development news was rather taken positively, consideration of lockdown by economies such as Europe given the second wave may be worrisome and we can it weigh on the markets.

6. US China tensions:

The tension over the two large economies again surfaced after the US asked China to shut its consulate in the Houston which was later retaliated by China. Now much is to be seen how the situation will further come up.

So, given the current high volatility, investors need to remain sideways and wait for correction before making any fresh call in stocks, also they can partially book profits.

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