 "Dalal Street edgy on fears of rupee weakening")
Last week, the BSE Sensex fell by about three per cent, as the dollar-index strengthened on improvement in the US manufacturing and jobs data. The stronger US economic data has sparked fears the Fed may start tapering its $85-billion bond-buying programme, known as Quantitative Easing (QE)3, by the end of this year. Till recently, most investors were expecting the QE3 rollback to start only by March, triggering fresh foreign institutional inflows into emerging markets, including India. Market participants worry QE3 tapering would dry up inflows and weigh down the rupee.
“The currency will now become a talking point in the equities market. In the last few days, we have seen the rupee showing signs of depreciation. So, markets are now watchful of the Rs 65-levels,” said Daljeet Singh Kohli, head of research, IndiaNivesh Securities. The rupee declined by 1.3 per cent last week.
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Foreign investors remained net buyers at Rs 1,361 crore through the week, while domestic investors were net sellers at Rs 2,859 crore.
Some worry that the weakness in the rupee could be further compounded by oil-marketing companies buying 30-40 per cent of their dollar demand from the markets rather than through the special Reserve Bank of India (RBI) window.
Technical analysts said investors would be watchful of some key support levels, breaking of which could lead to a sharper decline.
“If the Nifty falls below the 6,070 levels by Monday, then it could slip to 5,900. If it sustains at current levels, the Nifty could touch 6,350-levels in the next few sessions,” said Shardul V Kulkarni, senior technical analyst at Angel Broking.
On Friday, the NSE Nifty closed at 6,140 and the BSE Sensex ended the week at 20,666.
Markets are also nervously eyeing the industrial production data for September, which is expected to be in the three to 3.5 per cent range. The data for August stood at 0.6 per cent as opposed to a popular consensus of two to 2.5 per cent.
Tirthankar Patnaik, director, strategist and chief economist, Religare Capital Markets, said, “There will be some correction in the market if the IIP (Index of Industrial Production) numbers are not good. But the inflation numbers will be of higher significance for the equity markets because of the implication on the RBI’s stance on key policy rates.”
Inflation numbers for October are expected to be higher than September’s. Wholesale price inflation is expected to come at around 10 per cent as opposed to 9.84 per cent, while core inflation is expected to be around seven per cent as against 6.46 per cent in September.
Participants are concerned that high inflation numbers could signal a rate hike by RBI in its December policy review.
“Another rate hike by RBI could cause a sharp correction in rate-sensitive stocks, particularly the banking stocks, which had been recovering on good September quarter numbers,” said Kohli.
The week ahead will see State Bank of India (SBI), the largest public sector lender, announcing its results on Wednesday largely expected to be in line with the other public sector banks’ results.
This will also be the first result announcement by the newly appointed SBI Chairman, Arundhati Bhattacharya. The first quarter results after a change in management has traditionally been weak for the bank, analysts said.
Other companies expected to announce results are Coal India, Mahindra & Mahindra, ONGC, Tata Steel and Tata Power, among others.
THE WEEK AHEAD
RESULTS
Tuesday
* Coal India
* Hindalco
Wednesday
* BPCL
* Cipla
* Mahindra & Mahindra
* ONGC
* SBI
* Sun Pharma
* Tata Steel
Thursday
* JP Associates
* Tata Power
EVENTS
Tuesday
* CPI (October)
* IIP (September)
Friday
* WPI (October)
Monday-Friday
* Export-Import (October)