Swinging between encouraging reform announcements and a declining rupee, Indian equities are likely to remain range-bound in the week ahead.
Last week's announcement of a gas price hike had taken the market by surprise. Participants expect some of the optimism to continue to help sentiment from turning too negative in the new week. At the same time, movement in the currency will be keenly watched alongside developments in the global markets, they say. Automobile and cement numbers will also be watched.
"Movement in the rupee is currently dictating the trend of equity markets; followed by performance of global counterparts. Last week, it formed a new all-time low against the dollar at 60.75. Keeping that in mind, we might see a pause in further decline of the rupee in the near future and that will boost the possibility of further rebound," said Jayant Manglik, president (retail distribution), Religare Securities.
Foreign institutional investors (FIIs) have so far bought Rs 72,000 crore since January and sold close to Rs 12,000 crore since June 11, when the rupee's slide began.
However, auto and cement numbers for June, to be announced on Monday, could dent the optimism, say some.
"The monsoon has hit earlier than expected and this has impacted construction activity. To that extent, cement companies will be hit and the expectation is that the numbers are not going to be great," said Amish Munshi, senior fund manager and head of research (equities), Tata Asset Management.
Similarly, auto numbers were unlikely to spring a positive surprise for the market, fund managers said, as the sector has been affected by fuel hikes three times in June.
Global markets may not offer much support.
"Charts in the global market are not positively poised…The outlook for now remains bearish and the scenario is not conducive to buying," said Shardul Kulkarni, senior technical analyst at Angel Broking.
"The resistance on the upside is at 19,500 levels for the Sensex and for the Nifty it will be at 5,860-70. If these levels are crossed, then the indices could cross 19,700-levels and 5,976 level. On the downside, the support levels could be the Friday closing. If that is broken, then the market would resume the downtrend," he added.
The BSE Sensex closed on Friday at 19,395, up 520 points or 2.75 per cent, while the NSE Nifty closed at 5,842, up 160 points or 2.8 per cent.
For the week ahead, analysts said stocks of the coal, power, steel and cement sector could see some gains after the government approved the proposal to set up an independent regulatory body for the coal sector.
