Macroeconomic data points and global trends mainly from the US-China trade conflict would drive the equity markets in a holiday-shortened week ahead, analysts said.
Stock markets will be closed on Monday for 'Ganesh Chaturthi'.
Official data released after market hours on Friday showed that India's GDP growth slipped to an over six-year low of 5 per cent in the June quarter of 2019-20, hit by a sharp deceleration in manufacturing output and subdued farm sector activity.
"The continuation of the slowdown in GDP growth was expected but the 5 percent growth in Q1 is worse than expected...GDP growth figures will pick up in Q3 and Q4 benefitting from the low base of previous financial year.
"Also the rate cuts by the RBI will act strongly in Q3 and Q4 since monetary policy impacts with a lag of 2 to 3 quarters. We need structural reforms like labour and land market reforms to stimulate and sustain growth," said V K Vijayakumar Chief Investment Strategist at Geojit Financial Services.
"The week ahead would be lackluster and there will be a dearth of triggers from the corporate side, therefore international triggers could be the driving factor," said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote.
Meanwhile, the government on Friday unveiled a mega plan to merge 10 public sector banks into four as part of plans to create fewer and stronger global-sized lenders as it looks to boost economic growth.
Deepak Jasani, Head of Retail Research, HDFC securities said, "The announcement of PSU bank consolidation is welcome and a good first step in sustainably turning around the PSU banks. The government has accelerated the pace of reform announcements over the past few weeks pushed by the slowdown in the economy and emboldened by the recent RBI fund transfer."
According to Anusha Raheja, BFSI Research Analyst at LKP Securities, the merger announcement would change Indian banking landscape for the better. Various other governance reforms announced with respect to strengthening PSU boards will address their key legacy issues and bring them on par with private peers, he added.
Markets would also await PMI data for the manufacturing and services sectors which would influence trading sentiment, analysts added.
Also, auto counters may see increased activity post monthly sales data announcement.
The country's largest carmaker Maruti Suzuki India on Sunday reported a 32.7 per cent decline in sales at 1,06,413 units in August, while Mahindra and Mahindra reported a 25 per cent fall.
Investors would also monitor other key factors such as movement of rupee, crude oil and investment trend by overseas investors.
On the global front, participants would track developments related to the US-China trade tiff.
Over the past week, the Sensex advanced 631.63 points or 1.72 per cent.
Disclaimer: No Business Standard Journalist was involved in creation of this content
