The downward trend in domestic equities seems likely to persist for another week. This is due to investors potentially booking profits in response to US Federal Reserve Chairman Jerome Powell’s hawkish comments on interest rates.
The coming week will be busy for Dalal Street investors in terms of business.
Investors are eagerly anticipating Reliance Industries Chairman Mukesh Ambani’s speech at the company’s 46th annual general meeting on Monday. They will be watching attentively for his insights and announcements.
The Supreme Court’s hearing in the Adani-Hindenburg case on Tuesday is the upcoming significant event for the market.
Experts predict that market volatility will be strong due to domestic events and a lacklustre global outlook.
According to Hemant Kanawala, senior EVP and head of equity at Kotak Mahindra Life Insurance Co., “Equity markets are expected to remain volatile due to weakness in the external environment.”
Kanawala suggests that despite strong corporate earnings and high valuations, investors should anticipate returns aligned with earnings growth until year-end.
RIL AGM
Some of Ambani’s most significant announcements in recent years have often occurred at the AGM. As a result, Dalal Street has become the focal point of this festival.
The Street wonders if Ambani has more to offer post Jio Financial’s IPO and new Reliance Retail stake sale.
Anticipation grows as Reliance Retail’s values double in three years, expecting AGM insights on its IPO.
Investors in the telecom sector are eagerly expecting the release of Jio Airfiber, a fixed wireless access device. According to rumours, the announcement is most likely to occur during the holiday season.
The Adani-Hindenburg storyline
SEBI, previously granted 15 extra days for inquiry, will now present its case to the Supreme Court on Tuesday.
In an affidavit sent to the Supreme Court, the capital market regulator reportedly updated the court on its investigations. 22 of the 24 completed investigations have been concluded, while two are still in the interim stage. It is currently expecting comments from outside organisations about two ongoing investigations.
Ahead of the hearing, investors withdrew from Adani Group equities on Friday, causing the stock price to end the day lower. The shares of Adani Transmission, which closed more than 7% lower, took the biggest hit.
Powell Rate Observations
At the Jackson Hole Economic Policy Symposium, Powell indicated that the US Fed might raise rates to control inflation and meet targets.
“Although inflation has moved down from its peak – a welcome development – it remains too high,” Powell said in his keynote speech.
Powell stated, “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”
On Friday, this made trading in US markets turbulent. Benchmark indices fluctuated between gains and losses, but ended higher as investors processed the comments.
Worldwide Monitorables
Domestic equities will be impacted by how Asian markets respond to Powell’s comments. Investors will also closely monitor changes in the dollar index and US Treasury yields.
Foreign investors may start selling stocks if the dollar index or bond yields increase.
Flow of FII
As of August 26, foreign portfolio investors have sold equities worth Rs 15,817 crore, based on NSDL data.
“Strength in the dollar index at well around 104 and the US 10-year bond yield remaining around 4.25% are short-term negatives for FPI flows to emerging markets like India,” according to V K Vijayakumar, chief investment analyst at Geojit Financial Services.
He said FPIs might continue selling in the cash market due to the strong dollar and rising US bond yields.
Poor August monsoon conditions and uneven distribution could keep inflation high, worrying the market and causing irregular capital inflows.
OTC Tracker
The primary market continues to see significant inflows while the secondary market is experiencing selling.
The IPO of infrastructure company Vishnu Prakash Punglia has garnered strong interest, oversubscribed by retail and high-net-worth investors in two days.
Additionally, Rishabh Instruments’ IPO, worth Rs 491 crore, will open for subscription from August 30 to September 1.
Next week, subscriptions for SME issues like Mono Pharmacare, CPS Shapers, and Basilic Fly Studio will be available.
Follow-up technicals
Technical charts indicate that bears are currently in the lead over bulls, which is bad news for the Nifty 50.
“A decisive breach below the 19200 mark would signal a continuation of this downward trend, potentially driving prices towards the range of 19,000-18,900, aligning closely with the vicinity of the 21-week EMA,” stated Arvinder Singh Nanda, senior vice president, Master Capital Services.
The Nifty 50 fell 0.6% on Friday to close at 19265.80 points.
Given that the August derivative series is about to expire, volatility is predicted to be strong.
Only time will tell who prevails in the battle between bulls and bears in the week leading up to expiration.
(Disclaimer: The experts’ recommendations, suggestions, views, and opinions are solely their own. These don’t reflect STMN News’ opinions.)