Global cues, FIIs' fund movement to steer equity markets

New Delhi, Aug 20 : Global cues and direction of foreign funds' flows are expected to affect the movement of key equity indices during the upcoming week, market observers opined.

"With earnings season almost over, markets would now focus on global risks and political developments from the US, valuations, domestic flows and stock- or sector-specific developments," Devendra Nevgi, Chief Executive of Zyfin Advisors, told IANS.

Apart from global cues, the direction of foreign fund flows are expected to influence the trajectory of the equity indices.

"On YTD (year-to-date) basis India has performed well, led by strong liquidity and reform. But in the recent 1 to 3 months, the inflows from FIIs (Foreign Institutional Investors) have reduced which may impact the performance in the near-future," said Vinod Nair, Head of Research, Geojit Financial Services.

"FIIs have started to pull out money from the domestic market -- till date the outflow is Rs 7,628 crore."

Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 6,804.47 crore, or $1.06 billion, during the week ended August 18.

Provisional figures from the stock exchanges showed that FIIs sold stocks worth Rs 5,892.1 crore, while DIIs bought scrip worth Rs 4,369.26 crore during August 14-18.

Currency-wise, the Indian rupee, which closed the week ended August 18 on a flat note at 64.14 to a US dollar, is expected to be volatile and can potentially erode investors' risk-taking appetite.

"Over the near-term, we need to watch how the risk-aversion plays out in the equity markets. Volatility has begun to inch higher in stocks and bonds, which is negative for risk assets like equities," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.

"Positioning remains stretched as speculators and investors overly long in risk assets like EM equities and DM equities. When positioning remains so stretched, any excuse can trigger an unwind. It can be as innocuous as the Korean peninsula or another of Trump's foot-in-the-mouth moments."

"Therefore, over the near-term, we remain cautious on the rupee. Over the next week a range of 63.90 and 64.30 can be seen in the pair," Banerjee added.

On technical levels, the underlying trend in the NSE Nifty remains bearish with a downside expected.

"Technically, while the Nifty has pulled back this week, the underlying trend remains down," Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS.

"The downtrend is likely to resume once the immediate support of 9,783 points is broken. Pullback rallies could find resistance at 9,866 points and 9,933 points."

Last week, key equity indices -- the Sensex and the Nifty50 -- made gains on the back of easing global geo-political tensions and healthy buying in realty, metal and FMCG stocks.

Consequently, the 30-scrip Sensitive Index (Sensex) of the BSE gained 311.09 points or 0.99 per cent to close at 31,524.68 points.

Similarly, the Nifty50 of the National Stock Exchange (NSE) gained 126.6 points or 1.30 per cent to close at 9,837.40 points.