Korean tension, Cabinet rejig & IPOs to steer market next week




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        ChartsValuation & Peer ComparisonCommunity BuzzPEER COMPANIES NEW DELHI: Escalating geopolitical tensions after a fresh nuclear test by North Korea and claims that the rogue nation now possesses a hydrogen bomb, a reshuffle in the Union Cabinet back home and new issues hitting in the primary market are going to decide market mood in the coming week.

        The domestic equity market came out with flying colours during the week gone by despite weak macroeconomic data. Stocks stood unruffled despite June quarter GDP numbers slipping to a 13-quarter low of 5.7 per cent, which speaks volumes about the colossal confidence and faith that investors have in the Indian market.

        Although heavy downpour in Mumbai and tensions on the Korean Peninsula threw some hurdles to the market rally, the bulls fought back emerging triumphant at the end.

        On Friday, the S&P BSE Sensex surged 162 points to settle the session at 31,892 while the Nifty50 closed at 9,974 with 40 constituents ending in the green and rest in the red. On a weekly basis (August 24- September 1, 2017), the Sensex gained 0.9 per cent while the broader Nifty added 1.19 per cent.

        Among the key highlights, the non-banking financial company (NBFC) Bajaj Finance scripted a new milestone last week by touching the Rs 1 lakh crore mark in market capitalisation for the first time ever! Auto stocks saw consistent gains on the back of robust August sales while pharma major Dr Reddy’s defies the weak sectoral trend to surge over 6 per cent and end as second best performer in the Sensex pack on weekly basis.

        IT major Infosys was stable all through after founder and former CEO Nandan Nilekani came back at the helm of the company.

        So what’s in store for the coming week? Going by the buzz on Dalal Street, the following factors will steer market direction:

        Tension on Korean Peninsula
        North Korea said on Sunday it has developed an advanced hydrogen bomb that possesses “great destructive power” as US President Donald Trump and Japanese Prime Minister Shinzo Abe talked over phone about the “escalating” nuclear crisis, Reuters reported. The report by North Korea’s official KCNA news agency comes amid heightened regional tension after an earthquake measuring 5.2 struck North Korea on Sunday, suggesting the reclusive country may have conducted a sixth nuclear test. The US Geological Survey said the quake struck 55 km north northwest of Kimchaek. There were no immediate reports of damage or casualties.

        Modi’s Cabinet reshuffle
        As part of his biggest Cabinet reshuffle, Prime Minister Narendra Modi decided to induct nine new ministers while half-a-dozen ministers were relieved from their duties. The government described the motto of the Cabinet reshuffle is Power of 4P: Passion + Proficiency + Political Acumen – for Progress. The political development is likely to have a bearing on the stock market, as a host of recent developments including back-to-back rail accidents, Gorakhpur hospital tragedy and questions over demonetisation have raised many eyebrows on the Modi government’s performance.

        Technical factors favourably poised
        The Nifty50 crossed the strong resistance at 9,950 level on Friday, Day 1 of September futures and options series, and boosted chances of the index hitting the 10,000 level early next week. Experts believe the index could now face resistance at 10,020 level, while it may find support at 9,990 level. However, various indices are at divergence with the Nifty50. For example Bank Nifty, Nifty Infra Index and Financial Services Index are all still showing weakness. “This shows that the market is still in the correction zone and any rise should be used to exit long positions and new trades should be avoided unless clarity emerges that the correction is nearing an end,” said Jimeet Modi, CEO, Samco Securities.

        Two IPOs to hit Street on Sept 6
        Dixon Technologies, a consumer electronics manufacturer and Bharat Road Network, a road BOT company, focused on development, implementation, operation and maintenance of roads/highways projects are slated to launch their respective IPOs on Wednesday (September 6, 2017). Both the firms aim to raise Rs 600 crore each via their respective IPOs. While Dixon has set a price band of Rs 1,760-1,766 per share for the issue, Bharat Road IPO price band has been fixed at Rs 195-205. Both the issues will close on September 8.

        New kid on the block
        Apex Frozen Foods, a smaller peer to listed Avanti Feeds, is scheduled to make debut on the bourses on Monday, September 4. The recently-concluded IPO of the company was well received by the investors with the issue getting subscribed 6.10 times. It will be listed and admitted to dealings on the exchanges in the list of ‘T’ Group of Securities.

        Brokerage Nirmal Bang had a subscribe rating on the issue. “We like the business model of the company given its high asset turnover, customer stickiness and integrated business operations. At the upper end of the price band at Rs 175, the issue looks attractive and hence recommends investors to subscribe it for listing and long term gains.”

        US jobs report confusing
        In a major setback, US jobs growth slowed more than expected in August after two straight months of solid increases. The non-farm payrolls increased by 156,000 in August. Also, the unemployment rate ticked up one-tenth of a percentage point to 4.4 per cent. The US economy created 399,000 jobs in June and July. The numbers are likely to make the US Federal Reserve become cautious about raising interest rates again this year.

        ECB monetary policy meet
        The European Central Bank will hold its two-day rate setting meeting next week with the outcome due on Thursday (September 7, 2017). The bank is likely to maintain a status quo on the interest rate, but some commentary around the bank’s easing policy is expected. According to a Reuters poll, the central bank is likely to announce a reduction of its monthly asset purchases in October. Not only this, the economists who participated in the poll expect the central bank to shut down the programme by the end of next year. In July, the ECB said it had not discussed reducing its asset purchases, also known as quantitative easing (QE), but signalled the change would likely come “this autumn”.
        Fed speeches to hold key

        A number of regional Fed presidents are slated to speak next week. According to a report by Financial Times, Fed governor Leal Brainard, Dallas Fed president Robert Kaplan, Minneapolis Fed president Neel Kashkari — all voting members of the monetary policy setting Federal Open market Committee — are slated to deliver remarks on Tuesday. New York Fed president Bill Dudley and Philadelphia Fed president Patrick Harker, fellow voting members of the FOMC, are also scheduled to deliver remarks next week. The speeches are likely to influence investor sentiment. This apart, the US Fed will release Beige Book next week, or the Summary of Commentary on Current Economic Conditions.




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