Global cues, GDP data to drive equities

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SME Times News Bureau | 22 Feb, 2021
As the Indian equity market goes on a consolidation mode, global markets along with the GDP data scheduled to be released later in the week is likely to steer the domestic stock markets going ahead.

Vinod Nair, Head of Research at Geojit Financial Services, said that the market was largely in a consolidation phase throughout the week following weak global cues.

Bears took control of the markets across the globe as worries of increasing US Bond yield and inflation kept investors' mood gloomy, he said, adding that PSU banks outperformed during the week due to developments around privatisation, while the sector witnessed profit booking towards the end of the week.

"We expect the domestic market to continue following the global markets in the coming week due to lack of any major domestic events. The GDP data for the third quarter which is to be released towards the end of next week is expected to show signs of economic recovery adding positive momentum in Indian market," he said.

The economy is expected to record positive growth for the October-December quarter after the 7 per cent contraction in the previous quarter.

As per the recent projection by ICRA, India's GDP is expected to record a year-on-year rise of 0.7 per cent in Q3FY21.

S. Ranganathan, Head of Research at LKP Securities noted that that week ended Friday belonged to the PSU Bank Index which rose close to 11 per cent with Midcap state-run banks and non-life insurers posting huge gains.

"During the coming week we expect investor interest coming back to large banks as FPI flows this month of over Rs 24,000 crore reflects the appetite of foreign funds," he said.

Deepak Jasani, Head of Retail Research at HDFC Securities said that the optimism about the global economic recovery was shortlived this week as profit booking emerged at higher levels on February 16.

"Weakness in global markets on lingering pandemic concerns pushed against stronger economic data," he said.

The Nifty and the Sensex fell by 1.2 per cent and 1.3 per cent respectively over the week. Markets ended in the red on four out of five trading days.

The Indian rupee on the other hand ended the week around 72.65 levels.

Sajal Gupta, Head, Forex and Rates, Edelweiss Securities: "It seems like RBI has slowed the pace of intervention and has given some strength to rupee. FII flows poured in though at a reduced pace. We expect rupee to trade with strong bias towards 72.40 with a range of 72.30 to 72.80."

He, however, said that rising crude prices, trade deficit and high US treasury yields pose risk to the rupee rally and any rise in US yields beyond 1.33 levels can be a serious risk to global liquidity.

Rahul Gupta, Head of Research for Currency at Emkay Global Financial Services said: "Even next week, the hopes that Biden could pass a decent stimulus package will underpin the risk appetite, keeping the focus on stimulus headlines. At the same time, the vaccine rollout will act as a tailwind to the risk-on mode limiting any uptick in the USD-INR spot and will keep it below the psychological level of the 73 zones."