Will derivatives expiry drive domestic market sentiments

Derivatives expiry, combined with the pace of foreign funds inflow and global crude oil prices, will guide the Indian equity markets during the week ahead.

According to D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, the key Indian equity markets could witness volatility owing to F&O (Futures and Options) expiry scheduled for September 29.

"In the coming week, it is expected that markets would witness volatile movement due to the expiry of September derivative contracts," Aggarwal told IANS.

Foreign investors might unwind index option positions due to the derivatives expiry which is slated for Thursday. This can force prices out of the recent ranges.

Besides, trends in global crude oil prices, movement of the Indian rupee and the release of deficit monsoon data are also expected to influence investors` sentiments.

Anand James, Chief Market Strategist at Geojit BNP Paribas Financial Services, told IANS: "Crude oil is likely to see volatility as an energy conference is scheduled for next week in Algeria.

"The energy conference has stoked tremendous expectation that the member nations will chalk out a plan to deal with the supply glut and arrest price fall."

Cues on the Reserve Bank of India`s (RBI`s) October monetary policy review will keep the key indices on tenterhooks. 

"With three new members inducted into the monetary policy committee (MPC), markets will watch with interest on how the October 4 RBI rate announcement will pan out," James said.

James further said the swift developments along the GST (Goods and Services Tax), budget and reform measures will keep downside checked next week.

The GST regime started to take shape after the pan India indirect tax`s apex body met last week and fixed the turnover-based exemption limit from such levies at Rs 20 lakh.

However, the GST Council left the decision on fixing the actual tax rates and the finalisation of draft rules for later. The council is scheduled to reconvene on September 30 and again from October 17-19.

The central government had also announced the merger of general and railway budgets, along with consultations to advance the budget presentation date.

Investors will also keep an eye on global central banks` statements on the future of monetary policies. For the week ended Friday, the US Federal Reserve decided to keep its key interest rates unchanged, and the Bank of Japan (BoJ) announced new monetary policy measures.

"Central bank rhetoric should continue to hold sway next week, as we will get to hear from Fed presidents, ECB`s (European Central Bank) Draghi, as well as BoJ`s minutes," James added.

In addition, the pace of foreign fund inflows will determine the trajectory of the key indices.

"Investors will closely follow important cues in the next week like FIIs (foreign institutional investors) fund inflow into the Indian equity markets and strength and sustainability of markets at higher levels," said Dhruv Desai, Director and Chief Operating Officer of Tradebulls.

Provisional figures from the stock exchanges showed that the week witnessed an outflow of Rs 720.81 crore.

Figures from the National Securities Depository Limited (NSDL) disclosed that foreign portfolio investors (FPIs) were net buyers of equities worth Rs 3,758.59 crore, or $561.77 million from September 19 to 23.

Desai pointed out that investors will closely follow the global markets` sentiments and data on deficit in monsoon rains.

Sector-wise, banking sector companies` stocks will be in focus next week ahead of RBI monetary policy meeting scheduled in the first week of next month, Desai said.

"Indian equity markets are likely to trade with volatility due to profit booking at higher levels in the coming sessions," Desai added.

For the week ended September 23, positive global and domestic cues had marginally lifted the Indian equity markets. However, gains were ceded due to volatility over global event risks, outflow of foreign funds and profit booking.

The 30-scrip sensitive index (Sensex) of the BSE had closed the previous week`s trade with a gain of 69.19 points or 0.24% at 28,668.22 points. Similarly, the 51-scrip Nifty of the National Stock Exchange (NSE) edged up 51.70 points or 0.59% to close at 8,831.55 points.

On Nifty50, during the week, among the top gainers were Hindalco Industries (8.27%), Eicher Motors (7.43%), Aurobindo Pharma (7.13%), Bharti Infratel (5.43%) and Yes Bank (5.42%). 

On the same benchmark, among the top losers were Tata Steel (-1.39%), Motherson Sumi Systems (-1.42%), Power Grid Corporation of India (-1.46%), Infosys (-1.53%) and Reliance Communication (-1.54%).

On Nifty50, companies that tracked the most aggressively traded stocks in terms of price change (in crore), were ACC (43.48), Adani Ports & Special Economic Zone (84.36), Ambuja Cements (57.21), Asian Paints (79.60) and Aurobindo Pharma (289.79).