Infosys, Jackson Hole, NPA: 7 factors that may drive market next week

NEW DELHI: Just when domestic equity market was showing signs of recovery from the previous week’s carnage, the sudden resignation of Vishal Sikka on Friday as MD and CEO of IT bellwether Infosys dampened investor sentiment badly, pushing headline indices back into the negative territory.

On Friday, the S&P BSE Sensex cracked 271 points to close at 31,524 while the broader Nifty50 index of the National Stock Exchange (NSE) lost 67 points to close the session at 9,837 with 25 components ending in the green and 26 in the red. However, on a weekly basis (Aug 11-Aug 18), Sensex gained 1 per cent while Nifty added 1.3 per cent.

The coming week is going to be a short one, as the market will be closed on Friday (August 25, 2017) on account of Ganesh Chaturthi.

Let’s check out what all might matter to Dalal Street through the week:

Infosys boardroom chaos, lawsuits, and buyback
A hefty share buyback announcement, a slew of lawsuits in the US over suspected securities fraud and the ongoing boardroom battle between a founder-promoter and the company’s board will continue to swing the Infosys stock, which has a large weightage in the benchmark indices. On Saturday, the company announced at Rs 13,000 crore share buyback at a buyback price of Rs 1,150, which is at a 25 per cent premium to Friday's closing of Rs 923.10 on BSE.

But that may not help much as three US law firms are reported to have mounted suits against the IT major and even domestic institutional investor LIC has expressed unhappiness over the goings-on in the company, denting the long-term outlook for the business. Analysts say, the stock will react to all these developments when trading resumes on Monday and in all probability the buyback offer at best will help cap the downside on an immediate basis.

Tech charts signal rangbound days ahead
The Nifty50 on Friday snapped a three-day winning streak and formed a Hammer pattern on the daily chart. A 'Hammer' is formed when the index trades significantly lower than its opening price for most part of the day, but manages to recoup losses and close near its opening level.
Analysts say neither is the market going to see any runway rise, nor will it witness any major breakdown. At best, the Nifty50 will trade in a broad upward rising channel within a defined range. "The 9,950 and 10,150 levels are likely to be immediate resistance for the Nifty50 while supports will come in at 9,685 and 9,580 levels," said Milan Vaishnav, a technical analyst.

Bank stocks to be on driver’s seat

Banking stocks will be a major factor deciding the course of the market. RBI Governor Urjit Patel on Saturday said state-run banks need more capital to resolve bad loan problems weighing on their balance sheets. He said the regulatory challenges of tackling bad loans were compounded by weak capital positions of some banks, particularly those owned by the government.

Finance Minister Arun Jaitley on Saturday said the new insolvency law now sides more with the lenders, as the slew of changes in the existing laws are aimed at speeding up NPA resolution. This is definitely going to boost banks, which are reeling under Rs 8 lakh crore of non- performing assets (NPAs) or bad loans. PSU banks alone account for about 75 per cent of total bad loans.

Trump policy agenda
The resignation of a number of top CEOs from US President Donald Trump's manufacturing council following weak initial response to the Charlottesville White Nationalism March and the sudden ouster of White House Chief Strategist Steve Bannon have ignited fresh tensions in the US political environment. These developments have raised more questions about the Trump administration's ability to implement its pro-growth agenda.

Markets across the globe, including India, are likely to see an impact from any significant developments in the US.

Crude price movement
Crude oil prices jumped three per cent on Friday as the dollar fell and US drillers cut rigs, feeding a rally that boosted global benchmark Brent crude to a weekly gain, said a Reuters report. Earlier in the week, government data showed crude output was still rising in the US.

Brent and US crude prices both headed for weekly declines of more than 2 per cent, but Friday's sharp rally left Brent with a 1.5 per cent weekly gain while US crude finished the week virtually flat, down just 0.3 per cent, the report added.

Going forward, the crude price is likely to sway markets.

Cues from Jackson Hole
Top central bankers, including US Federal Reserve's Janet Yellen and ECB's Mario Draghi, will meet for their annual get-together at Jackson Hole, Wyoming, to discuss everything that matters to the global economy. Several of the developed world's central banks appear to be on the cusp of beginning a windback of the massive monetary stimulus injected into their economies since the global financial crisis.

Proceedings and outcome of the summit will be watched closely by investors across the globe.

Myriad of data may hold sway
Markit Economics will announce Nikkei Flash Japan Manufacturing PMI for August. The Nikkei Japan Final Manufacturing PMI fell to 52.1 in July 2017, compared to a preliminary reading of 52.2 and a final print of 52.4 in June.Markit Economics will announce Nikkei Flash Japan Manufacturing PMI for August. The Nikkei Japan Final Manufacturing PMI fell to 52.1 in July 2017, compared to a preliminary reading of 52.2 and a final print of 52.4 in June.

This apart, June quarter earnings of the last batch of companies such as Castrol India and Gillette India, the progress of monsoon and movement of the rupee against the US dollar will guide market direction during the holiday-truncated week.