Fed meet, crude prices hold key to markets this week

MUMBAI: The US Federal Reserve meeting on Tuesday and the trend in global crude oil prices are seen deciding the trend on the bourses this week. On Friday, the US Labour Department said 1,13,000 jobs were added in July — lower than consensus analyst estimates.

Reacting to the news, the dollar sank, while bond prices rose on hopes that the Federal Reserve may not raise interest rates for the first time in two years at Tuesday’s meeting. However, data shows a fall in US oil inventories and the impending hurricane season in America.

Last week, Indian equities saw signs of investor confidence returning, when the mid-cap and small-cap indices both rose much more than the main indices. Analysts view this as a bullish signal. Vinit Birla, senior technical analyst at Pranav Securities said that his outlook for the coming days is “positive”.

He adds, “There is a strong support at 10700 for the sensex and 3100 for the Nifty, which would mean, for the time being, that we may not go below these levels.” He says that as investor confidence increases, the trading range may gradually rise up to 11500 to 12000 by September-end, unless the Fed sends out an overtly negative signal on Tuesday.

Last two weeks have also seen foreign institutional investors (FII) and local mutual funds turning net buyers after a short hiatus. FIIs bought equity worth Rs 260 crore in the last two weeks, while mutual funds net bought shares worth Rs 700 crore during the same period. Fitch upgrading its India rating could further boost FII confidence which could translate into further inflows into the markets, brokers feel.

However, Manish Kanchan, CEO, Ambit capital says he is “cautiously optimistic” and believes that in the short term, “the applecart is delicately poised” and sensex may move within a trading range of between 10300 and 11500.