Watch out for for these domestic triggers in first half of 2017

India Infoline News Service | Mumbai | January 07, 2017 12:12 IST

In the first five trading sessions of the New Year, the domestic equity market continued to trade in a rangebound manner, looking for an immediate trigger. Market participants seemed to stand on uncertain grounds, due to a strong dollar, the impact of demonetisation on the economy, corporate earnings and the policies that US President-elect Donald Trump is expected to adopt.

Sensex, Nifty
In the first five trading sessions of the New Year, the domestic equity market continued to trade in a rangebound manner, looking for an immediate trigger. Market participants seemed to stand on uncertain grounds, due to a strong dollar, the impact of demonetisation on the economy, corporate earnings and the policies that US President-elect Donald Trump is expected to adopt.

As the third quarter earnings' declaration of the Indian companies is about to commence, the fear of weak earnings, post demonetisation continued to haunt domestic market participants.

How adversely the economy will be affected post demonetisation, and how it will affect corporate earnings is still unclear. The market will take cues from the impact of demonetisation on corporate earnings, forthcoming Union Budget and implementation of goods and services tax (GST).


Corporate earnings:
The corporate earnings season is about to start and it is expected that for a few quarters earnings will remain suppressed. However, demonetisation will be a roadblock only in the short term. 

It is expected that the market will remain stock-specific as of now and earnings would grow gradually. India will continue to be a significant player among the emerging markets from an institutional asset allocation point of view, as the structural growth story continues to play out and the long-term drivers remain intact.

RBI monetary policy:
As the Consumer Price Index (CPI)-based inflation continues to be within RBI's comfort zone, it is expected that interest rates would continue to be on the lower side.

RBI's continuous efforts to improve bank balance sheets through full recognition of losses and increasing of bank capital buffers is expected to boost the whole banking system going forward. The Nifty50 is expected to trade in a range from 8,100 to 8,400.
 

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