The market continued to consolidate in the passing week, with the Nifty hovering in the range of 9,000-9,200. Clearance to important bills in Parliament, paving the way for timely implementation of the Goods and Services Tax from July 1, and hopes of the Non-Performing Assets crisis being resolved helped the Nifty gain 0.7 percent during the week amid mixed monsoon predictions.

The broader markets, however, outperformed benchmarks as the BSE Midcap rallied 1.8 percent and Smallcap surged 2.5 percent, backed by global liquidity.

FII inflows were the highest-ever in a single month as they poured in nearly Rs 30,000 crore in March, taking total inflow to Rs 49,910.57 crore in FY17. Majority of FIIs are bullish on Indian equity markets, citing likely policy continuity for next seven years after the BJP’s landslide win in UP and stable earnings despite demonetisation.

The Nifty spiked nearly 19 percent, while the BSE Midcap shot up 33 percent in the financial year gone by, after absorbing events like Brexit, Rexit, demonetisation and Donald Trump win.

In the coming truncated week, the market is likely to remain positive amid consolidation, driven by consistent FII inflows and ahead of RBI policy and March quarter earnings that will be kicked off by Infosys on April 13. They expect the Nifty at around 9,300-mark.

The market will remain shut on April 4 for Ram Navami.

“All indications are in favour of a positive bias to hold in the coming week as well. However, volatility, especially in the rate sensitive pack, will remain high,” said Jayant Manglik of Religare Securities.

He feels midcap and smallcap still have a lot to offer and slightly extra efforts on the selection part could yield phenomenal returns.

Abnish Kumar Sudhanshu of Amrapali Aadya Trading & Investments said that with valuations becoming rich, market will take a breather here and keenly watch fourth quarter corporate earnings. NPA resolution and debt restructuring will continue to fuel the rally in banking stocks and stressed sectors, he added.

Rakesh Tarway of Reliance Securities expects the markets to consolidate again and sustenance above levels of 9150 will be watched for the up-move. However, in case the Nifty breaks 9,000, he expects sharp profit booking.

Here are factors that will chart direction next week:

RBI policy meet

The meeting of the Monetary Policy Committee on April 5 and 6 will be closely watched by the Street. Majority expect status quo this time despite encouraging retail inflation data. The RBI in its February meeting surprised the Street by changing monetary policy stance to neutral from accommodative and left its key repo rate unchanged at 6.25 percent for the second time.

Rupee and bond markets will also closely watch RBI policy.

In March, the Indian rupee was the best performing currency in Asia, gaining 2.8 percent and closing at 64.85 against the US dollar, backed by FIIs money. In the last quarter of financial year, it gained around 5 percent.

Auto sales

On Monday, auto stocks will react to March sales data which is expected to be good, especially after Supreme Court on March 29 banned the sale of BS-III vehicles from April 1. Experts say this move forced auto companies to clear inventories with heavy discounts by March 31, but margins may be hit.

The country’s largest car maker Maruti Suzuki reported a 8.1 percent rise in sales at Rs 1.39 lakh units compared with the year-ago period. Commercial vehicle manufacturer Tata Motors also showed a 8 percent increase in sales at 57,145 units during the month on a yearly basis, driven by passenger vehicle sales while its commercial vehicle sales declined 6 percent.

Eicher Motors sold 60,113 units of Royal Enfield in March, a growth of 17 percent year-on-year and its commercial vehicle sales increased by 8.5 percent YoY.

Fuel price increase

Oil marketing and aviation companies’ stocks will react to the fuel price cut. Indian Oil Corporation on Friday cut petrol price by Rs 3.77 per litre and that of diesel by Rs 2.91 a litre effective from April 1. BPCL and HPCL will also be in focus.

SpiceJet, Jet Airways and InterGlobe Aviation stock price may increase as oil marketing companies also cut aviation turbine fuel price by 5.2 percent to Rs 51,482/kL in Delhi.

Implementation of GAAR

All eyes are also on the long=pending GAAR (general anti avoidance rule) that finally will be implemented from April 1, 2017. This rule shall make it harder for FIIs to avoid domestic duties by routing investments through tax havens.

“We see foreign portfolio investors buying momentum to take slight hit, though they seem to be well prepared in the grace period,” Kumar Sudhanshu of Amrapali Aadya Trading & Investments said.

GAAR’s implementation was proposed by the previous United Progressive Alliance government to check tax avoidance. It was proposed with a view to bar companies from aggressive tax planning by use of opaque low tax jurisdictions such as Mauritius.

It was initially included in the Income Tax Act in 2012 but implementation was postponed after opposition from foreign investors.

GST Roadmap

The Goods and Services Tax (GST) Council approved the drafts of four sets of rules (relating to composition, valuation, input tax credit and the transition process) and finalised five others on March 31, bringing India closer to a unified tax regime.

Five other rules involving registration, payment, refund, invoices and returns, the drafts of which were already approved in the Council’s previous meeting, were finalised.

The Lok Sabha already passed the Central GST Bill, 2017 (The CGST Bill), Integrated GST Bill, 2017 (The IGST Bill), Union Territory GST Bill, 2017 (The UTGST Bill) and the GST (Compensation to the States) Bill 2017.

The Council has already agreed on a four-slab structure – 5, 12, 18 and 28 percent — along with a cess on luxury and `sin’ goods such as tobacco.

An officers’ panel will complete the fitment exercise of goods and services according to this slab structure, which will be taken up in the Council’s next meeting.

The next meeting will take place on May 18-19 in Srinagar, where besides finalising these rules, the rate classification exercise will also be taken up.

Economic data

The market on Monday will react to important core sector data. In February, core sector industries growth slowed down to 1 percent as against 3.4 percent in January on the back of a slowdown in growth of crude oil, fertilisers and cement sectors.

Nikkei India Manufacturing PMI data and Nikkei India Services PMI data will be released on April 3 and April 6, respectively.

The Nikkei India Manufacturing Purchasing Managers’ Index increased to 50.7 in February against 50.4 in January, showing a healthy rate after the shock of demonetisation in November. The Nikkei Services PMI also showed a significant expansion at 50.3 in February, up from 48.7 in January.

Technicals

At closing of Friday, Nifty 50 has formed a spinning top candlestick pattern on daily chart. Formation of spinning top is an area of uncertainty and early indicator of trend reversal. After a spectacular rally, Abnish Kumar Sudhanshu of Amrapali Aadya Trading & Investments said he sees some profit taking ahead.

“Indicators are showing some minor divergence indicating some profit booking can still emerge next week. The momentum of this week’s rally was slightly slower which means still the bulls are not in full control and therefore some more consolidation is expected before the upmove begins. The market may come to fill the gap and touch the 9000 levels before making any decisive move up,” Jimeet Modi of SAMCO Securities said.

Vijay Singhania of Trade Smart Online said if Nifty trades above 9180 on Monday then traders could expect positive move towards 9200 followed by 9240.

FY18 outlook

Most experts expect the market to continue its run up in next financial year as well on hopes of earnings revival and more government reforms.

Timothy Moe of Goldman Sachs said the brokerage house stayed overweight on India as the medium-term reform story remains promising. The research firm expects the Nifty to reach 9,500 in 12 months and 10,200 by 2018-end as earnings recovery gathers pace driven by 12 percent and 15 percent profit growth this year and next.

The Nifty is not far off from hitting fresh record highs and if everything falls in place, the index could well hit mount 1,0000 in the next financial year which is nearly 10 percent from current levels, UR Bhat of Dalton Capital Advisors said.

Stocks in focus

MOIL cut price of ferro grade with Mn content above 44 percent by 15 percent for Q1 w.e.f April 1 while Tata Steel announced a 29.9 percent increase in Q4 hot metal production at 3.52 million tonnes and 16.9 percent increase in sales at 3.18 mt YoY.

Elecon Engineering has bagged order worth Rs 130 crore from Ramagundam Fertilizers while Nila Infra has secured construction contract worth Rs 131.7 crore.

Indraprastha Gas will also be in action on Monday as RBI says FII limit in the stock hit overall limit of 24 percent, so no further purchases are allowed.

Indoco Remedies has received warning letter from US FDA for its Goa unit.

Corporate action

Prime Securities and GM Breweries will announce its March quarter and FY17 earnings in its board meeting on April 6. AVT Natural Products, R Systems and Gufic Biosciences will also have board meetings next week.

Container Corporation will trade ex-bonus (1:4) from April 5 onwards.

Global scenario

Nikkei Japan Manufacturing PMI, Markit Eurozone Manufacturing PMI and US Markit Manufacturing PMI for March will be unveiled on Monday. The Federal Open Market Committee (FOMC) March meeting minutes will be released on Wednesday. The Federal Reserve raised the target range for its federal funds by 25 basis points to 0.75 percent to 1 percent during its March 2017 meeting.

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