India-Pakistan tensions, global cues to dent equity indices

suicide terror attack on paramilitary forces convoy in Pulwama
suicide terror attack on paramilitary forces convoy in Pulwama

Mumbai, Feb 17. The key Indian equity indices may
slide further in the coming week as the prevailing India-Pakistan tensions
along with high global crude oil prices are expected to weigh heavy on
investors’ sentiments.

Market Outlook By Rohit Vaid

Analysts predict, continuation of investors’ negative
reaction to the rising India-Pakistan tensions after a major terror strike took
place in Jammu and Kashmir and any further outflow of foreign funds.

In addition, the rupee’s depreciation against the US
dollar and dynamics of the emergency declared by President Donald Trump over
the funding of a southern border wall will hamper any upmove.

“Geo-political tensions within our neighbourhood
will keep the market on edge,” said Deepak Jasani, Head of Retail Research
for HDFC Securities.

“Though terrorist attacks produce mildly negative
price effects, markets typically recover the lost ground soon, unless there is
an increase in hostilities.”

According to Sahil Kapoor, Chief Market Strategist,
Research, Edelweiss Wealth Management: “Nifty is now nearing a crucial
support at 10,600-10,650 points range, a breakdown of this range can result in
a fall towards 10,350 points levels.

“Global rally has provided little support with
Indian markets grappling with its own set of problems in a once again
deteriorating trade deficit, fumbling fiscal revenues and tight liquidity.
Expect some consolidation which will be succeeded by further down move.”

Apart from the India-Pakistan tensions, crude oil
prices which have lately been around the $62-65 per barrel-range are expected
to impact investor sentiments.

Further rise in oil prices have potential to inflate
India’s import bill. The surge has already pushed the cost of petrol in the
national capital to Rs 70.60 per litre.

“Crude oil prices will be in focus as any further
rise in prices is expected to escalate macro concerns of the country,”
said Vinod Nair of Geojit Financial Services.

“Expecting the current volatility in the market
to continue further with no major positive triggers due for next week and
10,500 to act as a crucial support zone for the market.”

Besides, the rupee’s price movement against the US
dollar will also be crucial for the market, especially in the backdrop of a
continuous outflow of foreign funds.

“Geo-political risk premium (India-Pakistan
tensions) post Pulwama terrorist attack along with high crude oil prices and
trends of oversees Dollar will impact the rupee-dollar equation next
week,” Anindya Banerjee, Deputy Vice President for Currency and Interest
Rates with Kotak Securities, told IANS.

“Currently, all these factors are negative for
the rupee which could see depreciations over 71.80-mark, after which we can
expect an intervention by the Reserve Bank of India (RBI).”

The rupee is expected to be in a range of 71-71.80 in
the coming week.

On a weekly basis, the rupee appreciated by 9 paise to
close at 71.22 against the US dollar from its previous close of 71.31 per
greenback.

Foreign fund outflows during the week also weighed the
equity indices. Foreign institutional investors (FIIs) sold stocks worth Rs
2,485.09 crore in the week ended Friday.

Additionally, global cues like the US-China trade
talks, declaration of a national emergency in the US and international
macro-economic data points will further steer the Indian markets.

On technical charts, Nifty might correct further to
the immediate support levels of 10,613-10,583 points.

“The 10,583 points support will be a crucial
level to watch in the coming week as a close below that could lead to a sharp
fall towards the next support of 10,333 points,” Jasani said.

Last week, both the key Indian equity indices —
S&P Bombay Stock Exchange (BSE) Sensex and the NSE Nifty50 — declined
sharply on the back of foreign fund outflows and rise in crude oil prices.

Consequently, the S&P BSE Sensex declined 737.53
points, 2.02 per cent, over the week to end at 35,808.95 points.

The broader NSE Nifty50 finished at 10,724.40, down 2
per cent or 219.2 points from its previous week’s close.

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