Global cues, FII flows, economic data to hold key for stock markets

It is often said that the Japanese are the last ones to come into the market and when they come it always falls. This time isn't any different. The Japan-based India-dedicated fund run by Eastspring Investments, after a long time, saw inflows coming into it. In the past two months, around $50-60 million money came into the fund that today stands at more than $1 billion. In 2007, the fund was around $4 billion. This came down to $1 billion following huge redemption till 2011. Before the Lehman crisis, the overall India-dedicated fund from Japan was at $12 billion, which today stands around $4 billion.

The Japanese are seeing India as a long-term story after Narendra Modi became prime minister. Koji Wada, CEO of Eastspring Investments, was in India last week along with a Japanese delegation including journalists to meet captains of India Inc. They have met companies in Gujarat - including a visit to Reliance Industries' Jamnagar Refinery - to look at the development work done by Modi in Gujarat when he was chief minister.

India is no more a short-term story and the country has to be looked as a long-term play. Whether the Japanese make money in India only time will tell, but in the short term it seems true that when the Japanese come, the market corrects. The Indian market is expected to remain weak in this truncated week as Friday is a holiday on account of Independence Day.

Global cues will be keenly watched, especially the news flow from the Iraq crisis. Geopolitical tensions in Ukraine and the Middle East will also keep the market on guard. There is no immediate trigger for the Indian markets and marketmen will take any negative news as an excuse to sell.

Foreign portfolio investment (FPIs) will be keenly watched. Investors globally are becoming risk averse and this will also impact local markets. And if the US increases rates before the middle of 2015 it will be a huge dampener for markets across the globe, including India, as this would lead to an outflow of money moving towards the US.

Apart from FII flows, in the coming week, economic data will have an impact on local markets. On Monday, the government declares its balance of trade data.

Industrial production data for June as well as the consumer inflation numbers for July will be released on Tuesday. Industrial output in May recorded its strongest growth in 19 months at 4.7 per cent.

The government will also declare the wholesale price index (WPI) for July on Thursday, August 14. WPI for June was at 5.43 per cent.

Some big companies like Tata Motors, Coal India, Hindalco, ONGC, Tata Steel, Reliance Communication, BHEL, Indian Oil, Cipla and Sun Pharmaceutical will declare their April-June quarterly results during the week.