Outlook: Equity market to remain weak ahead of F&O expiry

Lack of trigger has kept the Indian equity market subdued. This week the market is expected to remain weak ahead of the F&O contract expiry on Thursday, July 30, 2015. Disappointing results from corporate India as well as lack of positive news is keeping the Indian equity market subdued. More than expected delay in economic recovery has been keeping the market nervous. The market experts and analysts that were expecting the government to fire have realised that the Indian market economic recovery will take more time than expected.

It was never going to be easy for the new government to bring the house in order. With the banking system under tremendous stress it will be a while before demand picks up and economy is back on growth trajectory. In fact with the pain still there and many analysts going wrong on the timing, today analysts don't want to put a timeline on the recovery. However they fear that the pain in the system may see equity market remain subdued in the near term.

Lack of domestic positive trigger has seen the Indian market subdued, but one can't see Indian market in isolation. In the last three months as on July 24, 2015, the MSCI India Index is the biggest gainer among MSCI Emerging market indices gaining 4.2 per cent. In the last three months India is the only market that has delivered positive returns among MSCI emerging market indices. All others indices are down from 1 per cent to 23.5 per cent.  Year-to-date (YTD), the MSCI India Index may have just increased by 2.37 per cent, but it still ranks sixth among the emerging market indices after Hungary, Russia, UAE, China and Philippines.

Coming back to the Indian equity market, foreign investors from a global perspective see India as a growing economic which is why after two months (May and June 2015) of outflow ($1.4 billion) , FIIs have been net investors in Indian equity market that have so far in July 2015 invested over $1.2 billion.  The Indian equity market has also been a beneficiary of the subdued return in gold and real estate which saw some money coming into Indian equity.

Concerns over US slowdown, Euro-zone crisis, China slowdown and fall in commodity prices, especially crude oil augurs well for Indian equity. In fact, going ahead the trend in the Indian equity market will be dictated by foreign flows and the development in the international market. This would mean that Indian equity would continue to remain volatile. Lack of trigger may see the market consolidating and moving in a range of 1,500 to 2,000 points. However for investors, they should bet only on companies with strong fundamentals that have a positive cash flow and have the pricing power for its products.

The next trigger for the market will be the Reserve Bank of India (RBI) monetary policy which is slated on Tuesday, August 4, 2015.  This week the market will also keep an eye of the US Fed which meets on July 28 and 29, 2015 to decide on the interest rate. Though the market doesn't expect Fed to change interest rate in the coming week, but market will keep a close eye on the Fed chairperson statement on when it plans to raise rates.

Stocks of companies like L&T, ICICI Bank, ITC, IDFC,  Ambuja Cements, Tech Mahindra, HDFC, Bank of India, Dish TV, YES Bank, IDBI, PNB, Maruti Suzuki, NTPC, Kotak Bank, Nestle India and Union Bank will remain in focus as they declare their June 2015 ended quarterly results.