Lack Of Triggers To Keep Markets Range Bound

Indian equities witnessed a strong up-move in the preceding week. This was quite surprising as most on the street had expected the markets to remain cautious ahead of speech of Prime Minister on the occasion of August 15 (68th Independence Day of India). However the bulls were reluctant to let go the charge form their hands. As a result on last trading session of preceding week (Thursday) the equity indices moved northwards. While the Sensex closed above the psychological 26000 mark even the Nifty closed near the psychological mark of 7800. Markets extended gains for the fourth consecutive day tracking gains in banks, capital goods and oil and gas majors. The Sensex advanced 184 points at 26,103 and the Nifty gained 52 points to trade at 7,792. In the broader markets, the mid and smallcap index gained over 1% each and outperformed the benchmark index which was up 0.6%. On the macro front, India’s wholesale price (WPI) inflation eased to a five-month low in July, helped by a moderation in fuel costs. The WPI rose 5.19% year-on-year last month, its slowest pace since February. In June, prices rose 5.43% from a year earlier.

While a lot on economical front was expected from the speech of Prime Minister, nothing materialistic actually was announced. He kept it very general and most importantly very simple. It was focused more on the general improvement rather than particular financial and economic agenda.

While the speech was relatively general, there were few actions taken over the week that might be considered relatively important. Soviet-style Planning Commission will be scrapped soon, Prime Minister Narendra Modi announced while unveiling his economic agenda inviting global businesses to make India their manufacturing base and launching a financial inclusion scheme for poor families. Modi invited the global business community to set up manufacturing facilities in India giving the slogan 'Come, Make in India'. He exhorted youth to become entrepreneurs and manufacture 'zero-defect' goods with a view to make the country a global export hub.

On the global front the US equity market finished an upbeat week on a cautious note after a late-morning headline interrupted an extension of this week's rally. Despite the intraday weakness, the major averages were able to climb off their lows into the close. The S&P 500 settled right below its flat line with six sectors ending in the green. The benchmark index posted a 1.2% gain for the week while the NASDAQ outperformed. The tech-heavy index added 0.3% to extend this week's advance to 2.2%.

US equities on Friday (Preceding week) climbed out of the gate with biotechnology claiming the lead at the start of the session. However, the advance was halted after the spokesman for Ukraine's National Security and Defense Council said the country's army destroyed a part of an armed convoy from Russia. The news sent US and European equity indices to lows, while boosting German Bunds, U.S. Treasuries, and the yen.

As for Asian indices, most of the leading equity indices are trading flat with negative bias. Only Nikkei is trading in green with marginal gains of 0.06% and Shanghai Composite is also trading in green with gains of 0.38%. Hang Seng however is trading with marginal losses. SXG Nifty is trading in red with loss of 0.195 (15 points). We expect the Indian equities to open on a weak note as there are hardly any triggers in near term.