Indian Market & Sectorwise Stocks Outlook for the Week - 28.Sep.2015 to 1.Oct.2015

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Auto Stocks Outlook for the week – 28.09.2015 to 01.10.2015 May open up next week on RBI rate cut hope


Sentiment is expected to be frail next week as foreign institutional investors will continue selling in emerging markets and this will cap any upside if the Reserve Bank of India was to cut rates on Tuesday. The RBI will detail its fourth bi-monthly monetary policy of 2015-16 (Apr-Mar) on Tuesday. The MSCI Emerging Market Index has slumped over 5% this week due to fears of a rate hike by the US Federal Reserve, and slows down in the global economy. India has also under-performed most other emerging markets in this month. In September so far, foreign investors have net sold $415.76 mln in the Indian equity market.

Most market participants expect the RBI to cut the policy repo rate by 25 basis points. Benign consumer price inflation readings, running below the central banks own indicative trajectory and broad-based disinflation have offered room for monetary easing. Expect the RBI to adopt a neutral to a mildly hawkish stance, as it may shift its focus to consumer price inflation target of 5% in January 2017. These factors are seen weighing on benchmark indices in the next week.

The National Stock Exchange's Nifty is expected trade between 7700-8000 points next week. Thursday, it ended at 7868.50 points, up 22.55 points or 0.3% and S&P BSE Sensex closed at 25863.50 points, up 40.51 points or 0.2%.

In the futures and options segment, rollovers to the October series indicate that market participants have transferred mostly short positions in Nifty, and rate-sensitive sectors such as banks, capital goods, infrastructure and metal. The sentiment in banks is also negative as RBI's draft guidelines to change the current base rate framework to ensure faster transmission of policy rate cuts is seen weighing on net interest margins. If the new base rate is implemented then banks' net interest margins are expected to witness a contraction of 13-70 basis points over the next two financial years.

Factoring in concerns revolving around asset quality, slower credit growth and margin compression on adoption of expected new base rate framework. A continuous decline in iron ore and copper prices have ensured that traders roll over a high amount of short positions in the October derivatives contracts of metal companies. On the bright side, information technology sector has witnessed a high rollover of long positions, as the rupee is expected to depreciate further against the dollar. The sentiment is also positive on media sector, which has been relatively insulated from global uncertainty and is also expected to post robust growth in revenue. This was evident from the high amount of long rollovers seen in Dish TV, Sun TV Network and Zee Entertainment.