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US Fed rate decision, macro data to set market trend this week

Monday, June 12, 2017
By A Business Reporter

A slew of domestic macro-economic data and US Federal Reserve's monetary policy statement which due on Wednesday along with progress of monsoon and the impact of UK election results on Brexit negotiations are some of the factors that will affect the sentiments of market men this week, say experts.

“With the ECB meet and UK elections out of the way, the focus in the coming week will now shift to a slew of domestic macro-economic data and US Federal Reserve's monetary policy statement which due on Wednesday. Federal Reserve policy makers are forecasted to raise their benchmark interest rate for the second time this year at the conclusion of a two-day meeting next week. Central banks in Japan and Britain are also scheduled to weigh in with policy decisions,” said Vijay Singhania, Founder-Director, Trade Smart Online.

Investors will keep an eye on the progress of the southwest monsoon rains. Among macro-economic data, he added.

The government will announce industrial production data for the month of April 2017 after market hours on Monday. The data on inflation based on consumer price index (CPI) or retail inflation for May 2017 will also be announced. The data on inflation based on wholesale price index (WPI) for May 2017 is slated to release on Wednesday. While India's trade data for the month of May 2017 is scheduled on Thursday.

“Going ahead, markets will focus on the policies of President Trump along with US Fed rate hike decision in next week. Impact of UK election results on Brexit negotiations along with oil price movement are also crucial for the markets. Domestically, markets will watch for progress and geographical spread of monsoons as it will be important for agri-related, cement, automobile and FMCG companies. GST council meet on Sunday to address concerns of some of the sectors will also be important for smoother implementation of GST by July,” said Teena Virmani, Vice President - PCG Research at Kotak Securities Ltd.

Speaking about the week ahead, Vinod Nair, Head of Research, Geojit Financial Services said, “Going forward domestic market focus will be on implementation of GST which is expected improve the long-term outlook and is anti-inflationary to retail index (CPI). However, Investors are a bit cautious given the markets strong performance in the last one year compared to the tepid results and expectation of volatility on corporate earnings in the near term associated to GST implementation. In the near term market is expected to trade in range bound with a positive bias. US FED interest rate decision and domestic IIP are the key data to be watched for the week ahead. Recent economic data from US is not encouraging but consensus suggest a 25bps rate hike by FED which is creating doubts on investor minds.”

BSE small-cap gives 72% return, Sensex 34% in 3 yrs
With 72% return to investors, S&P BSE SmallCap index has outperformed the Sensex and large-cap indices in the three-year period ended May 31.
While the small-cap index of the BSE has given a return of 72.11%, S&P BSE SmallCap Select index, which is a measure of the performance of the 60 most liquid small-cap companies, has generated a return of 66.86%, as per data compiled by S&P Dow Jones Indices for a period of three years ended May 31, 2017.

On the other hand, blue-chip index Sensex and S&P BSE LargeCap companies have shelled out a return of 34.24% and 38.56%, respectively, in the period under review. "We see that in the three-year period ending May 31, 2017, the absolute returns of the S&P BSE SmallCap and S&P BSE SmallCapSelect were significantly higher than those of the S&P BSE LargeCap and S&P BSE Sensex," S&P BSE Indices Associate Director (product management) Ved Malla told PTI.

"This significant outperformance by small-cap stocks has resulted in more market participants looking at the small-cap segment," he added.

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