The week begins on the back of an extremely action packed week. The week gone by saw 4 days of losses and then everything turned around on Friday after the Finance Minister announced the rate cuts. Here are some of the major cues for the coming week starting on 22 September.

· The lag impact of the massive tax cuts will be still felt on Monday. The Sensex gained nearly 1921 points on Friday and that lag effect will show on stocks in the banking and auto stocks where short covering could continue to be quite aggressive.

· There is a downside to the government announcement of the Rs.145,000 crore package for Indian corporates because it entails an expansion of the fiscal deficit. For example, it is estimated that the fiscal deficit could expand from 3.3% currently to 3.97% as a result of the outlay. That is something to watch out for.

· We expect a number of new expansion announcements coming shortly after the rate of tax was cut to 15% for new operations. A lot of companies that were holding back expansion plans may go ahead and announce now. That could also be a positive trigger for the markets.

· There have been some disconcerting developments on the China / US trade war front. The Chinese delegation had cut short its trade talks with the US and also refused to visit their Montana farms where they wanted to showcase America’s agri prowess. That is negative for global markets sentiments. The US had postponed its higher tariffs by 15 days as a goodwill gesture and that appears to have been diluted for now.

· The rupee movement will hold the key in the coming week. Last week, the rupee had substantially strengthened by more than 1% and the Friday rally only added to that. As long as rupee is in the range of 71-72, markets should be pleased. Only beyond 72, the markets will really have reasons to worry.

· Last week, the crude prices saw a sharp rally after the drone attacks on Saudi facility. The supplies were not really hit last week due to the stockpiles that Saudi Arabia had. Oil experts believe that the real impact could only be felt in this week after the stockpiles start falling. Oil was up by nearly 8% last week but closed below $65/bbl.

· Keep an eye on the FPI flows. Despite all the reforms talks and the tax cuts, FPIs infused only Rs.35 crore on Friday. A lot of the rally came from these FPI covering their shorts in the Nifty futures and the stock futures. This raises questions over whether the rally would be able to sustain unless buying comes back in a big way on Monday.

· Friday will see the release of the foreign exchange reserves data and the all important current account deficit for the June quarter. It was 0.7% for the March quarter and it needs to be seen if it goes beyond the 1% mark. That would hold the key to the rupee movements.

· Finally, the F&O expiry could see some positive volatility this week as shorts will be unwilling to roll over and we could see short covering pushing the markets higher.

Of course, the key would be the lag impact of the tax cut announcement by the government last week.