The week ending 12th July has been negative for the market’s overall with the Nifty giving up more than 500 points from the Budget peak. This was largely driven by concerns over buyback tax of 20%, increase in public shareholding and the fact that 40% of the FPIs will be taxed at higher rates post the surcharge. For the coming week, the key cues for the stock markets could be as under:

· The markets are likely to react to the CPI inflation and the IIP growth data that came out on Friday evening after markets closed for the week. The CPI inflation for June has come in higher at 3.15% but still below the 4% mark set by the RBI. The IIP growth for May was weak at 3.1%, which is lower than the April growth rate. This low growth rate in IIP is likely to be a trigger for the RBI to cut rates in the August policy and that is likely to be positive for the banks and other rate sensitive stocks.

· On the subject of banking, the PSU banks are likely to be under the overhang of huge frauds reported in the Bhushan Power & Steel Company. While PNB had reported a fraud of Rs.3400 crore, even Allahabad Bank has reported a fraud to the extent of Rs.1700 crore. This is likely to weigh on PSU banks during the coming week as they will have to make adequate provisions for these losses.

· The markets are likely to react to the earnings of Infosys in the next week, more so considering that Infy increased its growth guidance by 70 bps for the coming year. One can look forward to narrowing of valuation spread between Infosys and TCS and makes a case for buying Infosys.

· While the monsoon has shown good progress in the first two weeks, the Met department has warned of a dry spell in the last two weeks of July. That could be an overhang on most consumption stocks.

· The tensions in the Middle East are rising. Last week, the UK had seized an Iranian tanker which was apparently carrying oil to Syria in breach of the US sanctions. In retaliation, the Iranian Coast Guards had tried to halt a British tanker off the Strait of Hormuz. While there was nothing untoward, the situation remains tense and Trump could hold the key.

· A series of important results announcements are scheduled for the coming week. This includes companies like Yes Bank, Mindtree, Wipro, Tata Metaliks, HDFC AMC, Federal Bank, Tata Elxsi, L&T Infotech, ACC, Colgate Palmolive, RBL Bank, Dabur, Interglobe, Bandhan Bank and HDFC Bank among others. All these results are likely to drive markets in the coming week.

· Apart from all these companies, the RIL results on July 19th assume significance. GRMs for the quarter are expected to be higher than last quarter and the Jio business is likely to show growth. GRMs and petchem margins will hold the key.

· Crude oil will remain the major overhang on the markets. Crude bounced sharply to around the $67/bbl mark in the Brent market as a combination of Middle East tensions, weak US stockpiles and Storm Barry had an impact.

· On the macro front, the WPI inflation data will be announced on 15th July while the deposit data and forex data will be released during the week.

· US will be announcing key data points like retail sales, housing starts and initial jobless claims which will be important pointes to US growth engine and the likely trajectory of the Fed when it meets on 31st July.

With the call accumulation levels moving lower, the Nifty and Sensex are expected to see selling pressure on every bounce during the week.