The week will be a truncated trading week since there will be no trading on Monday. However, there are some important data points that will be coming out and will be the key to the market direction during the week.

a) The first impact will be the bank mergers announced late on Friday. The mergers will reduce the 10 PSU banks to 4 PSU banks and banks like PNB, Canara Bank and Union Bank could benefit from greater cost efficiencies.

b) The big news on Friday was on the GDP front. GDP for the June quarter came in sharply lower at just 5% and that is likely to weigh on the market sentiments. The GDP growth was already low at 5.8% in March quarter and has fallen further this quarter. The slowdown was visible in agriculture and in manufacturing.

c) The FPI tax surcharge was removed on equity capital gains. However, the tax continues on debt capital gains and also on derivatives income. That is the reason the FPIs may not be too enthused about this move and may be more lukewarm to it.

d) Auto stocks will continue to slip in the coming week with most of the leading players like Maruti and Tata Motors reporting a fall of 30 to 50% on a YOY growth basis. This is likely to keep the sentiments tepid on the auto counters.

e) Trade war took a turn for the worst on Sunday with China and the US imposing additional tariffs on imports and US also calling upon US companies to shift supplies from China to other companies. This will keep global markets tepid.

f) Crude oil had closed above the $61/bbl last week and any sustained rise will depend on the trade war and US drawdown if any. Indian markets will be hoping for the oil prices to not go far beyond $65/bbl to keep the trade deficit in check.

g) The rupee could be the big trigger in the coming week. The rupee got as low as 72/$ in the previous week and market analysts are already projecting a re-run of the rupee to the 74/$ mark. That is not too encouraging for FPI flows into India.

h) The $1.45 billion fall in forex reserves to below the $430 billion mark is positive as it is an indication that the RBI is willing to support the rupee at around the Rs.72/$ levels. The PMI data for manufacturing and services will also be announced this week and that will also have an impact on markets.

Overall, the market is expected to be positive for PSU banks and negative for autos.