The Indian equity market witnessed heightened profit-booking in the second part of the week gone by as rising bond yields, geopolitical tensions and concerns over inflation eroded investors' risk appetite.
The Sensex fell 3.5 percent and the Nifty50 3.02 percent for the week ended February 26 compared to the 0.28 percent fall seen in the BSE midcap index, and a gain of 1.4 percent for the smallcap index.
The fall didn't surprise experts, many of whom say the correction was overdue as the market was trading at higher valuations and most of the positives were already factored in.
Here's how market analysts foresee the trend for the coming week:
Nirali Shah, Head of Equity Research, Samco Securities
The Nifty50 index closed negative, confirming the bearish engulfing pattern formed the week earlier.
Since the index remains overbought, confirmation of the bearish signal with a bearish evening star on the daily chart does indicate further caution.
The market has also breached the immediate support of 14,630 and the Nifty is likely to decline further till the next cushion support at 14,250 in the short term.
Equity markets could remain under pressure as the normal course of correction continues to take shape.
With a fresh stimulus in the US, there could be more helicopter money in the system.
Market participants should keep an eye on bond yields and the movement of USD/INR currency pair, which could undergo some depreciation.
Investors in need of liquidity could book profits in certain pockets but long-term investors should continue to remain invested.
Ajit Mishra, VP-Research, Religare Broking
The coming week marks the beginning of the new month and participants will be eyeing important domestic data alongside the global cues. First, the auto sales data will start pouring in from March 1. On the economic front, Markit Manufacturing PMI and Market Services PMI data is scheduled on March 1 and March 3, respectively.
Markets will first react to the GDP data that came in after the market hours on Febraury 26. The economy grew marginally in the third quarter at 0.4 percent after facing a contraction in the previous two quarters. Going ahead, the rising bond yields continue to remain a key concern for equity markets worldwide. Although the recent Fed statements have been comforting.
Indications are pointing towards further slide in the Nifty and the next support at 14,400 and 14,200 levels. We expect volatility to remain high, so traders should maintain extra caution in risk-management aspects. The prudent strategy would be to use rebound to create shorts using options instead of naked futures.
Siddhartha Khemka, Head–Retail Research, Motilal Oswal Financial Services
The market may continue to consolidate given weak global cues. Investors would closely track bond yields, geopolitical tensions and inflation data for further market direction and would monitor developments around new US stimulus announcement.
The market would react to India’s Q3FY21 GDP data on March 1, while on the economic calendar front, PMI data across few countries, including India, would also be watched.
High valuations do not provide much comfort and thus correction was long overdue. Investors should take this opportunity to buy on dips while traders should trade cautiously with stock-specific action and book profits in regular intervals.
Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking
The Nifty has sneaked below its recent swing low of 14,635.05 on a closing basis. This led to a confirmation of the first sign of trend reversal in the form of "lower top lower bottom" on the daily timeframe chart.
Looking at the price structure, we expect this correction to extend towards 14,200–14,000 levels first. Here, 14,000 would be seen as crucial trendline support and a breach of this would open up further space towards 13,700– 13,500.
The short-term tide has turned downwards and the view will remain intact as long as 15,200 is not broken. On the immediate basis, 14,750 – 14,920 are to be seen as stiff hurdles.
Traders should not get intimidated if all the above-mentioned scenarios play out because the larger degree uptrend is still very much intact. For a long time, the market has not seen any major correction, so this should only be construed as a much-awaited profit-booking or a short-term corrective phase, which is healthy in the longer run.
Momentum traders should avoid aggressive or leveraged longs for a while and use decent declines to accumulate quality propositions.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities
For the next few weeks, the market trend would depend on the long-term bond yield trend, which should be on the watch list.
The market has established a series of ‘lower top and lower bottom’ that would be negative for the medium-term trend of the market.
The Nifty/Sensex would find support at 14,300/48,000 for the coming week. If the market falls to 14,300-14,350/48,200 without meaningful bounce, then it would be a buying opportunity for short-term/medium-term traders/investors.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.