From long term bond yield trends to crude oil price movements to macroeconomic data takeaways, a slew of factors will drive domestic equities this week, according to analysts as investors look for a breather after days of bloodbath in the market.
Besides, investments by FPIs (Foreign Portfolio Investors) as well as domestic investors, February auto numbers and readings of services and manufacturing sectors' performance last month will be keenly watched by investors. The coronavirus situation in various states, some of which are seeing a spike in infections, will also be a factor.
"Going ahead the market may continue with its consolidation 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 announcements," Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, said.
After multiple rallies since the Union Budget presentation on February 1, the stock market closed in the red in the week gone by. The benchmark indices -- Nifty-50 & BSE Sensex -- slumped over 3 per cent during the week, and on Friday, the 30-share BSE Sensex crashed about 1,940 points to post its biggest single-day fall in nearly ten months.
The domestic equity market witnessed a massive selloff amid a global correction led by a sharp spike in global bond yields along with a sudden increase in COVID-19 cases in a few Indian states.
"What we are seeing in the Indian market is a knee jerk reaction to the rise in global bond yields. In the immediate future, Indian markets could also bear the brunt of global correction but as time goes it could recoup and standout," Rusmik Oza, Executive Vice President and Head of Fundamental Research at Kotak Securities, said.
Further, Oza noted that due to the strong accumulation of reserves, RBI could be in a better position to handle any currency weakness being caused by rising bond yields and potential FPI outflows. "Stable currency, strong economy growth and a sharp rise in earnings could help India sustain any global correction due to inflation and rising bond yields."
On Monday, the market will also react to the GDP data for the December quarter of the current fiscal. The Gross Domestic Product (GDP) grew 0.4 per cent in the October-December 2020 period compared with the same period a year back, according to the data released on Friday.
"The Q3 GDP growth number at 0.4 per cent is lower than our estimates of 0.8 per cent but quite short of some other estimates which were in the range of 1.4-2 per cent... The equity markets may be a tad disappointed with these data points but the mood at this point is anyway somber," Dhiraj Relli, MD & CEO of HDFC securities, said.
Investors will also track movements in brent crude oil and rupee-dollar during the week.
"Since 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; rather use decent declines to accumulate quality propositions with the broader view," Sameet Chavan, Chief Analyst (Technical and Derivatives) at Angel Broking, said.