The beginning of Ukraine invasion by Russia and rising oil prices dampened market sentiment in the week ended February 25, though benchmark indices showed smart recovery of 2.5 percent following positive global cues on Friday. The correction was across the board with sectors falling between two and five percent.
The BSE Sensex plunged 1,974 points or 3.41 percent to 55,858 and the Nifty50 fell 3.6 percent or 618 points to 16,658 during the week while broader markets Nifty Midcap 100 and Smallcap 100 declined 3.4 and 5.3 percent respectively.
Experts expect sentiment may remain in favour of bears till the conflict between Russia and Ukraine subsides. Moreover, economic data and monthly auto sales are lined up for the coming holiday-shortened week.
"Prevalent geopolitical tensions will continue to take centre stage and will be a primary driver directing market and investor mood internationally. If the current state of conflict between Russia and Ukraine continues, markets may sink further into the red sea," says Yesha Shah, Head of Equity Research at Samco Securities.
Given various trigger points and growing uncertainty, she advised extreme prudence in the short term and avoiding any aggressive trades.
Also read - Benchmark indices can deliver double digit returns this year, says Gaurav Misra
The market will remain shut on Tuesday for Mahashivratri.
Here are 10 key factors that will keep traders busy next week:
Invasion of Ukraine by Russia is going to be a key concern in coming days, which will keep global markets volatile but will support commodity prices that rallied sharply last week.
Russian forces have launched a brutal attack on Ukraine that is fighting hard to hold its capital city Kyiv as well as other cities. Volodymyr Zelensky, the president of Ukraine, urged people to fight Russian forces. Reports indicated Russian forces are facing resistance from Ukrainians as well as logistical issues.
Click Here To Know All Live Updates on Ukraine-Russia
"Russian forces are not making the progress they had planned. They are suffering from logistical challenges and strong Ukrainian resistance. Russian forces are sustaining casualties and a number of Russian troops have been taken prisoner by Ukrainian forces," CNBC reported quoting the UK's ministry of defence.
Reports further said the US could be supporting Ukrainian forces with Javelin missiles and Germany with anti-tank weapons and stinger missiles.
Also read - US, UK, Europe, Canada to block Russian access to SWIFT: Report
Several countries including the US, UK and European nations already put several sanctions on Russia that is conducting military operations in Ukraine. The US, Britain, Europe and Canada on Saturday moved to block Russia's access to the SWIFT international payment system as part of another round of sanctions against Moscow, Reuters said.
Oil Price
Oil price, the major part of India's import bill, will be closely watch by market participants in coming days as international oil benchmark Brent crude futures climbed up to $105.79 a barrel, the highest since 2014, before settling the week at $97.93 against $93.54 levels last week. The prices gained around 45 percent in last two months.
Elevated oil prices will force the country to shell out more to buy the black gold and could impact the economy to some extent. Earnings could be at risk as there could be margin pressure due to higher commodity prices of oil and others including aluminium and nickel where Russia has market share.
The attack on Ukraine intensified selling by foreign institutional investors (FII) spurred by expectations of a faster US Federal Reserve tightening. Analysts largely expect six to seven rate hikes by the Fed in the coming year.
If the war between Ukrainian and Russian forces continues, the selling could further intensify, experts feel.
FIIs have net sold Rs 19,843 crore worth of shares in the passing week, taking the monthly outflow to Rs 41,771.60 crore, the highest since March 2020. With this, the total outflow stood at more than Rs 1.84 lakh crore in just five consecutive months since October 2021.
On the other hand, domestic institutional investors have managed to compensate the FII outflow by buying Rs 21,512 crore worth of shares during the week. Their net buying during the current month stood at Rs 37,941 crore.
Auto Sales
Market participants will also watch monthly sales data by auto companies which will be released from Tuesday. Commercial vehicle sales are expected to continue to show positive growth and passenger vehicle sales could also be positive on improved chip supplies, but subdued customer sentiment may impact two-wheeler and tractor sales, experts feel.
Stocks like Tata Motors, Ashok Leyland, Maruti Suzuki, TVS Motor, Bajaj Auto, Escorts, Eicher Motors, M&M, etc. will be in focus next week.
"The channel checks indicate that commercial vehicles should maintain upward momentum in February. Passenger vehicle volume growth should also be positive thanks to improving chip supplies. Two-wheelers and tractors are likely to decline due to subdued customer sentiments and the high base effect," says Emkay Global in its latest report.
Economic Data Points
Apart from geopolitical tensions, the Street will also closely watch economic data points including GDP growth for December quarter, infrastructure output for January and fiscal deficit numbers for January which will be released on Monday.
The Indian economy registered 8.4 percent growth in the quarter ended September against 20.1 percent growth in the previous month. Most analysts largely expect growth in the December quarter to be in the range of around six percent.
Markit Manufacturing PMI data for February will be released on Wednesday, followed by Markit Composite & Services PMI for February on Friday.
Technical View
The Nifty50 formed a bullish candle on daily charts on Friday as the index gained 2.5 percent at 16,658 but for the week there was a bearish candle formation on the weekly scale indicating nervousness at Dalal Street.
Also the benchmark index is still under its 200-day exponential moving average of around 16,700-16,800, which is a key concern though the market recovered sharply on Friday. Experts feel the index needs to clear this hurdle (16,700-16,800) before the 17,000 mark which could give strength to bulls, whereas the recent low of 16,200 could be the major support.
"The sharp comeback of market on Friday could be a cheering factor for bulls to make a comeback. But the crucial overhead resistance of around 16,700-16,800 levels could be a tough task to sustain the highs," says Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
"Further upside from here is likely to encounter resistance in the short term and one may expect weakness emerging from the lower highs. Immediate support is placed at 16,500 levels," he adds.
India VIX
After rising to June 2020 levels at 32, volatility cooled down considerably to 26.7 on Friday but has to fall below 20 for stability in the market which could be possible with the easing of geopolitical tensions; till then volatile swings could be seen that may support bears more, experts feel.
India VIX, the fear index which measures the expected volatility in the market, jumped 20.6 percent during the week to 26.74 on Friday.
"Wild swings have caused volatility to move to highest levels since June 2020. In the last session it declined from 32 to 27 percent. Further cool-off may be seen if geopolitical tensions start showing signs of easing," says ICICI Direct.
Prevailing volatility is hard to trade, says Ajit Mishra of Religare Broking, suggesting traders limit positions and wait for some stability. "Investors, on the other hand, should use this phase to accumulate quality stocks on dips."
Option data clearly indicates that the Nifty50 could remain in a wider trading range of 16,000-17,000 in coming days or till the market gets sense of easing geopolitical tensions, and sustainability above 16,800-17,000 levels is going to be crucial for further upward direction with strong support at 16,200-16,000.
On the option front, there was maximum Call open interest at 17500 then 17000, 17400 strikes with Call writing at 17500, 17400 and 17200 strikes and Call unwinding at 16400, 16300 and 16200 strikes.
The maximum Put open interest was seen at 16000 then 16500 and 16600 strikes with Put writing 16000, 16600 and 16500 strikes and Put unwinding at 17000, 17100 and 17200 strikes.
"From an options point of view, not just Nifty but most stocks have started the series below their Put bases. A recovery above Put base should bring some normalcy. However, during the process significant Call writing was also observed. Hence, a move above 16,800 may trigger short covering move towards 17,200," says ICICI Direct.
Corporate Action
Here are key corporate actions taking place in the coming week:
Global Data Points
Here are key global data points to watch out for next week:
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
