The market fell nearly 1 percent for the week ended March 24, extending the downtrend for a third consecutive week. A correction in European banking stocks after rate hikes by the European Central Bank, consistent selling by foreign institutional investors (FIIs) and a surprise hike in securities transaction tax (STT) on futures and options trade by the government weighed on the sentiment.
The BSE Sensex dropped 0.8 percent to close at 57,527 and the Nifty50 declined 0.91 percent to 16,945, the lowest closing level on weekly basis since July 2022. Technology, auto, metal and realty stocks corrected the most, while FMCG and pharma outperformed the benchmarks.
The broader market was hit hard, falling more than benchmarks. The Nifty midcap 100 index was down 1.75 percent and the smallcap 100 index slipped 1.88 percent during the week to close at the lowest levels since July 2022.
The market is likely to see volatile and rangebound trade in the coming holiday-shortened week with the focus remaining on global banking system in the absence of key driving factors on the domestic front, experts said.
"The volatility in the market is expected to continue in the short term as the global banking system is yet to fully recover from the crisis, especially in Europe," Vinod Nair, Head of Research at Geojit Financial Services said.
Joseph Thomas, Head of Research, Emkay Wealth Management, said bank failures, a hike in the base rate by the Fed and Bank of England and persistent inflation could see the hard money policy continuing to influence the market in the coming week too.
The markets will be closed on March 30 on account of Ram Navami.
Here are 10 key factors that will keep traders busy next week:
1) Banking Crisis
Every update on the global banking system, especially with respect to the US and Europe, will be watched in the coming week. In the passing week, the market was nervous after fresh concerns emerged with German lender Deutsche Bank falling more than 14 percent at one point on March 24 after a jump in credit default swaps (CDS). It closed 6.5 percent lowers, taking the total loss to over 25 percent for March.
CDS is a form of insurance for a company's bondholders against its default. These fresh concerns emerged after a recent emergency rescue of Credit Suisse (by UBS for $3.2 billion), the collapse of Silicon Valley Bank (SVB), the shut down of Signature Bank and First Republic Bank getting financial aid from 11 US banks. After these worries, authorities in the US and Europe have taken steps to avoid a bigger crisis in the financial sector.
The recent US probe against UBS and Credit Suisse on whether financial professionals helped Russian oligarchs evade sanctions will add to uncertainty in the macro-economic environment and keep investor confidence fragile, Ravindra Rao of Kotak Securities said.
The US regulators assured the public that the banking system was safe, while European Central Bank President Christine Lagarde said the euro area was resilient because it had strong capital and solid liquidity positions.
On March 24, “The Financial Stability Oversight Council discussed current conditions in the banking sector and noted that while some institutions have come under stress, the US banking system remains sound and resilient," the statement said after a closed meeting was convened by US treasury secretary Janet Yellen, Federal Reserve chairman Jerome Powell and more than a dozen other officials.
2) US Q4CY22 GDP growth
The market participants will be following the final US growth numbers for the final quarter of the previous calendar year scheduled to be released on March 30.
In the second advance estimates announced in February, the US economic growth at 2.7 percent was weaker than the 2.9 percent recorded in the initial advance estimates, as the 1.4 percent increase in consumer spending (the lowest since Q1CY22) was lower compared to 2.1 percent increase in initial estimates announced in January. Fall in spending on goods and lower spend on services also impacted second advance estimates for growth.
The US economy recorded 3.2 percent growth in July-September 2022.
The UK's GDP numbers for the October-December period of 2022 will also be watched. In the passing week, Bank of England raised interest rates by 25 bps, the 11th consecutive hike since December 2011, after a surprise jump in inflation to 10.4 percent for February.
3) Global economic data points
Here are other key global economic data points to watch out for next week:
4) Domestic Economic Data Points
On March 31, we will have fiscal deficit and infrastructure output data for February. Current account and external debt numbers for the quarter ended December FY23 will also be released the same day.
India's fiscal deficit for April-January FY23 widened to Rs 11.91 lakh crore, which accounted for 67.8 percent of the full-year target for FY23 against 58.9 percent in the same period last year.
Foreign exchange reserves data for the week ended March 24, too, will be released on March 30. In the week ended March 17, the reserves increased by $12.798 billion to $572.801 billion due to a rise in foreign currency assets and gold reserves.
5) Oil prices
Oil prices remained in favour of net importers like India and acted as strong support for not only equity markets but also the economy because any rise in fuel prices increases the pressure on fiscal deficit. Hence if the price falls further or remains steady, it will continue to support the market.
International benchmark Brent crude futures dropped over 1 percent on March 24 after fear of slowing demand, correction in European banking shares and comment by US energy secretary Jennifer Granholm, who said it would be “difficult” to refill government oil reserves this year. For the week, the prices settled 2.8 percent higher after nearly a 12 percent loss in the previous week. West Texas Intermediate (WTI) US crude futures gained 3.7 percent for the week.
6) FII Flow
The consistent FII outflow was also one of the reasons for the correction in the equity market, though domestic institutional investors (DIIs) managed to compensate for the FII outflow by a wide margin. Given the global concerns, the FII flow is unlikely to improve in the coming weeks, experts said.
FIIs have net sold Rs 6,654 crore worth of shares during the week, turning the flow negative for the current month, whereas DIIs poured in Rs 9,430 crore.
7) Technical View
The Nifty has formed a bearish candlestick on the daily as well as weekly timeframes, making lower top and lower bottom for the second consecutive week, indicating nervousness.
The index once again broke the lower threshold of the channel towards the end of the last week, with the momentum indicator relative strength index in a bearish crossover on the daily as well as weekly scales, making traders cautious.
Hence, 17,200-17,250 area is expected to be a crucial hurdle on the higher side, as surpassing the same can take the Nifty to 17,450-17,500, which also coincides with the 200-daily moving average. The recent low of 16,800 will likely act as crucial support followed by 16,600-16,500 levels, experts said.
"Amid all the pessimism, we expect Nifty to hold the support zone of 16,600-16,800 levels. However, the upside also seems capped, due to the stiff hurdle at the 17,200-17,400 zone," Ajit Mishra, VP-Technical Research at Religare Broking said.
It would be prudent to stay light and wait for clarity, he said.
8) F&O cues
The options data also indicated that the expected trading range for the Nifty50 may be around 16,800-17,200 in the near term and the broader range could be 16,500-17,500 levels.
The maximum Call open interest was at 18,000 strike, followed by 17,100 and 17,500 strikes, with Call writing at 17,000 strike, then 17,500 strike and 17,100 strike. On the Put side, the maximum open interest was at 17,000 strike, followed by 16,500 strike, with writing at 16,800 strike, then 16,700 and 16,900 strikes.
"The immediate support on the downside is at 16,850-16,800, whereas the immediate hurdle is at 17,100 where the highest open interest was built up on the Call side. Till the time Nifty is in this range, it is expected to remain sideways," Mitesh Karwa, Research Analyst at Bonanza Portfolio said.
9) India VIX
The volatility has increased for the third consecutive week but overall, it was still within the previous week's range. India VIX, the fear index, rose 3.2 percent to 15.24, taking the total increase to 25 percent in three weeks.
10) Corporate Action
Hindustan Zinc, SBI Cards and Payment Services, Angel One, CRISIL, Dwarikesh Sugar Industries, and Indraprastha Gas will trade ex-dividend, while Symphony, and Godawari Power & Ispat are going to turn ex-buyback next week.
Here are key corporate actions taking place in the coming 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.
