The biggest risk factor for the market to watch out for would be the deadly coronavirus
The momentum in the equity market continued for the second consecutive week ended May 7, though it was a volatile and range-bound week. It was supported by hopes of recovery through vaccination, RBI's further liquidity measures for COVID-hit sectors, and positive global cues including Biden's decision to waive intellectual property rights on vaccines and easing restrictions on movement in the US & Europe.
The BSE Sensex climbed 424.11 points to 49,206.47 and the Nifty50 was up 192.05 points at 14,823.15 during the week, while the broader markets outpaced frontliners as the BSE Midcap index gained 1.46 percent and Smallcap index jumped 2.53 percent.
Overall the market has been in a range for three consecutive months and there has been no directional move in the market. Hence experts feel the market is expected to remain range-bound in the coming truncated week as well and will keep a close watch on COVID spread, earnings season and global cues.
"Though we have not seen any major impact of the COVID second wave on markets yet, the news of strict lockdown in several states may deteriorate the sentiment ahead. Amid all, participants are keeping a close watch on the vaccine drive as well," said Ajit Mishra, VP Research at Religare Broking.
"The stock-specific trading opportunities across the board are keeping the traders busy and it may continue in the coming week as well. Traders should align their positions accordingly," he added.
The market will remain closed on May 13 for Ramzan Id.
Here are 10 key factors that will keep traders busy in the coming week:
Total 165 companies will declare March quarter earnings next week including major ones like Asian Paints, Lupin, UPL, Vedanta, Cipla, Dr Reddy's Laboratories, and Larsen & Toubro.
Among others, Chambal Fertilisers, HFCL, HSIL, Aarti Industries, BASF India, Dishman Carbogen Amcis, Godrej Consumer Products, Granules India, Kalpataru Power Transmission, KEC International, Neuland Laboratories, Siemens, Apollo Tyres, Birla Corporation, Happiest Minds Technologies, Jindal Steel & Power, Pidilite Industries, Tata Power, Voltas, Equitas Holdings, Indian Energy Exchange, Mphasis, Polycab India, SCI, Westlife Development, Balkrishna Industries, Escorts, Indigo Paints, Macrotech Developers, Mindspace Business Parks REIT, Rossari Biotech, and Trident will also release quarterly earnings next week.
Larsen & Toubro
L&T, the largest engineering and infrastructure company, would be key stock to watch out for in the coming week as it will release its March quarter and full year earnings on Friday.
Brokerages largely expect around 10 percent growth in key earnings parameters with quarterly order inflow of over Rs 50,000 crore in Q4FY21.
"We expect revenues to increase by around 9 percent YoY mainly due to ramp up in execution of core E&C segment. EBITDA is expected to increase by around 10 percent, while adjusted profit is likely to grow by around 9 percent YoY," said Dolat Capital which sees total order inflow for the quarter worth around Rs 65,000 crore, up 13 percent YoY.
Motilal Oswal expects order inflows in core business to increase 10 percent YoY at Rs 53,000 crore. L&T declared orders in the range of Rs 26,000-50,000 crore during the quarter.
Key things to watch out for would be ramp-up in execution trend and outlook across various segments, outlook for first half of FY22 and commentary on working capital management.
The biggest risk factor for the market to watch out for would be the deadly coronavirus that tightened grip over India, as the country continued to report more than 4 lakh COVID cases for third straight day with biggest single-day rise in deaths of 4,187 people on Friday, not only increasing pressure on the medical infrastructure and but also increasing pressure on the economy through lockdowns in several important states.
Experts feel the cases to peak could take more weeks considering the current count. Infact there is a fear of more waves as recently K Vijay Raghavan, the Indian government's principal scientific advisor, himself told in a news conference, "Phase 3 is inevitable given the high levels of circulating virus. But it is not clear on what timescale this phase 3 will occur. We should prepare for new waves." Firstpost reported on May 6.
Corporates, economists, and market experts feel if the situation continues for another 2-3 months then that would be a big pressure on several business segments.
India added 4.01 lakh cases with 4,187 deaths, while the recoveries were 3.18 lakh on Friday. The recovery rate dropped to 81.90 percent compared to 81.95 percent in the previous day.
The single-day vaccination tally remained above 20 lakh for the second straight day as 22.97 lakh doses were administered on May 7, taking the total vaccination tally to over 16.5 crore including fully vaccinated count of people over 3.28 crore so far.
In total, India reported confirmed COVID cases at 2.19 crore so far with 2.38 lakh deaths, while the recoveries were 1.79 crore and active cases count was 37.23 lakh so far by Friday.
FII Outflow continues
The outflow by foreign institutional investors continued in the month of May as well, as they have net sold more than Rs 5,000 crore worth of shares in May so far in the cash segment, in addition to Rs 12,039 crore of selling in April. Experts feel the outflow could continue if the situation deteriorates further which ultimately pressurises the economy.
The reason behind their outflow remains the same - the rising graph of COVID cases as they worried about COVID impact on the economy as well as earnings growth for the full year, though there is a support to the market from domestic institutional investors.
Domestic institutional investors have net bought Rs 2,135 crore of shares so far in May, on top of over Rs 16,500 crore of buying in the previous two months.
Economic Data Points
The important economic data points to watch out for in the coming week would be IIP and inflation. The industrial production and manufacturing production data for March, and inflation for April will release on Wednesday, while WPI inflation for April will be declared on Friday.
"IIP data is expected to show robust growth due to economic recovery witnessed in March while inflation rates are to remain at elevated levels," said Vinod Nair, Head of Research at Geojit Financial Services.
Industrial output contracted 3.6 percent in February and CPI inflation reported in March at 5.52 percent.
Foreign exchange reserves for the week ended May 7, and balance of trade for April will also be released on Friday.
The price movement of commodities would also be watched out for in coming weeks. Several key commodity prices continued their upward momentum on the back of likely strong demand amid global recovery hope especially after optimism over the US economy and easing travel related restrictions in Europe. Experts feel if the price rise continues then it could strengthen inflation concerns and that ultimately could fuel debate over continuity of loose monetary policies by central banks.
Last week, LME Copper price has jumped to record high levels above $10,200 per tonne; crude oil has resumed its upward momentum and tested the highest level since March, gaining 1.5 percent during the week and 8.5 percent in the last one month. Gold also breached the $1800 per troy ounce level as the US dollar weakened and market players played down monetary tightening possibilities. Similar up move was also visible in agri commodities as well which are trading near multi month highs.
With rising commodity prices, world food prices increased for a 11th consecutive month in April, hitting their highest level since May 2014, the United Nations food agency said on Thursday.
"While rising commodity prices have fueled inflation concerns, major central banks have played down the risks so far however there are signs of dissent. Fed officials have maintained that while the economy is recovering fast it is still too soon to withdraw stimulus measures. However, Dallas Fed Robert Kaplan said he wants the central bank to start talking about reducing policy accommodation sooner rather than later," said Ravindra Rao, VP- Head Commodity Research at Kotak Securities.
"If commodities continue to trade higher, inflation concerns may strengthen further fueling debate about how long central banks can continue with loose monetary policies. Meanwhile, higher prices could also dent demand from China which is usually a bargain buyer," he added.
The Nifty50 gained 98.40 points on Friday but formed Doji kind of pattern on the daily charts as the closing was near to its opening levels, indicating indecisiveness among bulls and bears. On the weekly scale, the index witnessed bullish candlestick formation as the index gained 1.3 percent.
Overall the market continued with range-bound action and is expected to continue with the same unless it decisively breaks either 15,000 on the upside and 14,400 on the downside.
"Nifty50 index closed the week on a positive note, however, the price is still oscillating within a consolidation range. The market breadth also remained quite strong and many stocks are witnessing a fresh up-move or continuation in uptrend. But as long as Nifty trades below the lower end of the rising channel, there are chances of this rally being a bull trap," said Nirali Shah, Head of Equity Research at Samco Securities.
She further said, "The short-term support and resistances are now placed at 14,400 and 15,000, break on either side will dictate the short-term trend." She suggests traders maintain a neutral bias on the market and keep strict stop-loss below immediate support.
On the option front, the maximum Put open interest was seen at 14,500 followed by 14,600 and 14,800 strikes while maximum Call open interest was seen at 15,200 followed by 15,000 and 15,100 strikes. Call writing was seen at 15,200, 14,800 and 15,400 strikes with Call unwinding at 14,700 and 14,600 strikes, while Put writing was seen at 14,800 then 14,500 strikes.
Option data suggests the Nifty could see a wider trading range of 14,400 to 15,200 levels, while an immediate trading range could be 14,600 to 15,000 levels.
"On the data front, the Nifty still has the highest Call base at 15,000 Call strikes for the coming weekly settlement," ICICI Direct said.
The brokerage further said, "Since mid-March, the Nifty was unable to close above these levels. However, gradual writing at OTM Put of 14,600 and 14,800 strikes suggest limited downsides. Till these levels are held, there is a high probability that the Nifty could move towards 15,200 in the coming sessions."
Volatility in the markets moved lower towards 20 (20.82 levels against 23.02 levels on a week-on-week basis), which is the lowest level for volatility since mid-April. "Sustainability of current levels may infuse fresh uptrend in the broader markets in the coming sessions. As suggested earlier, one should be cautious if it starts moving higher once again," ICICI Direct said.
Here are key corporate actions taking place in the coming week:
Here are key global data points to watch out for next week: