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Dalal Street Week Ahead: 10 key factors that will keep traders busy next week

This week, we'll first see a reaction to HDFC Bank's March quarter earnings. The stock market will remain shut on April 21 on account of Ram Navami

April 18, 2021 / 06:40 PM IST
 
 
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The market fell for the second consecutive week amid worries over economic and earnings growth, as states increased restrictions to control the spread of COVID-19. The weakness in the Indian Rupee against the United States Dollar also dampened sentiment.

All sectoral indices, barring pharma, witnessed selling pressure during the truncated week ended April 16.

The BSE Sensex declined 759.29 points or 1.53 percent to close at 48,832.03 and the Nifty50 dropped 217 points or 1.46 percent to 14,617.85. The broader markets saw more correction than benchmarks, with the BSE Midcap and Smallcap indices falling 2.91 percent and 2.68 percent, respectively.

In the coming truncated week, the market is largely expected to be volatile as it keeps an eye on the the second wave of COVID-19 cases and global cues. Plus, given the ongoing earnings season, stock-specific action will continue, experts feel.

The market will first react to HDFC Bank's March quarter earnings announced on April 17. The stock market will remain shut on April 21 on account of Ram Navami.

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"In the coming week, we expect volatility to remain high as the market is expected to continue its focus on updates of state-wise restrictions and the spread of the virus. Stock-specific movements based on upcoming results can be expected in the market," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

Here are 10 key factors that will keep traders busy this week:

Earnings

We will be in the second week of March quarter earnings season. ICICI Bank, HCL Technologies, Nestle India, ACC, Bajaj Consumer Care, CRISIL, ICICI Prudential Life Insurance Company, 5paisa Capital, Tata Steel Long Products, ICICI Securities, Majesco, Tata Steel Bsl, Cyient, Indus Towers, Rallis India, Tata Elxsi and Mahindra & Mahindra Financial Services are among 55 companies that will release their quarterly earnings this week.

As it is the March quarter and full year earnings season, companies will keep releasing quarterly numbers for two months, i.e. till the end of May.

Spread of COVID-19

The second wave of COVID-19 cases has wreaked havoc. India reported more than 2.34 lakh new cases on April 17 for the previous 24 hours, with Maharashtra being the most-affected among states. The western state reported record 67,000 infections in 24 hours on April 17. Delhi, Kerala, Karnataka, Uttar Pradesh, Chhattisgarh and Madhya Pradesh, among other states, have also been recording a major spike in daily cases.

India's COVID-19 tally stood at 1.47 crore on April 17, including 1.76 lakh deaths so far. Over 16 lakh cases remain 'active' in the country. The recovery rate has fallen to 87.22 percent from what was around 90.80 days earlier. On the other hand, more than 12 crore doses of COVID-19 vaccines have been administered in the country so far.

Click here for Moneycontrol’s full coverage of the coronavirus pandemic

Several state governments have announced additional restrictions, which experts feel could impact economic growth. However, state have stopped short of imposing a complete lockdown like last year, which comforts the market.

FII flow

Foreign investors have turned net sellers in the month of April as they seem to be cautious due to India's COVID-19 situation and its likely short term impact on the economy. They have net sold Rs 2,597 crore worth of shares this month, though they also carried out some buying on sharp declines. If they turn net sellers in April, that would be the first monthly selling since September 2020. Hence the flow will be closely watched going forward.

On the contrary, the domestic institutional investors continued to be supportive as they net bought Rs 1,736.6 crore worth of selling in equities.

Indian Rupee

The INR further weakened to close at 75.54 against the USD, declining 1.1 percent on week-on-week basis. In fact, the currency has seen the lowest level since June 2020 amid unwinding of short dollar positions and RBI's Rs 1 lakh crore bond purchase plan.

Experts feel the picture for rupee looks gloomy amid rising coronavirus cases and its impact on the economy.

"This depreciation caused the rupee to deteriorate its position from one of the best performing currencies in Asia last quarter to the worst one now. The weakness was also intensified by unwinding of short dollar positions against the rupee. Further, central bank's gigantic bond purchase plan and rising commodity prices too going ahead might lead to a current account deficit from the existing surplus situation. Cumulatively, these determinantsare worrying participants dealing in the USD/INR pair," said Nirali Shah of Samco Securities, who advised currency traders to remain vigilant until the existing headwinds subside.

Easing bond yields

The US bond yields corrected to around 1.53-1.6 levels, from 1.77 levels seen (the 14-month high) at March-end, which supported the Indian equity market as the risk of FII outflow reduced to some extent.

The bond markets seem to have convinced by the Federal Reserve officials commentary who have repeatedly played down inflation risks and maintained statement that interest rate may remain low for a longer time. The market will closely watch the bond yields movement going forward.

The US dollar index, which measures the value of US dollar to a basket of leading global currencies, also corrected sharply to 91.53 levels, from a recent high of 93.42 levels seen on March 21, 2021.

Listing

Macrotech Developers, earlier known as Lodha Developers, will list its equity shares on the bourses on April 19. The issue price has been fixed at Rs 486 per share and the company raised Rs 2,500 crore through its public issue.

Experts largely expect it to be a muted listing on Monday, while the stock price traded at a 5-15 percent premium in the grey market, the data available on IPO Watch, IPO Guru and IPO Central showed.

Technical view

The Nifty50 gained 36.40 points on April 16 and formed small bullish candle which resembles Doji kind of pattern on the daily charts. The index fell 1.5 percent for the week and witnessed Doji kind of formation on the weekly scale which can also be seen as a Hammer kind of pattern.

Overall technical experts feel the volatility could continue in coming sessions with a broad range of 14,300-14,900 levels.

"The level of 14,250 has now become a make or break level for the index. Any break below the current support will trigger a bearish sentiment across the broader markets while other global and emerging market indices are trading at all-time highs," Nirali Shah, Head - Equity Research at Samco Securities said.

"We suggest traders maintain a cautiously bullish bias on the index and initiate long positions around the support by maintaining a strict stop loss just below the support. Resistance on the higher side is now placed at 14,900," Shah added.

F&O cues

The weekly options data indicated that the Nifty50 could see a trading range of 14,300-15,000 levels in coming sessions. Maximum Call open interest was seen at 15,000, 14,700 and 14,800 strikes, while the maximum Put open interest was seen at 14,000, 14,500 and 14,400 strikes.

Call writing was seen at 14,800, 15,300 and 15,000 strikes with Call unwinding at 14,400, 14,300 and 14,500 strikes. Put writing was seen at 14,600, 14,500 and 13,800 strikes.

"On the data front, the Nifty has major Call base placed at 14,700 strike with highest Call base placed at 15.000 strike for the weekly settlement. On the downside, 14,500 remains a crucial support due to continued build-up seen in this strike. Hence, we believe that move above 14,700 may trigger upside momentum towards 15,000 in the April series," ICICI Direct said.

The volatility cooled down 3 percent to settle around 20 levels after hitting 23 levels in the beginning of week. "We expect volatility to remain subdued, which should bode well for the current recovery," the brokerage said.

Corporate action

Here are key corporate actions expected this week:

On the economic data front, deposit and bank loan growth for the fortnight ended April 9, and foreign exchange reserves for the week ended April 16 will be released on April 23 (Friday).

Global cues

Here are key global data points to watch out for this week:

Sunil Shankar Matkar
first published: Apr 18, 2021 07:43 am

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