Bears weighed on the sentiment in the week ended September 25, though bulls made a successful strong attempt on Friday to soothe the weakened sentiment amid expectations of stimulus package before festive season. The market fell nearly 4 percent during the week, while the broader markets corrected over 5 percent.
Rising concern over global economic recovery following increase in COVID-19 infections in Europe and fear of re-imposition of lockdown, and uncertainty over US stimulus package dented sentiment.
Experts expect the volatility to continue in coming week despite strong rally seen on Friday amid short covering, and feels all eyes on RBI monetary policy and COVID-19 virus cases.
"The market is expected to remain volatile and directionless in the absence of solid triggers. Global cues will continue to be in focus as resurgence in virus cases around the world, leads to more restrictions and more pressure on the economic recovery," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
He advised traders to limit overnight positions and investors to only accumulate quality stocks for the time being.
Ajit Mishra, VP - Research at Religare Broking also feels the volatile swings seen across the board do not subside anytime soon.
Among sectors, Auto, Bank, Energy, Infra, Metal and Pharma indices declined 5-8 percent each.
Here are 10 key factors that will keep traders busy next week:
RBI Monetary Policy
The key event to watch out for in the coming week would be the outcome of three-day MPC's monetary policy review meeting scheduled on October 1. The rate cut is largely unexpected given the elevated inflation levels, though RBI kept an accommodative stance. The key thing to note would be commentary on macroeconomic data points.
"The Monetary Policy Committee's stance will continue to be accommodative and supportive of economic growth. This is crucial as we are now in a critical phase of India's recovery - high frequency data shows that many segments of the economy are moving and are reaching close to 70/80 percent of pre-COVID levels. Inflation is still elevated. However, with normal monsoons and higher agriculture output, inflation should moderate through Q3. Overall, expect a 'wait and watch' policy," Shanti Ekambaram, Group President – Consumer Banking at Kotak Mahindra Bank told Moneycontrol.
Auto sales for September month will be released later in the coming week will also be keenly watched by the Street. The improvement in two-wheeler, tractors and passenger vehicle sales data is expected to continue in September, but commercial vehicle sales may remain weak, experts feel.
Bajaj Auto, TVS Motor Company, Hero MotoCorp, Maruti Suzuki, M&M, Tata Motors, Escorts etc would be in action.
The primary market will continue to be in action next week too, as three more IPOs that will open for subscription. Much-awaited UTI AMC will launch its IPO on September 29 and will close on October 1, with a price band of Rs 552-554 per share.
The IPO of state-owned Mazagon Dock Shipbuilders will also open on September 29 till October 1, with a price band of Rs 135-145 per share, while Likhitha Infrastructure, the oil & gas pipeline infrastructure service provider, is also going to launch its Rs 61.2-crore IPO in same schedule, with a price band of Rs 117-120 per share.
Chemcon Speciality Chemicals and Computer Age Management Services are expected to list shares on bourses on October 1, after witnessing strong subscription of 149.30 times and 47 times respectively during September 21-23.
Currently both are trading at more than Rs 300 per share premium over their final issue price of Rs 340 per share and Rs 1,230 per share respectively, sources familiar with the development told Moneycontrol.
COVID-19 was one of reasons for correction seen in the passing week as some countries especially in Europe have been seeing sudden sharp increase in infections, which raised fears of re-imposition of lockdown. As a result, the global markets turned cautious due to delay in global economic recovery. Market is also worried about second wave.
Now there are more than 3.2 crore confirmed infections globally with nearly 10 lakh deaths, while India reported more than 59 lakh confirmed cases with around 94,000 deaths so far, as per Johns Hopkins University.
World Health Organisation on Friday said that global COVID-19-led death toll could double from nearly 10 lakh now if the countries don't uniformly work to reduce the virus spread. Hence, the all developments related to virus will be closely watched, as vaccine is expected in the end of 2020 or initially next year.
But the good part to note here in India is the improving recovery rate (which was at 82.2 percent jumped from 79.4 percent last week) as well as fatality rate (which was below 1.6 percent now, from 1.61 percent last week).
FII flows are going to be closely watched next week as they were net sellers in the week gone by, to the tune of Rs 10,491 crore, but DIIs tried to have an offsetting position as they net bought over Rs 4,200 crore worth of shares during the week.
FIIs seem to be turned cautious amidst volatility in the global market. On the FIIs derivatives front, there was long liquidation in index futures and short covering in stock futures.
The Nifty50 rebounded over 2 percent and formed large bullish candle on daily charts Friday, but during the week, it was down nearly 4 percent and formed bearish candle. Hence the technical experts expect the rangebound trade to continue in the coming week unless and until the index decisively breaks the expected range of 10,800-10,350 on either side.
"Overall, Nifty can trade in a range of 20 DMA standing around 11,350 mark and 200 DMA placed near 10,800 levels for the coming week whereas strong movement on either side will decide directional action," Shabbir Kayyumi, Head of Technical Research at Narnolia Financial Advisors told Moneycontrol.
But for the rally to resume, he feels the Nifty needs to close above 11,350 mark, till then sell on a higher level would be the right strategy. "Also, in the very near term, rapid fall in the last week has put the majority of the oscillators in an oversold zone, so chances of bounce back to cool off the indicators is likely possible," he said.
Options data also indicated the similar trading range of 10,800-11,300 for the Nifty in the coming week, while the broader trading range could be 10,500-11,500 levels. Short covering on Friday, the first day of October series, helped the index close above psychological 11,000 mark after significant fall of nearly 3 percent on September expiry day, Thursday.
Maximum Put open interest was seen at 10,500 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. Marginal Call writing was seen in 11,300 and 11,600 strike while Put writing was seen at 10,500 then 10,600 strikes.
"The October series has started with just 85 lakh shares, which is one of the lowest open interest in the Nifty historically suggesting long liquidation. Sectorally also, we have seen most of the performer stocks have seen relatively low open interest coming into the October series," ICICI Direct said.
"On the options front, the Nifty has a major Call base at the 11,200 strike, which is likely to remain an immediate hurdle for the coming weekly settlement. Going ahead, we expect the Nifty to remain under pressure while highs can be utilised for creating short positions," the brokerage added.
Corporate Action and Other Economic Data points
Here are key corporate actions taking place in the coming week:
Among others, infrastructure output and fiscal deficit for August, and current account numbers for first quarter of FY21 will be released on September 30, while Markit Manufacturing PMI for September will be announced on October 1.
Here are key global data points to watch out for next week: