The market witnessed too much volatility in the week ended January 15 as the indices started off on a good note and hit a record high in the middle of week following good Q3 earnings and amid FII inflow, but failed to sustain the momentum on Friday due to weak global cues, rising bond yield and lower-than-expected US stimulus.
The BSE Sensex and Nifty50 ended the week around half a percent higher, but the broader markets underperformed frontliners with the Nifty Midcap index falling 1.2 percent and Smallcap declining 0.6 percent.
The volatility seen last week may continue in the coming week as well, considering the Union Budget 2021 ahead, while the focus will also remain on quarterly earnings, experts feel. On Monday, the first market will react to HDFC Bank's earnings announced on last Friday.
"Up until the Union Budget, markets are expected to witness unusual hype and hysteria on hopes and expectations from the budget which will drive the volatility even higher. Taking a holistic view, largecap players might not see a significant rise but there could be a lot of buzz in small and midcaps. At current price points, market participants may look for trading bets rather than invest for the long haul," Nirali Shah, Senior Research Analyst at Samco Securities told Moneycontrol.
Vinod Nair, Head of Research at Geojit Financial Services, who advised investors to consider partial profit booking, said along with the weak global market, in the coming week, the domestic market would shift its focus on the banking and finance sector as major Banks and NBFCs are to release their quarterly result.
Here are 10 key factors that will keep traders busy next week
Earnings season for the quarter ended December 2020 will be in full swing now as around 193 companies will announce their quarterly earnings in the coming week.
The important one to watch out for would be Reliance Industries, Bajaj Finserv, Bajaj Finance, Bajaj Auto, Asian Paints, Yes Bank, Indiabulls Real Estate, IndiaMART InterMESH, IRB Infrastructure Developers, Mindtree, Alembic Pharmaceuticals, CSB Bank, ICICI Lombard General Insurance Company, Larsen & Toubro Infotech, Federal Bank, Havells India, HDFC AMC, L&T Technology Services, Syngene International, Bandhan Bank, Biocon, JK Tyre, Ceat, MCX, SBI Card, Gland Pharma, HDFC Life Insurance Company, Indian Bank, JSW Steel, SBI Life Insurance Company, Symphony, DCB Bank, Polycab India and UltraTech Cement.
Country's largest private sector company Reliance Industries will announce its earnings for the quarter ended December 2020, on January 22. The key focus would remain on its telecom and retail businesses, while the sequential performance is expected to be strong with ARPU at Rs 149, gross refining margin around $7 a barrel and improvement in petchem margin.
"RIL is expected to report GRM at $7.0 a barrel, benefitting from spike in ATF cracks during the quarter, while Arab LtHv spread shrinks marginally QoQ, while Jio's ARPU could improve by 3 percent QoQ to Rs 149, with subscribers at 41.5 crore (up 12 percent YoY, up 2 percent QoQ)," Motilal Oswal said.
"Petchem margins improved QoQ with PE, PP, PVC delta up 25 percent, 27 percent, 52 percent respectively - thus likely to offset the continued pain from delay in recovery of refining margins," the brokerage added.
Coronavirus and Vaccination
The world's largest vaccination programme has started off across the country on January 16 with around 3 crore people getting doses in the first phase, including healthcare workers, doctors and then people with age above 50 years. Currently the government's vaccination app, CO-WIN, is accessible only to above people, which will then be available for general public after a month's time, to self-register for the vaccination drive.
Two vaccines have been granted emergency use approval in India - Covishield, developed by Oxford University and AstraZeneca and produced by Serum Institute of India, and COVAXIN, developed and produced in India by Bharat Biotech.
The market will keenly watch the vaccination drive, though currently India is at far better stage in terms of infections compared to western world which still struggling with large infections and facing lockdown measures.
The recovered people count at 1.02 crore was more than 48 times of active cases (2.11 lakh) available currently. The recovery rate further improved to 96.56 percent while the positivity rate slipped to 2 percent and mortality rate was at 1.44 percent for seventh straight day.
Globally more than 9.38 crore people are infected by virus so far, with over 20 lakh deaths as per the Johns Hopkins University.
The market will start focussing on the budget expectations ahead of Union Budget 2021-2022 which is scheduled to be presented by the Finance Minister Nirmala Sitharaman on February 1. Hence, experts feel the rotational buying or selling in sectors could be seen in coming two weeks.
Majority of experts feel the government may largely focus on infrastructure, manufacturing and healthcare segments, and segments where the maximum jobs creation can happen going ahead, along with fiscal consolidation path, though the government already announced several slew of measures to boost the economy.
This is budget is also important because it will be the first budget after COVID-19 pandemic which dragged the economy into contraction mode and has taken more than 1.5 lakh lives so far in India.
"We believe, the government's spending towards infrastructure, social sectors as well as relief to sections impacted by the pandemic will decide the pace of economic recovery. We expect the government to prioritize spending in areas such as Agriculture; Manufacturing; Healthcare; Infrastructure; pandemic affected sectors such as Financials (NBFC’s), MSME's, travel and tourism; and relief to farmers and lower income households. We believe reforms that boost long term growth and productivity will find the ‘pride of place’ in the budget," Niraj Kumar, Chief Investment Officer at Future Generali India Life Insurance Company said.
The year 2021 for the primary market started off on a strong note as two IPOs - Indian Railway Finance Corporation and Indigo Paints - will hit the Dalal Street in the coming week, after a strong IPO season seen in the second half of last year 2020.
Indian Railway Finance Corporation, the dedicated market borrowing arm of the Indian Railways, will open its Rs 4,633 crore IPO for subscription on January 18 and the same will close on January 20.
The bidding for Rs 1,176-crore initial public offering of Indigo Paints, the fifth largest company in the Indian decorative paint industry, will begin from January 20 till January 22.
The foreign fund flow continued to be strong in the month of January as well, as they have net bought more than Rs 17,000 crore of shares so far in current month, in addition to over Rs 1.6 lakh crore of buying in previous year. Majority of 2020 inflow was seen in last three months (October-to-December).
Majority of experts feel the FII flow may continue in medium to long term given the outperformance of India compared to other nations amid COVID-19 crisis, but there could be slight volatility in flow around budget, the big event of the year.
On the other hand, domestic institutional investors continued their selling in equities for fourth consecutive month, as they preferred to take money off the table given the market at record high levels. They net sold more than Rs 12,000 crore of shares in January so far.
The Nifty50 lost more than one percent on Friday and gained 0.6 percent for the week, forming bearish candle on the daily chart and Doji kind of pattern on the weekly scale which indicates indecisiveness amongst participants.
The index failed to surpass its record high of 14,653 seen on last Wednesday in the following two sessions, which is expected to be stiff resistance for the market and decide the next uptrend, while the crucial support may remain at around 14,000 mark in the coming week, experts feel.
"We expect the coming week to be volatile and remain in a range between the Nifty50 level of 14,250-14,650. We don’t expect the Nifty to hit 15000 ahead of budget," Ashis Biswa of CapitalVia Global Research told Moneycontrol.
"The 14,653 will now act as a major hurdle for the Nifty. On the downside, the immediate support is placed at 14,350 and a breach of the same will attract further selling pressure which might drag Nifty towards 14,200 levels," Nilesh Jain of Anand Rathi said.
The option data indicated that the Nifty could oscillate in the range of 14,000 – 14,600 in the coming week, while the volatility could spike to 28-30 levels ahead of budget, which could keep the market volatile, hence experts advised caution going ahead.
The unwinding was seen at 14,400 and 14,600 strike on Friday as Put writers ran for cover. A fresh addition was seen at 14,000, 14,200, and 14,300 strikes where the highest open interest of 17.2 lakh contracts was placed at 14,000 strike. The base has now shifted lower and 14,200 levels will now act as immediate support followed by 14,000 in the coming week.
A huge Call writing was seen at 14,500 and 14,600 strikes and also most of out of the money strikes. The maximum open interest is placed at 14,600 strike which will act as a major resistance for the coming week, experts feel.
"The volatility index has closed above 23 levels which is the highest seen in more than 2 months. While approaching budget can be attributed to the rising volatility but sustainability at current levels can be considered as a sign of caution," ICICI Direct said.
Here are key corporate actions taking place in the coming week:
Joe Biden will take oath as the President of United States on January 20, so any further announcement related to control the pandemic and boost the economy would be closely watched. He already unveiled $1.9 trillion stimulus plan last week.
Here are key global data points to watch out for next week: