The market had a historic week that ended on May 28, as bulls staged stellar performance, taking the Nifty 50 to fresh record high levels after spending more than three months into a consolidation. The steady decline in daily COVID-19 infections, rising hope for another stimulus package to support the most affected sectors in the second COVID wage, corporate earnings and positive global cues boosted market sentiment, though the RBI sent the signal of caution by warning of the risk of a bubble in the equity market.
The benchmark indices ended at a record closing high with the BSE Sensex surging 882.40 points or 1.75 percent to 51,422.88, and the Nifty50 rising 260.35 points or 1.72 percent to 15,435.65 driven by technology, banking & financials, auto, and infrastructure stocks. However, there was selling pressure in metals and pharma stocks.
The broader markets also gained momentum but underperformed front lines, as the Nifty Midcap 100 index was up 1.1 percent and Smallcap 100 index up 1.83 percent.
The momentum may remain positive with continuity in record highs in the coming week amid falling COVID cases, expected state-wise unlocking, and a likely stimulus package by the government, experts feel.
"Expectations of state-wise unlocking due to declining COVID cases are giving hopes of economic recovery. As the result of a decline in the covid second wave infection curve, the plausibility of further re-opening of the economy has enlarged and consequently, the market is expected to gain further momentum surpassing previous highs," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
Here are 10 key factors that will keep traders busy in the coming week:
Risk of Coronavirus Subsiding
The consistent fall in coronavirus cases for the third consecutive week after crossing the 4 lakh mark suggests that the risk has steadily been subsiding. With the expected pick up in vaccination drive, experts expect the cases to fall further in coming weeks which could ultimately unlock the economy and that may keep the market sentiment positive going ahead.
India continued to report less than 2 lakh cases per day, adding 1.73 lakh cases in the last 24 hours ending at 8 am on May 29, the lowest rise since April 14, taking the total confirmed cases to 2.77 crore.
The death count per day remained below the 4,000 marks for the third consecutive day, at 3,617, taking the total deaths so far to 3.22 lakh in India. The recoveries remained higher than daily infections, improving the recovery rate further to 90.80 percent, from 90.34 percent in the previous day, while the positivity rate was at nearly 2-month low of 8.35 percent.
We are now in the last leg of earnings season. Prominent companies including Aurobindo Pharma, ITC, Motherson Sumi Systems, PVR, Bharat Forge, and Bank of India will release their quarterly earnings in the coming week.
Among others, Balrampur Chini Mills, Gujarat Gas, Shilpa Medicare, Radico Khaitan, MTAR Technologies, Muthoot Finance, Quess Corp, and MOIL will also declare quarterly earnings.
The monthly sales data for May 2021 will also be key to watch out for in the coming week. So auto sales including Maruti Suzuki, Tata Motors, TVS Motor, Ashok Leyland, Bajaj Auto, Hero MotoCorp, and Eicher Motors will be in focus.
Analysts largely expect a significant decline in auto sales due to COVID-led lockdown-like restrictions in several states. Also, several companies closed their plants for maintenance as well as lockdown, which could also hit sales. Hence, the year-on-year comparison doesn't make sense.
"In May 2021, most regions were under an ensuing COVID-led lockdown. Inquiries were significantly lower than normal levels, except in Tractors. Wholesales are expected to decline MoM due to the impact of localized lockdowns by states and supply-side issues (including the availability of industrial oxygen)," said Motilal Oswal.
In May 2021, 2-wheeler wholesale volumes are estimated to decline by 37 percent MoM, passenger vehicles around 69 percent, commercial vehicles around 74 percent, 3-wheelers 19 percent, and tractors around 21 percent, the brokerage added.
Economic Data Points
The key data point to watch out for would be the GDP growth rate for March 2021 quarter, which will be released on Monday. The infrastructure output and fiscal deficit for April will be announced on the same day.
Markit Manufacturing PMI for May will be released on Tuesday, while Markit Services and Composite PMI for May will be announced on Thursday.
The Monetary Policy Committee will release its three-day meeting conclusion on Friday, June 4. Given the weakness in the economy amid rising COVID cases in April and May and lockdown-like restrictions in the same period, the RBI is expected to maintain its accommodative stance while keeping a close watch on inflation amid rising fuel prices.
"We believe that the Monetary Policy Committee has no option but to stay accommodative, even as it monitors incipient price pressures, and keep all rates on hold, while likely extending its Government Securities Acquisition Program (GSAP)," said Barclays.
The research house further said, "Since May's policy announcements, the growth outlook has degraded further, with greater evidence that inflation headwinds may remain persistent going into the second half of 2021. However, with some relief on the virus caseloads, the RBI can balance its message around prospects for a return to economic normality."
Oil Prices and OPEC+
Fuel prices in the country continued to increase with petrol price crossing Rs 100 mark per litre and diesel over Rs 92 per litre in Mumbai, following a gradual rise in global oil prices.
International oil benchmark, Brent crude futures reached near $70 a barrel during the passing week amid rising hope for global demand recovery with the opening of Western countries and improving economic data points following declining COVID cases, though it has been rangebound in the area of $65-70 a barrel for more than a month now. Further increase in oil prices is a key risk for the country like India which is a net importer and that could also increase inflation risk. Investors will closely watch the OPEC meeting to be held on June 1, and talks on US-Iran nuclear deal.
"Overall global bullishness and demand are keeping oil prices at current levels. But investors need to be cautious as the OPEC meeting slated for June 1 will dictate the supply, production, and price indications going ahead," said Nirali Shah, Head of Research at Samco Securities.
Hareesh V, Head of Commodity at Geojit Financial Services said there are hopes that OPEC+ may bring back 2.1 million barrels per day of oil production from July by decreasing their planned daily output cut. "US production numbers and the pace of global economic recovery will also influence the short-term price outlook of the commodity," he added.
The Nifty50 gained 97.80 points on Friday, forming a Doji kind of pattern on the daily charts as the closing was near opening levels. The index rallied 1.7 percent during the week and witnessed bullish candle formation on the weekly scale.
Experts expect the uptrend to continue in the coming sessions with hitting fresh record high levels amid intermittent correction, and feel 15,600 would be the next level of resistance to watch out for.
"We expect the prevailing uptrend to continue with intermediate corrective moves. In case of any dip, Nifty would find support around 15,150-15,300 zone while 15,600-15,700 zone might act as a hurdle," said Ajit Mishra, VP Research at Religare Broking.
"With markets at a record high, we feel it's prudent to maintain a positive yet cautious approach and continue with the 'buy on dips' approach," he added.
F&O Cues and India VIX
The options data indicated that the Nifty could see a broader trading range of 15,000-15,800 levels in the coming sessions. The maximum Put open interest was seen at 15,300 followed by 15,000, 15,400, and 15,200 strikes while maximum Call open interest was seen at 16,000 followed by 15,500, 15,600, and 15,800 strikes. Call writing was seen at 16,000, 15,500, and 15,600 strikes while Put writing was seen at 15,400, 15,300, and 15,000 strikes.
Going ahead, "sustainability of 15,200 will be crucial in the short-term as it is the highest Put base for the weekly settlement. On the other hand, a move above 15,500, may open room for continued momentum. However, in the coming week, we are expecting the
Nifty to remain in the range of 15,200-15,500," said ICICI Direct.
"On the rollover front, both the Nifty and Bank Nifty have started the new series with relatively high open interest in the June series. Net long positions from FIIs are the highest seen since March 2021 while the short open interest from FIIs is at an all-time low. Thus, a round of long liquidation cannot be ruled out, which may prompt some short build-up in the system," the brokerage added.
The volatility fell to the lowest level in 2021, supporting the bullish bias in the market. India VIX was down by 8.80 percent from 19.08 to 17.40 levels on a week-on-week basis. "Falling VIX is likely to extend the bullish market momentum towards the new high territory," said Chandan Taparia of Motilal Oswal.
Here are key corporate actions taking place in the coming week:
Here are key global data points to watch out for next week: