The market closed flat for the truncated week ended December 24. The steep fall seen on December 21 (the biggest single-day fall since May 2020) was offset by the rally in three consecutive sessions after that.
The discovery of new strain of coronavirus in the United Kingdom sent a panic wave among investors instilling fears of more lockdowns. This took away from the cheer of early phases of vaccination and second COVID-19 relief bill passed by the United States.
The BSE Sensex rose 12.85 points to 46,973.54, while the Nifty50 was down 11.30 points at 13,749.25 during the week after a 18 percent rally of previous seven consecutive weeks.
The market is expected to remain volatile in the coming week given the fresh cases of virus and December derivative contracts expiry due on December 31. While the upside, if any, may not be sharp and trading volume may get impacted by the start of new margin norms, experts feel.
"With the new year at our door step, markets are likely to trade in a rangebound manner. Going ahead, bourses may witness enhanced volatility and drying up of liquidity as the new margin norms set-in," Nirali Shah, Senior Research Analyst at Samco Securities said.
Vinod Nair, Head of Research at Geojit Financial Services feels for the week ahead, concerns regarding the fresh case of the virus will remain in the limelight along with development on Brexit deal.
"Investors should stay focused on quality sectors & counters and also watch at the trend of FII inflows, which is the main factor of the recent rally, no eventful data and announcements are expected next week," he said.
Here are 10 key things that can keep traders busy next week:
India continued to see recovery on the COVID front as daily infections count remained below 25,000 mark since December 20 and the total recovery rate increased to 95.77 percent, so far, from 95.4 percent last week, while the fatality rate improved further to 1.448 percent from 1.453 percent in same period, which are resulted from the government's effort to implement test, track and treat policy.
India reported more than 1.01 crore confirmed cases, with the active cases at 2.81 lakh or 2.78 percent of total infections, while the recovered patients count so far was 97.4 lakh. Globally, so far, 7.98 crore people infected by the virus with 17.5 lakh deaths (as per Johns Hopkins University.
This positive news clearly supported the market, but the new strain of COVID-19 found in United Kingdom impacted the market for a short while and cases related to new strain also found in other parts - France, Belgium, Australia, Germany etc. However, the recovery in global equity markets later indicated that market seems to be not worried about new strain of virus due to increase in vaccination in western world, but still that will be closely watched in coming days.
Vaccine Developments
The government has planned for a dry run of COVID-19 vaccine in four states - Andhra Pradesh, Assam, Gujarat, and Punjab - which will take place for two days next week - December 28-29, ahead of actual implemention whenever the drug gets finalised.
News reports indicated that the Drugs Controller General of India (DCGI) is expected to grant an emergency use authorisation for at least one COVID-19 vaccine candidate in the coming week.
Indian drug regulator may give its nod to the Oxford COVID-19 vaccine next week, before deciding on giving emergency use authorisation to the Serum Institute that is manufacturing the shots here, PTI said quoting sources.
Recently Oxford/AstraZeneca, Pfizer Inc and Indian company Bharat Biotech applied for emergency use authorisation for their COVID candidates in India. Pfizer-BioNTech vaccine already received approval from drug regulators in United States, UK, Canada, Saudi Arabia, Bahrain etc, while Moderna's vaccine candidate also received approval for use in United States. Earlier this week, Oxford-AstraZeneca applied to UK's health regulator for roll out of COVID vaccine.
Auto Sales
Auto companies will release their December sales volumes data on the first of January in the coming week, hence auto stocks - Maruti Suzuki, Hero MotoCorp, Tata Motors, Escorts, Eicher Motors, TVS Motor, Bajaj Auto, M&M, Ashok Leyland etc - will be in focus.
After reasonable festive season sales, passenger vehicle (PV) and tractor segments may see growth in December but may not be similar to November, while commercial vehicle (CV) sales could see further sequential improvement but may remain weak on year-on-year basis. Two-wheeler segment may see growth lower than November.
"Current demand and low inventory sentiment in PV and tractor suggests higher wholesales in the coming months. On the flip side, 2-wheeler and CV OEMs are expected to maintain a cautious stance, with no major inventory push," Motilal Oswal note said in December.
Brexit to Exit EU
Finally the United Kingdom prime minister Boris Johnson and European Commission president Ursula von der Leyen struck a trade deal on December 24 after hard negotiations for last nine months, exactly a week before it exits European Union bloc. The trade agreement contains provisions on several subjects including nuclear energy, fishing, aviation and medicines. The global markets may react the news when they open for trade on Monday.
As the Britain leaves the EU's single market and customs union on December 31, there will be zero tariffs and quotas on the movement of goods between the EU and UK, while there will be border checks between member states. Britain's Parliament members are expected to meet in an emergency session on December 30 to clear the deal to get into UK law, while the European Parliament may clear the deal in January.
FII inflow slowed down in the passing week, but continued despite the rising coronavirus risk after new strain of COVID-19 found in the UK, Germany, France, Belgium, South Africa etc, thanks to the low-interest rates and surplus liquidity globally.
FIIs net bought Rs 2,591 crore of shares in the week ended December 24, against Rs 11,806 crore of buying in previous week, taking the total inflow to over Rs 41,000 crore in December and over Rs 1.5 lakh crore in 2020. FII flow is expected to act as a key role in further direction of the market, experts feel.
DIIs continued to be net sellers, offloading Rs 3,400 crore of shares this week against outflow of over Rs 11,000 crore in previous week, which are taking profits off the table given the market at record levels.
Listing
Antony Waste Handline Cell, one of the largest municipal solid waste management companies, is expected to list its shares on bourses on Friday after the good response from investors to its Rs 300-crore IPO during December 21-23. The public issue was subscribed 15 times.
Technical View
The Nifty50 gained a percent on Friday and formed bullish candle on the daily charts, while there was Dragon Fly Doji kind of formation on the weekly scale as the closed flat and the weekly closing was near to opening levels which generally considered as a bullish reversal pattern. As the pattern formed at the top, it shows indecisiveness amongst market participants.
Experts expect the rangebound trade to continue unless the index decisively surpasses earlier record high in coming sessions.
For the next few days, "traders need to be extra cautious, as the market has entered the zone of volatility. It would keep the market swinging between the broader range of 13,900 and 13,400 levels. The break of the trading range would stabilise the market and would start trending in that direction," said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities.
The momentum indicators and oscillators for the Nifty index have reached the overbought territory on the daily as well as weekly time frame. Hence, one needs to adopt a cautious approach and focus on stocks and sector-specific actions, experts advised.
F&O Cues
In the coming week, the futures & options contracts for December will get expired and positions will get rolled over to next month.
The fresh Put writing was seen at 13,500, 13,600, and 13,700 strikes. The highest open interest is still placed at 13,000 strike followed by 13,500 strike. However, some liquidation of positions was seen in 13,000 Put strike which hints that the base is getting shifted higher. Also, 13,700 strike witnessed huge addition on Thursday, which is likely to act as immediate support followed by 13,600 for the coming week, experts feel.
On the Call side, a fresh addition was seen at 13,900 and 14,000 strikes, and the maximum open interest is placed at 14,000 strikes of nearly 40 lakh contracts.
So the overall option data indicates a broader range of 13,500–14,000 for the coming week, said Nilesh Jain of Anand Rathi, adding the overall cooling off in the volatility is giving comfort to the bulls and a further drop will pull the index higher.
The volatility index 'IndiaVIX ended a tad below 20 levels last week.
Corporate Action and Economic Data Points
Here are key corporate actions taking place in the coming week:
The share buyback offers of Wipro, Mayur Uniquoters and Kanchi Karpooram will open on December 29, December 30 and December 31 respectively.
On the economic data front, infrastructure output and fiscal deficit for November will be released on Thursday. Deposit and bank loan growth for the fortnight ended December 18, and foreign exchange reserves for the week ended December 25 will be announced on Friday.
Global Cues
Given the Christmas and new year celebrations, there will be less global data points in the coming week. Here are key global data points to watch out for next week:
