The markets experienced yet another week of disappointment with the benchmark indices shedding nearly 2 percent in a ripple effect of the banking crisis in the US. A last-hour buying on Friday, however, helped it pare some losses following a rescue package to San Francisco-based First Republic Bank and financial aid to Credit Suisse.
The US banking crisis kept haunting markets around the world with the with Silicon Valley Bank filing for bankruptcy, and closure of New York's Signature Bank. Heavy selling by foreign institutions drove the Indian markets further downhill, despite a fall in the US inflation print and decline in crude oil prices.
BSE Sensex lost 1,145 points to 57,990 and NSE Nifty dropped 313 points to 17,100, extending the losses for the second straight week ended March 17. The broader markets also corrected in sync with the benchmarks. The Nifty Midcap 100 and Smallcap 100 were down 2 percent and 2.5 percent, while all sectoral indices closed in the red.
The market is expected to continue to face bouts of volatility with focus largely on global cues such as the US banking crisis and the Federal Reserve policy meeting as there are scarce triggers on the domestic front, according to experts.
"Consistently unfavourable signs in global markets are driving investors to safe havens like dollar and gold, while FIIs are withdrawing funds from the domestic market in response to the Indian rupee's depreciation," Vinod Nair, Head of Research at Geojit Financial services, said.
Considering the 50 bps rate hike by the European Central Bank (ECB), all eyes will be on the US Federal Reserve and the Bank of England (BoE), which are set to hold their policy meetings later this week, he said.
Let's take a look at the 10 key factors that will keep traders busy this week:
1) US FOMC Meet
The US Federal Reserve policy meeting on March 21-22 will be a key event to watch out for this week. Experts largely expect the Fed to continue with its rate hike path given the inflation above its 2 percent long-term target, though eased to 6 percent in February from 6.4 percent in January. The core inflation also eased to 5.5 percent from 5.6 percent in same period.
Earlier, there were expectations for 50 bps fed funds rate hike given the strong US jobs data, more than expected fall in number of Americans filing fresh claims for unemployment benefits last week and elevated inflation, but with the current US banking crisis, the expectation now eased to 25 bps for the March meeting and the terminal rate may go higher than earlier expectations.
"With the bulk of relevant economic data in hand ahead of the policy meeting this week, US central bankers are seen pressing on with their inflation-fighting campaign with a quarter-point interest-rate hike," Rajesh Sinha, Senior Research Analyst at Bonanza Portfolio said.
Bank of England officials are also scheduled to meet this week on March 23 for interest rate decision.
2) US Banking Crisis
The market participants will also keep a close watch on the crisis in the US banking space especially after Silicon Valley Bank filed for bankruptcy and Signature Bank went shut.
San Francisco-based First Republic Bank was the third one facing similar kind of issues but was saved with a $30-billion lifeline from 11 major US banks, including JP Morgan Chase and Morgan Stanley, bringing back the memories of the 2008 global financial crisis.
Experts largely believe the crisis is not only restricted to the US but also seems to be in other parts of world.
In the passing week, Credit Suisse also received a credit line of up to $54 billion from the Swiss National Bank to boost liquidity, but experts are still watching it closely.
"It’s too early to say the US banking crisis is over, but I am hopeful that it can be contained. Though looking at the European banks, I don't think it's restricted to the US. We have been through similar circumstances globally and even in India during 2018," Arun Chulani, Co-founder of First Water Capital Fund, said.
3) Global Economic Data Points
Here are key global economic data points to watch next week:
4) Oil Prices
Oil prices also caught in a bear trap, after crisis in the banking sector, posting the biggest weekly decline in the current calendar year. Any fall is always a welcome from oil importing countries like India but needs to be watched closely whether the decline is sustainable or not, said experts who still expect supply constraints may continue to support the prices.
Brent crude futures, the international oil benchmark, fell nearly 12 percent to close at $72.97 a barrel, the lowest closing level since December 2021, while US oil prices dropped 13.5 percent during the week.
OPEC+ members attributed this week’s price weakness to financial drivers rather than any supply and demand imbalance, adding that they expected the market to stabilise. Saudi Arabia and Russia in a meeting on Thursday affirmed their commitment to OPEC+ decision last October to cut the production targets by 2 million barrels per day until the end of 2023. CNBC reported.
Gold will also be in focus as global investors increased their bets on safe-haven when the banking crisis weighed on equity markets. Comex gold April futures climbed nearly 7 percent in the passing week.
5) Domestic Economic Data Points
We have foreign exchange reserves data for week ended March 17 to be released on March 24.
For earlier week ended March 10, forex reserves were down by $2.39 billion at $560.003 billion, the lowest since early-December 2022 due to foreign currency assets revaluation. However, in the previous week ended March 3, reserves had increased by $1.46 billion to $562.40 billion.
Along with that, bank loan and deposit growth for fortnight ended March 10 will also be announced on the same day.
6) FII Flow
Foreign institutional investors have withdrawn their funds from the Indian equity markets considering the weakening global environment due to recent banking crisis, which is another factor to watch out for.
FIIs have net sold nearly Rs 8,000 crore worth shares for week ended March 17, but domestic institutional investors provided great support to the market, compensating all those FII outflow by buying more than Rs 9,200 crore worth shares during the week.
Even for current month, they have net bought over Rs 16,000 crore worth shares, which is more than Rs 6,400 crore of buying by FIIs.
"If the US SVB-driven financial uncertainty escalates, the FIIs are going to turn cautious and that could have an impact on the Indian equity markets. Other than that we don’t see any other big challenges for equity markets," Dr Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital said.
On the primary market front, we will have an IPO from Karnataka-based road construction company Udayshivakumar Infra next week. The Rs 66-crore IPO will open for subscription on March 20 and the closing date will be March 23.
The company has fixed its IPO price band at Rs 33-35 per share. The offer comprises only fresh issue part and there is no offer for sale portion.
Also we will have one listing next week. Global Surfaces, the engineered quartz stone manufacturer, will make its grand debut on the bourses on March 23 after closing the public issue this week with 12.21 times subscription.
Analysts told Moneycontrol that in the grey market, Udayshivakumar Infra traded with a Rs 10 premium over its issue price while the premium for Global Surfaces is in the range of Rs 10-15 over the expected final issue price of Rs 140 per share.
8) Technical View
The Nifty50 has formed Long Legged Doji kind of pattern on the daily charts for second consecutive session, while on the weekly timeframe, there was long bearish candlestick pattern formation with long lower shadow indicating support-based buying.
Given the recovery from five-month lows with back-to-back Doji with higher high higher lows formation on daily scale, the temporary bottom for the market seems to have formed but considering the overall weakness on the bigger charts, the market by remain rangebound until we see a decisive closing above 18,000-18,100 area and the broad trading range could be 16,800-17,600 for coming sessions, experts said
"Nifty could face hurdles around the 17,250-17,400 zone next week, while the 16,600-16,800 zone would provide the needed cushion, in case the situation deteriorates further," Ajit Mishra, VP - Technical Research at Religare Broking said.
Since there is a mixed trend across sectors, traders should continue with stock-specific approach, with a focus on overnight risk management, Ajit advised.
9) F&O Cues
On the Option front, we have seen maximum Call open interest at 18,000 strike, followed by 17,500 strike and 17,600 strike, with Call writing at 17,500 strike, then 17,100 strike.
Per Put side data, the maximum open interest was seen at 17,000 strike, followed by 16,500 strike, with writing at 17,100 strike, then 16,500 strike.
The Option data indicated that the broader trading range for the Nifty50 could be 16,600-17,600 levels, while for the next week, it may be in the range of 16,800-17,400 levels, experts said.
After hovering around 16 levels for three days, the India VIX, the fear index collapsed by 9 percent to closed at 14.76 levels on Friday, but for the week, it maintained uptrend for yet second straight week, up by 10 percent for second week in a row. Hence, unless and until it came back to around 12 levels, the bulls may not be fully comfortable, experts said.
10) Corporate Action
Here are key corporate actions taking place in the coming week:
Hindustan Aeronautics, Ujjivan Financial Services, GAIL India, SAIL, NALCO, Sun TV Network, Aditya Birla Sun Life AMC, and Glenmark Life Sciences will trade ex-dividend next week.
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