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Last Updated : Feb 23, 2020 09:24 AM IST | Source: Moneycontrol.com

Market Week Ahead: 10 key factors that will keep traders busy

Experts suggest that market may remain volatile this week too, as investors will continue to monitor developments related to the novel coronavirus outbreak

Sunil Shankar Matkar

The market remained lacklustre for the second consecutive week that ended on February 20 as investors continued to monitor the coronavirus outbreak which has raised fears over global growth.

As a result, Moody's cut India's FY20 growth forecast to 5.4 percent (from 6.6 percent earlier), which also hit sentiments.

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The BSE Sensex declined 0.21 percent to 41,170.12 and the Nifty50 fell 0.27 percent to 12,080.85, underperforming broader markets. However, the BSE Midcap index gained 0.21 percent and Smallcap rose 0.44 percent during the holiday-shortened week.

Overall, the market has been in a tight range for the last two weeks after the earnings season and amid concerns over coronovirus.

Experts feel the market may remain volatile in the coming week too as there would be an expiry of February derivative contracts on February 27 and investors will continue to monitor developments related to the coronavirus.

"The movement of the benchmark index in the last two weeks shows indecisiveness among the participants. And, we expect volatility to remain high to the scheduled derivatives expiry of February month contracts. Though the number of confirmed cases of coronavirus is receding in China, which is positive, the impact on the economic growth would continue to be a key monitorable," Ajit Mishra, VP - Research at Religare Broking told Moneycontrol.

Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services also feels that the market would continue tracking global developments around coronavirus and thus could continue witnessing volatility.

He also expects the markets to remain narrow and concentrated in the absence of any major event.

Here are 10 key factors that will keep traders busy this week:

Coronavirus outbreak

The number of infected cases in China has been declining compared to a week earlier — which is quite supportive for the market. However, its spread to other countries worried investors towards end of the last week. As a results, US and European markets saw selling pressure on February 21.

As per China’s National Health Commission, so far 2,442 people have died in the country from the novel coronavirus. The number of confirmed cases have been over 76,936.

The outbreak has worsened outside of China, with infected cases crossing the 1,500 mark and 15 deaths in over 30 countries, reports CNN. South Korea topped in terms of infected cases — nearly 350 and two deaths so far. Tallies for Singapore and Japan crossed 800, including over 600 from the Diamond Princess cruise ship with three deaths.

A jump in coronavirus cases in Iran is also raising concern. Chinese authorities adjusted the number of cases for the third time this month, raising more questions over the reliability of the data.

Donald Trump's visit to India

This week will begin with US President Donald Trump's visit to India. Trump will be visiting the country for two days (February 24-25) along with US First Lady Melania Trump.

There have been talks that there could be a major trade package deal between two countries. But, US Trade Representative Robert Lighthizer, who has been negotiating with India for a trade deal, is not travelling with Trump in two-day visit. Hence, reports suggest that it would be unlikely for a trade deal to be signed during this visit.

However, investors will still await clarity on the major trade deal that the two countries are working on. Trump's visit is also very important for India in terms of opportunity to improve the bilateral relationship, strengthen the strategic ties and deepen commitment to an open Indo-Pacific.

Q3FY20 GDP

The Gross Domestic Product (GDP) growth for quarter ended December 2019 would be key thing to watch out for, especially after the economy in July-September period 2019 grew at 4.5 percent, the lowest in more than six years, against 5 percent in the previous quarter.

The fall in exports, factory output and investment slowdown caused the low growth.

Most economists expect growth to be around 4.5 percent for the December quarter and feel that it might have bottomed out during the quarter — which indicates that there could be a sign of recovery from Q4FY20 given other data parameters.

But, with China's novel coronavirus, which has already impacted global trade to some extent and many research firms having already revised China's growth forecast downward for January-March quarter 2020, investors are worried about India's economic growth too. China is the largest consumer and supplier of several products worldwide.

Among other data points, infrastructure output for January, bank loan and deposit growth for fortnight ended February 14, and foreign exchange reserves for week ended February 21 will be released on February 28.

Oil prices and gold

Investors turned cautious after the movement in oil prices and yellow metal.

After hovering around $54-55 for more than couple of weeks, international benchmark Brent crude futures jumped to over $59 a barrel before settling at $58.50 a barrel during the week gone by.

On the contrary, gold crossed $1,600 an ounce on safe haven buying as the infected cases by coronavirus has been rising outside of China, which raised fears over global growth. Now, experts expect the gold trend to remain on the upside considering the current virus fears.

"Crude oil increased by 8 percent from its pessimistic level, which indicates that fear of the virus (Covid19) may be receding, if we use crude oil as a thermometer to assess the impact of the epidemic on overall markets. On the contrary, gold bulls have suddenly become risk averse for reasons best known to them. This certainly calls for caution for global equity markets, if gold is to be considered as a barometer to measure risk," Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote said.

Technical view

The Nifty50 managed to defend psychological 12,000 mark in the passing week, forming bearish candle on daily charts. The index formed a small bodied red candle with long lower shadow on weekly time frame, which indicates that dips got bought into.

Experts expect the rangebound trade, seen for last couple of weeks, to continue in coming week also and feel 11,900 on the downside and 12,200 on the upside would key level to watch out for direction on either side.

"Considering overall chart structure, we are expecting the Nifty to move in the broader range of 11,900–12,250 in current series. At current juncture, positive implication of a Bullish Island Reversal pattern is still intact and till the time, Nifty holds above 12,030 levels, we maintain our positive stance for a bounce towards 12,200 and then 12,300 levels. On the flipside, major support is placed at 12,030 and then 11,900 zone," Chandan Taparia of Motilal Oswal told Moneycontrol.

F&O expiry week

Option data also indicated the Nifty could remain in a trading range of 11,900/11,950 to 12,200/12,250 levels in coming days, experts feel.

Maximum Put open interest was at 12,000 followed by 11,800 strike while maximum Call open interest was at 12,200 followed by 12,300 strike. We have seen Put writing at 11,900 followed by 11,800 strike while Call writing was seen at 12,200 then 12,100 strike.

"The major Call writer’s positions are placed at 12,200 strike, which has become a major resistance of this consolidation," Amit Gupta of ICICI Direct said.

"However, the Put base at 12,000 is still intact near which base formation may be seen in the index. The volatility has remained subdued and is not picking up lately, which makes us believe these are writing positions. Hence, 11,950-12,000 should remain an immediate support," he added.

India VIX moved up by 0.59 percent from 13.62 to 13.70 levels on weekly basis.

SBI Card IPO

SBI Cards and Payment Services, the first main board IPO will open for subscription on March 2, but there is no official announcement of issue price band yet.

Sources told Moneycontrol that the price band could be around Rs 750-755 per share, and the official announcement of the same would be in the coming week.

The anchor investors' reserved portion will open for a day on February 28, the day before issue opening. Experts expect there could be lot of appetite for this Rs 10,350 crore IPO.

"SBI cards may be a superstar IPO for this calendar month, and would see strong oversubscription," Gaurav Garg, Head of Research at CapitalVia Global Research - Investment Advisor said.

Rupee against US Dollar

The Indian rupee depreciated sharply in the week gone by, weakening to 71.66 against the US dollar, from 71.37 a dollar in previous week due to buying in dollar given coronavirus concerns and rise in oil prices.

Experts feel in the absence of FII inflow, there could be some more depreciation but that could be gradual.

"The rupee is expected to eventually move towards 72 as support from FIIs is missing in equity markets. However, a rupee move is likely to be slow as the debt market segment has started seeing some FII inflows post the recent monetary policy," Amit Gupta of ICICI Direct said.

"Safe haven buying in the US dollar has continued. The Dollar Index has moved up to 99 and is expected to reach 102 in the coming weeks. This may keep rupee appreciation in check," he added.

Corporate action

Here are key corporate actions taking place in the coming week:

Global cues

Here are key global data points to watch out for:

 

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First Published on Feb 23, 2020 08:18 am
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