Needless to say, global cues and developments around the coronavirus pandemic would dictate the market trend ahead also," Ajit Mishra of Religare Broking said.
The bleeding continued in equity markets as the novel coronavirus further tightened its grip over Dalal Street in the week ended March 20, though there was some short covering on Friday which helped benchmark indices curtail losses to some extent. Despite stimulus packages worth billions of dollars to support the economy, global equity markets and all other asset classes fell sharply during the week.
The BSE Sensex and Nifty cracked more than 12 percent, the biggest weekly loss since October 2018, the period of global financial crisis.
The selling was across sectors with Bank, Realty, Auto, Metal, Infra falling in double digits, while the Nifty Midcap index lost 13 percent.
Experts feel the regulator's measures by SEBI may support the market from free-fall to some extent, but the sentiment is so dire across the globe due to the COVID-19 pandemic, that weakness and volatility are likely to continue till the virus spread gets arrested as slowdown is in the offing.
"Friday's surge could just be a recovery due to oversold positions and sustainability would be difficult at higher levels. Needless to say, global cues and developments on the coronavirus front would dictate the market trend ahead also," Ajit Mishra, VP-Research at Religare Broking told Moneycontrol.
"We reiterate our advice of limiting leveraged trades and utilising this phase to accumulate quality stocks," said Ajit Mishra.
Here are 10 key factors that will keep traders busy this week:
COVID-19 Spreads At High Speed
Everyone seems to be talking about the novel coronavirus or COVID-19 and that seems to continue at least for next few weeks as it has taken more than 9,000 lives globally with infected over 2.8 lakh, a massive jump over the last week.
Many companies worldwide are trying hard to find a drug, but till then several countries have gone into a lockdown mode as the virus has been spreading fast outside of China. In fact, global central banks, in a coordinated manner, cut interest rates as well as announced big stimulus packages to support the economy, but that seems unlikely to help in the short term.
The major problem is in Italy, Spain, Germany, Iran, the United States etc. where not only infected cases, but also death toll has been increasing by the day. In fact, the fatalities in European countries are now far ahead of China, which was the epicentre of the outbreak.
In India, infected cases have crossed 300 mark with at least four deaths. Hence, to contain the pandemic, several states announced several precautionary measures including partial shutdowns, restrictions on public gatherings, etc.
Stimulus Hope Increase
The recovery seen on last Friday was also partly attributed to the hope of a stimulus from the government to support the economy, as schools, colleges, malls, cafes, restaurants, travel and tourism etc. are shut in major parts of the country now.
Finance Minister Nirmala Sitharaman, on Friday, said the ministry has been compiling demands from coronavirus-hit sectors.
"We discussed state of tourism, aviation, animal husbandry and MSME sectors with stakeholders. We are at a critical stage of taking inputs from virus-hit sectors, but we can't comment on when any relief package may be announced," she detailed.
RBI To Ensure Liquidity
The Reserve Bank of India has been taking several measures including open market operations to ensure the sufficient liquidity in the financial system.
The central bank, on March 20, announced that it will conduct open market operations (OMOs) for Rs 30,000 crore in two tranches –on March 24 and March 30 – as the stress in certain financial market segments "is still severe" and financial conditions remain tight.
"We will ensure all market segments function normally, and will ensure liquidity and turnover is adequate in all market segments," RBI said, adding the response to last Friday's Rs 10,000 crore OMO buy auction "has been positive".
To curb the high market volatility triggered by the novel coronavirus outbreak, SEBI, on last Friday, announced several measures to make short-selling of stocks difficult including the revision in market-wide position limit for stocks in the derivatives segment, flexing dynamic price bands, etc which will be effective for a month from March 23.
Hence, the market movement will be keenly watched next week as most analysts expect short covering in a big way on Monday.
As part of the measures, SEBI has proposed to raise the margin for the non-F&O stocks to 40 percent in a phased manner and the market-wide position limit (MWPL) on F&O stocks would be revised to 50 percent. "There would be flexing in dynamic price bands in the F&O (Futures & Options) segment only after a cooling period of 15 minutes after fulfilling certain criteria," Sebi said in a statement.
The regulator further said, "SEBI and stock exchanges will continuously monitor the market developments and review the position and take any further suitable actions as may be required."
Further, the impact of this circular would be highest on stocks with very high volatility. "Stocks like NCC, Indiabulls Housing Finance, Jindal Steel & Power, Just Dial, Adani Enterprises, Canara Bank, SAIL, PNB, Yes Bank, PVR and Vodafone Idea would be the 11 stocks that would probably go into ban period.
"Effectively about 10-12 percent of the F&O stocks would be impacted. For most other stocks, even if MWPL are restricted, open interest is far lower to have any meaningful impact," Jimeet Modi of Samco Securities said.
All F&O contracts for March will get expired on coming Thursday and positions will be rolled over to next month, hence there could be some volatility in the market in coming week.
Option data indicated the Nifty could trade in a wider range of 8,200 to 9,200 levels in coming sessions. Maximum Call open interest was seen at 12,000 then 10,000 strike while maximum Put open interest was at 8,500 then 8,000 strike. Call writing was seen at 10,000 and 9,500 strike while Put unwinding was seen at all the immediate strikes with minor Put writing at 8,000 strike.
"Markets are getting oversold as the Nifty futures are trading in discount, volatility has reached 72 percent during the week and index has fallen by 35 percent within 3-4 weeks. In fact, the short rollovers are happening at cost due to next month futures trading at par to near month futures. This may lead to closure of some short positions whenever Nifty declines towards 7,800-8,000 levels," Amit Gupta of ICICI Direct said.
He believes near expiry, this market is not conducive to go short due to this high oversold nature.
India VIX moved up by 30.37 percent from 51.47 to 67.10 levels during the week. "Higher volatility could keep market under pressure and a roller coaster ride could continue to keep traders in tension till it doesn't cool off from its high zones," Chandan Taparia of Motilal Oswal said.
The unabated large amounts of FII selling has completely battered the market for nearly a month now. They net sold Rs 62,611.82 crore (including Rs 51,243.15 crore in March so far) or over $8 billion worth of shares in 19 consecutive sessions from February 24 as they worried over global growth amid the widely-spreading virus to developed regions including Europe and the United States.
On the contrary, domestic institutional investors net bought Rs 60,146.77 crore of shares (including Rs 44,160.95 crore of buying in March so far) in the same period.
It was the biggest selling/buying by FIIs/DIIs in a single month, at least in the last 13 years, Moneycontrol data showed. Hence, the key thing to watch out for would be when the FIIs selling will start receding and how the market will get impacted by the flow.
Oil Price and Rupee
The falling oil price is clearly a great positive for India as it imports around 85 percent of its requirement, whereas the weakening and hitting new low by the rupee was worrying factor for the country as exports are much less comparatively. Both will be closely watched in the coming days.
International benchmark Brent crude futures dropped over 20 percent during the week to $26.98 a barrel and plunged 59 percent since the beginning of 2020 amid lower demand worldwide impacted by the coronavirus pandemic. This is great news for India and helps a lot to manage fiscal deficit in the weak economic conditions and at the time of failure to meet FY20's divestment target.
The rupee weakened to hit a record low of 75.31 during the week, before signing off the week with a loss of 128 paise at 75.20 on last Friday due to heavy FII outflow.
"Globally, crude has fallen sharply due to lack of demand and coronavirus outbreak. Thus, global and local idiosyncrasies will continue to weigh on Indian rupee for some more time, at least till the time coronavirus is not contained. In USD/INR spot pair until support of around 74.40 holds on a closing basis, the pair will not be out of danger for few sessions and may trigger a breakout towards 75.50 and then 76 levels. The markets will be constantly watching the domestic scenario with regards to the coronavirus outbreak," Rahul Gupta, Head of Research at Emkay Global Financial Services told Moneycontrol.
The Nifty50 rallied nearly 6 percent on last Friday to form large bullish candle on daily charts, but lost over 12 percent for the week to close at 8,745.45 and witnessed bearish candle formation on the weekly scale. The index continued its weakness for the fifth consecutive week amid extreme volatility.
Experts feel the marginal recovery seen on Friday might be carried forward in the next week as well, but the overall trend remains weak with the support at 8,000-8,200 levels and resistance at around 8,900-9,000 levels.
"Now, we might see some pullback towards 8,900 and above that, it may move towards 9,500. But the medium-term trend continues to remain negative as long as Nifty trades below 10,700 mark," Nilesh Ramesh Jain, Derivative Analyst - Equity Research at Anand Rathi told Moneycontrol.
"If we take the Fibonacci retracement of the entire recent fall from the top, then the 23.6 percent retracement is coming around 8,918 which will now act as immediate resistance, then 38.2 percent retracement is at placed at 9,588. The immediate support is now placed at 8,200 and below that, index may again slip towards 7,800 levels," he said.
Corporate Action and Macro Data
Here are key corporate actions taking place in the coming week:
On the macro data front, bank loan and deposit growth for fortnight ended March 13, and foreign exchange reserves data for week ended March 20 will be released on March 27.
Here are key global data points to watch out for next week: