Market Week Ahead: Top 6 factors which will chart market direction

“The market took a breather this week post a flip rally led by state election results and supportive FII inflows. The market was facing some pressure to edge past 9200 levels on concerns of stretched valuation,” Vinod Nair, Head of Research, Geojit Financial Services told moneycontrol.

“Strong selloff in global market due to emerging concern regarding the passage of Trump policies ahead of key vote on US new health care policy which pushed the domestic investors to turn profit booking,” he said.

Going by the buzz on D-Street, we have collated a list of top six factors which could chart the direction for markets this coming week.

Sebi bans RIL from equity derivatives

Come Monday morning, Reliance Industries (RIL), the country’s second most valued firm will be in focus after the Securities and Exchange Board of India (SEBI) on Friday banned RIL and 12 others from equity derivatives trading for one year and directed the firm to disgorge nearly Rs 1,000 crore for alleged fraudulent trading in a 10-year-old case.

A company spokesperson said it will challenge the order. Reliance Industries has been asked to disgorge Rs 447 crore, along with an annual interest of 12 percent since November 29, 2007, which itself would be more than Rs 500 crore, taking the total disgorgement amount to nearly Rs 1,000 crore.

(Disclosure: Reliance Industries owns Network 18, which publishes Moneycontrol.com.)

Market eyes monsoon, El Nino impact

One of the biggest domestic risks which D-Street faces is monsoon trajectory. The year 2016 gave some relief after two years of below-normal monsoon. The hope-based rally is based on a revival of earnings and pickup in economic activity.

IMD officials on Friday said that India is likely to emerge unscathed from the El Nino weather pattern as it is expected to set in only during the latter part of the four-month monsoon season which should lift sentiment on D-Street this coming week.

Monsoon rains, the lifeblood of India's farm-dependent USD 2 trillion economy, arrive on the southern tip of Kerala state by around June 1 and retreat from the western state of Rajasthan by September.

“Australia’s most respected weather forecast department has predicted El Nino this year which could potentially derail the rural recovery party, although it is still early to worry about this,” Jimeet Modi, CEO, SAMCO Securities told moneycontrol.

The year ending compulsions would keep the market range bound subject however to US market response to Affordable Care bill. The market is likely to remain in a sideways zone with a firm bias. Investors should remain invested and traders should buy on decline with strict stops.

March F&O expiry

The stock market is expected to remain volatile ahead of the expiry of March month’s contract as traders roll over their derivative positions (Futures & Options (F&O)) segment from the near-month March 2017 series to April 2017 series.

The near-month March 2017 derivatives contracts will expire on Thursday, March 30.

“Volatility to remain high as we go into the expiry of March series derivative expiry on next week which is also FY closing. Open interest build up shows maximum call writing at 9200 which shows the market is unlikely to reach that mark,” Abnish Kumar Sudhanshu, Director & Research Head, Amrapali Aadya Trading & Investments told moneycontrol.

“For the week, 9,180 and 9,220 levels will act as immediate resistance while the supports are expected to come in at 9,050-8,975,” he said.

Technical Outlook

The Nifty couldn't sustain the all-time highs and ended down while it recovered in the later part of the week sustaining the 9,100 mark. The Nifty made a hanging man pattern on the weekly charts thereby sending a cautious signal to investors and traders.

“A hanging man is a bearish pattern and is formed almost when an uptrend is near as there is sell-off seen with open and high being same, while a body displaying the existence of bears at upper levels,” Mustafa Nadeem, CEO, Epic Research told moneycontrol.

“Bulls try to cover the lower part making a shadow as same, or larger, compared to the body. This indicates as an early indicator of bulls losing the control and trend may reverse provided a confirmation with next closing below the shadow,” he said.

Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities said that the Nifty has to continue to hold above 9,075 to witness a buying interest towards 9,160 and 9,218, while on the downside 9,020-9,000 is likely to act as a major support.

Macroeconomic data

A flurry of macroeconomic data is expected on Friday, March 31. The government will unveil external debt data followed by infrastructure output data for the month of February, foreign reserves, bank deposit growth on a year-on-year (YoY) basis and bank loan growth.

India's annual infrastructure output growth slowed to 3.4 percent in January from 5.6 percent in the previous month on a fall in refinery production. The output growth came in at 4.8 percent for the first 10 months of the current fiscal year, which ends in March 2017.

Upcoming Board Meets

More than 50 companies are scheduled to hold their board meet in the coming week. Coal India will meet on Sunday, March 26 to consider a second interim dividend. Earlier this month, the state-controlled miner had announced an interim dividend of Rs 18.75 a share, paying out a total of Rs11, 640 crore.

Other companies which will hold their board meet to consider dividend include Colgate-Palmolive India (27 March), MindTree (27 March), and India Nippon (March 30).

Mangal Credit and Fincorp said that the board meeting is scheduled to be held on March 28, 2017, to consider and approve stock split. Layla Textile board will meet on March 29 to consider a stock split.