Globally, progress on US-China trade war, crude oil and currency movement would be actively tracked by the investors, Jayant Manglik of Religare Broking said.
Bulls managed to get charge on Dalal Street in the passing week, with the Sensex holding 36,000 levels amid volatility caused by geopolitical tensions between India-Pakistan, a bit of uncertainty over the US-China trade deal and no agreement between Donald Trump-Kim Jong Un at the Hanoi Summit.
The expiry of February derivative contracts and the rollover of positions to the next series also kept the market volatile.
The 30-share BSE Sensex gained half a percent to close the week at 36,063.81 and the Nifty50 climbed 0.7 percent to settle at 10,863.50, the level near to technical resistance of last three months.
With the ease of cross border conflict and hopes of a trade deal between the world's largest economies, US and China, the market is likely to get support, but with the lack of domestic cues in the coming truncated week after slower economic growth reported in Q3FY19 and mixed auto sales in February, the market may remain volatile till the announcement of polling dates for general elections.
"We expect markets to remain volatile in the near term. Signs of de-escalation of tensions between India and Pakistan is encouraging for Indian markets. However, any negative news on this front going forward would keep the markets volatile," Jayant Manglik, President at Religare Broking told Moneycontrol.
Globally, the progress on US-China trade war, crude oil price fluctuations and currency movements would be actively tracked by the investors, he said.
The broader markets, which hit during December quarter earnings season, continued to trade sharply higher in the week on hopes of a rate cut by Reserve Bank of India (RBI) after slower growth in Q3 GDP. The Nifty Midcap index rallied 2.5 percent and Smallcap index surged 3.6 percent.
The markets will remain shut for Mahashivratri.
Here are the top 10 factors that will keep traders busy this week:
India-Pakistan Border Conflict
With the handover of Wing Commander Abhinandan Varthaman to the Indian Air Force, tensions between India and Pakistan eased for the time being, but investors will closely watch the situation of both countries, the status of peace talks if any, and the actions taken by Pakistan against terrorism if any, especially ahead of India's general elections.
"If Indo-Pak tension snowballs into deeper confrontations then there can be a knee-jerk reaction in market," Jimeet Modi, Founder & CEO of SAMCO Securities & StockNote said.
US-China Trade Talks
The US-China trade tensions has been the biggest topic since 2018, but that seems to be easing given the positive talks for last few days between officials of both countries, experts said.
News reports suggested that they are in final stage of deal, which could end the crisis in the next couple of weeks.
According to a Bloomberg report, US officials are preparing a final trade deal that President Donald Trump and his Chinese counterpart Xi Jinping could sign in a week, even as debate continues in Washington about whether to push Beijing for more concessions. The US is eyeing a summit between the two presidents as soon as mid-March.
That report came after White House economic advisor Larry Kudlow told CNBC the two countries are making "fantastic" progress in their negotiations. Treasury Secretary Steven Mnuchin also told CNBC the two sides have "made a lot of progress".
Crude oil prices
Crude oil prices, the essential part of our import bill, fell by $2 per barrel to end the week at $65 a barrel amid volatility over global growth concerns, but it has gained by $15 a barrel since its December 2018 lows.
Brent crude futures, the international benchmark for oil prices, may remain rangebound on a likely slowdown in the global economy, and may get support from a likely lower supply, experts said, adding if the US-China signs a trade agreement, then there could be some rally which could take prices around $70 a barrel.
"The upside in prices has been supported with the OPEC maintaining its targeted oil production curbs. Due to this, the global oil market is likely to shift towards being balanced by the second half of 2019. OPEC's strong production cutbacks will provide downside pressure on oil inventories creating tightness in the oil market," Sakina Mandsaurwala, Commodity Analyst at Narnolia Financial Advisors said.
Lok Sabha elections dates
The key event of 2019 is the general elections, which is expected to take place in April-May. The market focus gradually is likely to shift towards this event and will remain in focus for at least the next three months .
All eyes are on the voting dates and its final results, which are likely to be announced in next couple of weeks by the Election Commission of India (EC), which has already said the elections will take place on time despite any major crisis.
Most experts said the pre-election rally along with volatility could be possible on the hope of BJP coming into power, especially after recent actions against Pakistan. They also expect Narendra Modi to continue as prime minister for the second time.
“Volatility is part and parcel of the equity market. It cannot be wished away at any stage. But, it also keeps a market healthy. Sometimes lack of triggers can be the best trigger for the market. I do believe that the market is poised for a big up move in the run-up to General Elections,” Amar Ambani, President and Head of Research, YES Securities told Moneycontrol.
The Nikkei India Services PMI for February 2019 will be released on March 5. Services PMI dipped to a three-month low of 52.2 in January 2019 from 53.2 in December 2018.
The country's foreign exchange reserves data for the week ended March 01 will be announced on March 8. Foreign exchange reserves increased by $944.7 million to $399.217 billion in the week to February 22, due to increase in foreign currency assets.
Foreign Institutional Investors (FII) flow was one of the factors that supported the market in February as well as in the week gone by.
In February, FIIs made the highest monthly buying since November 2017. They bought a net of Rs 15,328.5 crore worth of shares during last month, but they are still net sellers in FY19, selling to the tune of Rs 24,000 crore.
During the week, FIIs net purchased more than Rs 4,000 crore worth of Indian shares.
However, domestic institutional investors were net sellers in the week as well as in the month, selling around Rs 566 crore and Rs 7,500 crore worth of shares respectively. But they remained strong net buyers in FY19.
The Nifty50 continued to trade in range for the last three months as there has been buying when index reaches around 10,500-10,600 levels and selling at around 10,850-10,950 levels.
The index formed bullish candle on the daily as well as weekly charts. Consistently holding 10,800 levels despite geopolitical tensions in three straight sessions, followed by a rally on March 1 indicated that the index may move upwards, but the lack of follow-up buying may limit its upside, experts said.
"Broader range as per current technical setup is still intact i.e. 10,580 and 11,000. And in coming week as well we can expect the rangebound move to continue in the respective range," Manali Bhatia, Senior Research Analyst at Rudra Shares and Stock Brokers told Moneycontrol.
Considering the Fibonacci projections, the resistance for the week is likely to be at 11,035 i.e. at a 61.8 percent retracement level of the previous week's range. Trades on higher side could further extent the move till recent high of 11,118.1. However, support on the other hand exists at 10,749 and 10,580, said Bhatia.
On the options front, maximum Put open interest (OI) is at 10,600 followed by 10,700 strike, while maximum Call OI is at 11,000 followed by 11,500 strike.
Call writing is at 11,000 followed by 11,400 strike while Put writing is at 10,900 followed by 10,800 strike.
Option band signifies an immediate trading range between the 10,700 to 11,000 zone, and requires a range breakout to start the next leg of rally, experts said.
"Nifty has seen rollover 60.26 percent which is lowest in last 19 months suggests that participants are light in position and requires a decisive range breakout to add the market position," Chandan Taparia, Associate Vice President, Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.
India VIX moved up by 5.31 percent to 16.27 level during the last week while it fell down from higher zones in last two sessions from 19.98 to 16.27 level.
Overall higher volatility could continue to keep the volatile swing in the market, Chandan said.
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