Experts said the positive momentum is expected to continue with caution ahead of general elections, though global factors may intermittently cause volatility.
The moderate sell-off amid consolidation in the later part of the week failed to dent market sentiment, which improved significantly in initial sessions.
The Nifty50 ended higher for third consecutive week, rising 1.5 percent on hope of single party government coming to power in Lok Sabha elections 2019 after a surprise Indian Air Force (IAF) air strike across the Pakistani border in response to the Pulwama attack.
The renewed major buying interest in midcaps and smallcaps also lifted sentiment. Globally, the hope of easing US-China trade concerns remained a positive factor, but the lower-than-expected Chinese economic data and an increase in further stimulus to banks to improve credit growth by European Central Bank raised fears of a global slowdown.
In the coming week, the positive momentum with caution is expected to continue ahead of general elections, though global factors may intermittently cause volatility, experts said, adding the Nifty50 may gradually move upwards amid consolidation and the broader markets could also continue to participate in the run.
"We reiterate positive yet cautious view on markets and suggest keeping a close watch on global cues for next trigger. Also, we suggest focusing more on trade selection and position management aspects," Jayant Manglik, President - Retail Distribution at Religare Broking told Moneycontrol.
He said the Nifty needs decisive break above 11,100 for a further surge while 10,900-10,950 zone would act as cushion in case of any dip.
Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote advised investors to stay on the sidelines and keep a warchest of money ready for investing in good quality small and midcap shares after a correction.
Also, the allocation to frontline stocks should be made at or around the election month for building a portfolio at reasonable valuations, he said.
The broader markets continued to outperform frontliners for another week. The Nifty Midcap index climbed 2.5 percent and Smallcap index jumped 4.2 percent.
Here are 10 key factors that will keep traders busy this week:
The most important event, where the entire focus has been shifting, is Lok Sabha elections 2019, with the Election Commission of India (EC) announced polling dates. Elections voting will start on April 11 and will end on May 19. The counting will take place on May 23.
Some parties have started the discussion on fielding candidates and some have already fixed places among themselves.
In fact, the market started pricing in the event a bit, as the recent rally could be one of examples of raised hopes for the ruling party forming a strong government, experts said, adding ultimately the voter is the final king.
"The market is mesmerized in the hope that the ruling government has increased its chances of forming a strong government and expectations of a coalition government are receding, but in politics anything is possible before the actual outcome," Jimeet Modi told Moneycontrol.
He said just like Bloomberg's fear and greed indicator for the stock market, politics is guided by sentiment of expectation of a stronger government or coalition government which will oscillate the markets accordingly.
However, reasons can emerge which may again shift the opinion of the market towards the formation of a weaker Government coming to power; the markets will drift lower in that scenario, he added.
The industrial production data for the month of January and retail inflation for February will be released on March 12, with the WPI inflation for February will be announced on March 14.
Retail inflation in January dropped further to 2.05 percent against 2.11 percent in December 2018 on falling food and fuel prices, while India's factory output growth grew 2.4 percent in December 2018 after hitting a 17-month low of 0.5 percent in November.
The current account data for Q4 will be announced on March 13. On March 15, the balance of trade data for February, foreign exchange reserves for week ended March 8, and deposits and growth of bank loans for the fortnight that ended on March 1 will be released.
The benign oil prices, which were rangebound at around $65 a barrel, continued to support countries like India which imports around 85 percent of requirement.
Brent crude futures, the international benchmark for oil prices, increased by one percent during the week that ended on March 8, but fell 1.9 percent from weekly high of around $67 a barrel on the back of global growth concerns, after weak Chinese data and US jobs data and a rising US supply.
The Indian rupee gained a percent to close the week at 70.15 a dollar, outperforming most emerging market currencies even in the face of stronger dollar.
A consistent inflow from foreign institutional investors (FIIs), domestic political sentiment and a rally in equity markets have supported the currency. Experts expect another rally from the currency over improved domestic sentiment.
Amit Gupta of ICICI Securities said the rupee can rise till 69.30 in the near term while 70.60 is near term resistance.
"Despite Friday's fag-end recovery, it continues to face hurdles around its downward sloping trendline, suggesting short-lived moves. We expect, USD/INR to inch towards January 2019 low near 69.20 mark," Pritesh Mehta, Senior Vice President – Research at YES Securities told Moneycontrol.
The dollar breached 97.5 levels, driven by selling of Euro after the European Central Bank lowered its growth forecast as well as provided stimulus funding to banks citing risks to weak growth prospects.
US-China trade deal
Globally investors as well as traders will closely watch the developments between US and China with respect to trade deal, especially after weak Chinese economic data dragged equities in the week gone by.
None of the base metals had a positive move due to indecision surrounding the trade deal between the US and China and appreciating dollar. China lowered its economic growth targets due to trade war.
On March 8, Fed Chairman Jerome Powell after a speech at Stanford University, said downside risks have increased due to Brexit and the ongoing trade war between US and China. He also said the growth has slowed in China, Western Europe and US.
"Hence, traders would continue to monitor developments in the trade deal between US and China," Jigar Trivedi, Research Analyst- Commodities Fundamental at Anand Rathi Shares & Stock Brokers said.
The renewed buying interest from foreign institutional investors (FIIs) also lifted market sentiment, that is why the market did not see sharp fall since second half of February 2019.
FIIs have so far bought a net of more than Rs 5,200 crore worth of shares in March on top of Rs 15,328 crore of buying in February, which analysts expect to continue in coming month as well over benign crude oil prices, inflation and interest rates at least for the medium term.
The Indian rupee also stabilised around $70 dollar levels.
However, domestic institutional investors preferred to take a bit of money off the table. They have so far sold more than Rs 1,500 crore worth of shares in March in addition to Rs 566 crore worth of selling in February.
The Nifty50 continued to hold psychological 11,000 levels for third consecutive session on March 8 despite a moderate correction, and it formed a bullish candle on the weekly charts.
The index has given highest weekly closing since October 2018 suggesting bulls having upper hand in the current rally, also RSI has given breakout after four months.
"Bullish crossover in MACD indicates positivity in Nifty; an increasing histogram of MACD on the daily chart is also indicating bullishness in the index," experts said.
"Interestingly the index is trading above its three major simple moving averages 20 DMA, 50 DMA and 200 DMA which are placed between 10,830-10,870 levels suggesting validated upmove in progress, and strong support zone on the lower side," Shabbir Kayyumi, Head - Technical & Derivative Research at Narnolia Financial Advisors told Moneycontrol.
He said sustained trade above the previous months' high placed around 11,118 will accelerate the upmove, which can take the index higher towards crucial resistance zone of 11,250-11,300 levels. However, a close below the strong support (10,870) will push prices lower towards 10,750 level, he added.
Maximum Call open interest (OI) was seen at 11,500 strike, followed by 11,300 and 11,000 strikes while maximum Put open interest was seen at 11,000 strike, followed by 10,800 and 10,500 strikes.
Significant Call writing was seen at 11,300 strike, followed by 11,000 strike while Put writing was seen at 10,900 strike, followed by 11,100 strike.
Amit Gupta of ICICI Securities believes the Nifty can move up to 11,500 as positions in Call options are shifting to this strike.
Volatility has started cooling off from 20 percent after the relief seen in Indo-Pak cross boarder tensions.
"Market participants are utilising this decline in volatility by writing Put options. PCR-OI (Put Call ratio - open interest) of Nifty has reached 1.76 levels on the back of higher Put additions. These positions will benefit from stable or upward moving market," he said.
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