Top 10 factors that will keep traders busy this week

The bulls kept a tight control on Dalal Street for the fourth consecutive week and helped benchmark indices close at a fresh six-month high, majorly driven by banking and financials.

The consistent flow of funds from foreign institutional investors (FIIs), a stronger rupee, a calm global environment, easing tensions on Brexit and a hope of stable government at the Centre boosted investors' sentiment. The Nifty50 rallied 3.5 percent and the BSE Sensex gained 3.7 percent for the week.

As we are getting strong FII flow and there are expectations of policy continuity, the positive momentum is expected to remain, but as the market looks overbought, there could be some consolidation before moving upwards, experts said.

"The most heartening aspect of the current rally is it is quite broad-based across the sectors. As border tensions appearing to have cooled-off, and global central bankers turned pro-liquidity, Indian markets are in risk-on mood," Jagannadham Thunuguntla, Senior VP and Head of Research (Wealth) at Centrum Broking told Moneycontrol.

During the past fortnight, Indian markets have enjoyed one of the best stretches in the recent memory. FII inflows have crossed Rs 36,000 crore from February to March 2019 till date, resulting in a flood of inflows after the 2018 drought.

Jayant Manglik, President - Retail Distribution at Religare Broking said the Nifty has almost reached closer to its next major hurdle i.e. 11,525, so we might see some consolidation prior to further rise.

As the Nifty rallied nearly 8 percent and Midcaps 10 percent since February 19, experts advised selecting quality stocks.

Jayant Manglik said he has reiterated his view to follow the trend and avoid contrarian trades. "Also, focusing more on stock selection and maintaining "Buy on dips" approach."

The broader markets slightly underperformed benchmark indices during the week. The BSE Midcap and Smallcap indices gained 2.5 percent and 2.1 percent respectively.

It will be a truncated week for the market that will remain shut on March 21 for Holi.

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

Elections

The general elections will continue to be main factor for next couple of months, at least till the final results out on May 23. The 17th Lok Sabha election is scheduled to be held in seven phases from April 11 to May 19, 2019.

All major parties have started announcing their list of candidates, which can influence people's decision for whom to vote on polling date. Many surveys already conducted about which party may get how many seats.

Recent opinion polls after the air strike indicated that the BJP may continue to be the single largest party, but may struggle for a few seats to get past the half-way mark of 272 seats.

victory for the BJP-led coalition, National Democratic Alliance," Nomura said in its report published on March 11.

What is evident though is that the BJP's perceived toughness on national security appears to have bought it an additional 30-40 seats in the general elections from when these agencies last conducted polls in January 2019, it added.

But anything can change voters' decisions, so the market will keep a close watch on general elections.

FIIs Buying

FII flow has done a great job from February to March as that gush of liquidity has helped Indian equities march towards its earlier record highs that it touched in August 2018.

The flow of funds from foreign institutional investors surpassed the entire February-month flow in the first fortnight of March itself, which is always a good trend for any emerging markets.

FIIs bought a net of more than Rs 36,000 crore worth of shares from February to March, which is similar to 2017 when they bought more than Rs 44,000 crore. (Rs 10,485.18 crore in February and Rs 33,781.93 crore in March).

"This can be explained by their growing expectations of a favourable outcome of elections and also the return of short-term FIIs who look at this event as an opportunity to make money in the equities and F&O markets in a short period of time by trading on volatility expected," Deepak Jasani, Head Retail Research at HDFC Securities told Moneycontrol

India also had underperformed in comparison to other emerging markets till mid-February over performance and FII flows. Now some reversion to the mean seems to be happening, he said.

DII flow

Domestic institutional investors have been net sellers in February at Rs 565 crore, as well as in March at Rs 8,979 crore as per provisional data.

The inflow of Mutual fund contributions, considered a part of DIIs, receded significantly in February to around Rs 2,174 crore as against Rs 7,152 crore in January. But now in March, they turned net sellers to the tune of more than Rs 4,000 crore.

"From February 25, we have seen a change in the MF behavior whereby their earlier bullish view seems to have changed to cautious and then profit taking," Deepak Jasani said.

The decline in flow could be attributed to profit taking, a redemption pressure from investors who reshuffle their portfolios towards the end of the financial year, and keep cash for deploying after general elections.

"DII's may return to equity markets based on the improving perception of stability post the elections. Also, investor driven DII flows may happen in the case of a new all-time highs are registered on the Nifty/Sensex and the indices would remain stable at those levels for a few days," Jasani said.

Rupee and Crude

With the gush of FII liquidity, the rupee also turned favourable for India from February.

The currency gained 271 paise or 3.77 percent to close 69.09 to the dollar on March 15, as against 71.80 on February 4. Since October when it hit a record low of 74.44, it recovered more than 7 percent.

"The turnaround in political sentiment and FPI flows, coupled with the expected large inflows from rights issues and the Arcelor deal have driven the rupee appreciation, and the rupee could stay strong if the flows continue," CLSA said.

Crude will also be closely watched as Brent futures, the international benchmark for oil prices, closed the week at $67.16 a barrel on March 15 after testing a 2019 high of $68.14, higher from $65.74 levels on March 8.

"A further sharp rise in oil prices could be negative for importer nations like India," Amit Gupta of ICICIdirect said.

Fed Meet

Globally the key event to watch out for in the coming week would be Federal Open Market Committee (FOMC) meeting scheduled to take place from March 19 to March 20.

Most market experts expect the FOMC to keep its federal fund rates within the range of 2.25-2.5 percent, but the commentary on a further rate hike in 2019 amid rising economic uncertainty would be key to watch out for.

Experts also suggest that there could be an announcement on the end of operation to unwind their balance sheet.

"The risk sentiment would hinge on the next development on Brexit, as well the Fed's monetary policy meeting next week. Further hints of dovish assessment would provide a fillip to the markets. Domestic markets have seen decent inflows in March till date. Equities and debt flows are currently near $3 billion," Amit Gupta said.

Macro Data

India's current account balance for the quarter ended December 2018 will be announced on March 19, while the foreign exchange reserve for the week that ended on March 15 will be released on March 22.

Technical Outlook

The Nifty50 started the week on a positive note and continued breaking past critical barriers to show the biggest weekly gain since the past several weeks. The index rallied 3.5 percent and formed a robust bullish candle on the weekly charts.

Experts expect the upmove to continue in coming weeks, but as the market is in the overbought zone, there could be some consolidation before seeing a further break out on the upside.

"Needless to say, this upmove is likely to continue further higher. However, we don't rule out the possibility of a consolidation before the next leg of decisive move," Jaydeb Dey of Stewart & Mackertich Wealth Management told Moneycontrol.

He said that ending the week with a huge bullish body candle above the most critical resistance placed around 11,230 is a structural change, which is pointing towards continuation of this current uptrend. "Higher resistances are placed around 11,520 and 11,650, while critical supports are placed around 11,300 and 11,240."

F&O Cues

The maximum Call open interest (OI) is placed at the 11,500 strike, followed by 11,400 and 11,300 strikes while the maximum Put open interest is placed at the 11,000 strike, followed by 11,200 and 11,300 strikes.

Meaningful Call writing is at 11,700 strike, followed by 11,800 and 11,600 strikes while Put writing is at 11,400, followed by 11,500 and 11,300 strikes.

Option band signifies a shift in a higher trading range in between 11,300 to 11,600 zones, experts said.

"Even from the current levels the set up remains constructive for Nifty. Nifty is likely to move above 11,500 level, which is currently its highest call base. While at the same time Put base has shifted to 11,300 Put strike, suggesting this level to act as strong momentum support for the Nifty," Amit Gupta of ICICI Direct said.

As the Volatility Index continued trading above 15, it is likely to continue in coming month as well, he added.

Corporate Action

Here are companies which have corporate action and board meeting in the coming week:

Global Cues

Global sentiment was also upbeat in the week gone by as markets gained 1-3 percent amid hope of a US-China trade deal.

Here key data points to watch out for in the next week: