Market Headstart: Respite for bulls unlikely due to coronavirus spread; Yes Bank adds to fears

It is unlikely that the Indian market will have any respite on March 6 as fears of rising coronavirus cases and its impact on the global economy are getting stronger day by day.

Asian shares suffered losses on March 6 following another Wall Street rout as disruptions to global business from the coronavirus beyond China worsened, stoking fears of a prolonged world economic slowdown.

Trends on SGX Nifty indicate a gap down opening for the index in India. SGX Nifty was down 400 points at 10,836 around 08:40 hours IST.

Sensex and Nifty ended with small gains on March 5, as investors remained cautious amid reports of rising coronavirus cases in India.

Signs of improvement in the global cues offered little relief and the equity barometer Sensex ended with a modest gain of 61 points, or 0.16 percent, at 38,470.61, while Nifty settled 18 points, or 0.16 percent, up at 11,269.

BSE Midcap and Smallcap indices outperformed benchmark Sensex, closing 0.31 percent and 0.29 percent higher, respectively.

Vinod Nair, Head of Research at Geojit Financial Services said that the funds allocated by IMF and easing monetary measures are marginally supporting global markets but India is underperforming due to coronavirus cases.

He said foreign investors are selling with a notion that the effect of the epidemic will be more on emerging markets. In his views, volatility is expected to persist and issues related to telecom and weak asset quality of banks could hurt the market in the short to medium-term.

The rupee snapped its four-session losing run on Thursday to close 6 paise higher at 73.33 against the US dollar amid hopes that efforts by countries and global agencies would offset financial damage from the novel coronavirus outbreak.

Foreign institutional investors (FIIs) sold shares worth Rs 2,476.75 crore, while domestic institutional investors (DIIs) bought shares of worth Rs 2,510.89 crore in the Indian equity market on March 5, provisional data available on the NSE showed.

Technical view:

Nifty closed off the day's high but could not hold 11,300 and formed a bearish candle on daily charts again on March 5, as the closing was lower than the opening level.

The index did not participate in but global rally, but it also did not break crucial support of 11,000. It closed above its five-day simple moving average.

These are pointers to volatility continuing in coming sessions but the downsides may be limited, as the index has already corrected more than 8 percent from its record high, experts say.

They asked positional traders with a high-risk appetite to take long side exposure in small quantities, with a stop below 11,030 on the closing basis.

As long as the Nifty sustains above 11,036 on the closing basis, one can retain a positive stance, said Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in.

However, strength in the indices shall emerge only on a close above 11,433, which can pave the way for a sustainable upside with an initial target of 11,536, he added.

Meanwhile, the Central Government has imposed a moratorium on Yes Bank effective March 5, restricting the withdrawal of deposits to Rs 50,000. Any withdrawal over the amount will require the permission of the Reserve Bank of India.

The moratorium will be applicable from 6:00 pm on March 5 to April 3, 2020.

In a press release, the RBI said, the financial position of Yes Bank has undergone a steady decline largely due to the inability of the bank to raise capital to address potential loan losses and resultant downgrades, triggering the invocation of bonds covenants by investors, and withdrawal of deposits.

Three levels to watch out for: 11,245, 11,350, 11,388.

Max Call OI: 11,800, 11,500

Max Put OI: 11,000, 11,300

Stocks in the news:

M&M: February production down 56 percent to 25,643 units, sales down 43 percent to 30,083 units YoY.

JSW Steel: Moody's has changed the outlook on the company's ratings to stable from positive; affirmed Ba2 ratings.

Yes Bank: SBI, LIC likely to pick up 24.5 percent stake each in the bank - CNBC-TV18 sources.

Pidilite: Company incorporates JV to carry on construction business using C-Techos Wall Tech.

Lupin: Company launched generic Vimovo tablets in the USA.

Technical recommendations:

We spoke to Rudra Shares & Stock Brokers and here’s what they have to recommend:

JSW Steel futures | Sell | CMP: Rs 247.85 | Target: Rs 237 | Stop loss: Rs 255 | Downside: 4%

Escorts futures | Sell | CMP: Rs 834.95 | Target: Rs 793 | Stop loss: Rs 856 | Downside: 5%

Bata India | Buy | CMP: Rs 1,605 | Target: Rs 1,685 | Stop loss: Rs 1,565 | Upside: 5%