Market Week Ahead: 10 key factors that will keep traders busy

Benchmark indices nosedived for the seventh consecutive week which ended on April 3 amid concerns over the rapidly spreading novel coronavirus pandemic and rating downgrades on fear of NPA pressure in banking and financials sector due to lockdown. Subdued auto sales data for March and rally in oil prices also hit the sentiments.

The BSE Sensex tanked 7.46 percent to 27,590.95 and the Nifty50 fell 6.66 percent to 8,083.80 for the week, taking total seven-week loss to 33 percent each.

On the other hand, Bank Nifty was down 13.62 percent for the week and 44 percent over the last six weeks — recording the biggest six-week fall ever. However, pharma (up 8 percent), FMCG (3 percent) and energy (2.5 percent) were the only outperformers.

The broader markets relatively outperformed frontliners with the BSE Midcap index falling 3 percent and Smallcap index down nearly 1 percent.

Even the market breadth was in favour of bulls for the last three straight sessions during the passing week, which experts feel indicated suppressed valuations in quality stocks attracted buying interest at lower levels hoping that the worst might have discounted by the market.

According to experts, consolidation is expected to continue and bears are unlikely to handover the charge of Street to the bulls easily in the coming truncated week given the uncertainty over the ongoing lockdown, according to experts.

"Market would continue to be highly volatile and would track global markets along with the trend in coronavirus cases globally and locally," Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services told Moneycontrol.

"While it is very difficult to predict the bottom of the market, it always rewards investors in the long term who take the benefit of such sharp fall. Thus we suggest accumulating on a gradual basis," he said.

Indian equity markets will remain shut on April 6 (Monday) for Mahavir Jayanti and on April 10 (Friday) for Good Friday.

Here are 10 key factors that will keep traders busy in this truncated week:

Novel coronavirus pandemic tightens grip

The main factor to watch out for this weeks would be the novel coronavirus or COVID-19 pandemic, which has been spreading rapidly in the United States and some European nations.

In fact, the most worrying part is that the number of confirmed cases are significantly higher in these nations as compared to China, where the outbreak reportedly started in late 2019.

As per the data compiled by Johns Hopkins University, there have been around 11.9 lakh infected cases globally. Over 58,000 deaths have been reported so far across the world due to COVID-19. United States, Spain, Italy, Germany and France, have more reported cases than China, and which has not seen any significant increase in the number of cases in the last couple of weeks.

The confirmed cases in India increased to 3,072 on April 4. This includes 213 patients who have already recovered and 75 deaths recorded so far. April 5 is the 12th day of the 21-day nationwide lockdown.

Hence, the behaviour of global markets (especially US and Europe) with respect to the novel coronavirus pandemic and its impact on the economy and the people will be closely watched by the Street in coming weeks.

Lockdown to end on April 14? Another economic package?

We are halfway through the 21-day lockdown started on March 25. Hence, this week will be crucial to watch out for whether that lockdown will be ending on April 14 as scheduled, or not.

Confirmed cases of COVID-19 have been increasing. The Centre and state governments have been urging citizens to co-operate and follow social distancing and other guidelines to help control the spread of the virus.

Follow our LIVE blog for the latest updates on the novel coronavirus pandemic and its impact

A Reuters report, citing officials, had suggested that the lockdown could be extended depending on the assessment of the situation in each state.

"If people don't obey the rules seriously and cases continue to rise, then there may be no option but to extend the lockdown,” Maharashtra's Health Minister Rajesh Tope had told Reuters. “It could be extended in Mumbai and urban areas of Maharashtra by two weeks."

Further, there are expectations of an economic relief package for industries and corporates, among others, from the government before the lockdown ends, especially given the weak March auto sales numbers.

"It can reasonably be expected that the government will announce a second round of economic relief package before the lock down is lifted by mid-April. Also there is hope for a scrappage policy that may be around the corner when the government announces an economic package," Jimeet Modi, Founder & CEO at SAMCO Securities & StockNote said.

Crude oil price move

Oil prices jumped 50 percent in April so far after hitting nearly two-decade low on March 31, amid hope of production cuts after report suggested that the US is trying to get the world to cut output by 10 million barrels per day to prop up prices and is also pressing Saudi Arabia to dial back its plan of cutting oil price after the market-share war with Russia. The fall in oil price below the production cost worried drillers in the United States and other oil producers around the globe.

International benchmark Brent crude futures jumped to $34.11 a barrel on April 3, against $22.74 a barrel on March 31. Currently global oil markets are highly oversupplied with about 20 million barrels a day, whereas the demand has hit very badly due to virus-led lockdown in major part of world which brought oil prices down by 65 percent from January's high.

Experts expect the negative sentiment to be seen in the oil market despite production cut efforts, as demand is very less globally due to lockdown and the same is unlikely to revive in short term.

Indian Rupee and FII selling

The recovery in Indian Rupee after welfare and liquidity stimulus seemed to be short lived as the currency weakened sharply to breach 76 against the US dollar during the gone by.

The rising coronavirus cases, rebound in oil prices, FII selling, strength in dollar and weak equity markets dented sentiment and drive the rupee lower by 124 paise to close at 76.13 WoW.

"As of now the overall trend remains skewed on the downside, amid the uncertainty as to how long this pandemic will last and a convincing breach of the crucial level of 76.25 would further accentuate the fall in rupee towards 77.50 mark," Sugandha Sachdeva, VP-Metals, Energy & Currency Research at Religare Broking told Moneycontrol.

FIIs net sold nearly Rs 10,500 crore worth of shares during last week, higher than previous week (over Rs 7,100 crore). Hence, unless and until FIIs turn net buyers for several sessions, the stability in the market is unlikely, experts suggest.

Technical view

The Nifty50, after losing 6.66 percent for the week, formed bearish candle on weekly scale and witnessed Bearish Belt Hold kind of formation on daily charts.

Technical charts indicate that the weakness is likely to continue given the selling seen on every rally and 8,000 could play a major role in coming weeks, experts suggest.

"RSI oscillator is moving southward on weekly and monthly chart and yet not showing any sign of reversal. At current juncture, weekly set up of Nifty is negative and small bounces are also getting sold-off quickly as it is making lower highs from last seven consecutive weeks. Thus, traders should refrain taking long positions," Chandan Taparia, Derivative & Technical Analyst at Motilal Oswal Financial Services told Moneycontrol.

Going forward, resistance for Nifty is placed at 8,350 and 8,555 levels while support is now placed at 7,700 and 7,500 levels, he said.

F&O cues and VIX

The Options data indicated that the Nifty could trade in the broad range of 7,500-8,500 in coming days and the cooling off volatility from 86 levels to 53 indicated some sort of stability but supply seems likely at higher levels, experts feel.

On monthly options front, maximum Call open interest was seen at 9,000 and then 10,000 strike while maximum Put open interest was at 8,000 then 7,500 strike. We have not seen any noticeable activity in Call and Put Options.

"In the futures segment, no major open interest addition is visible in the first week of the series while Nifty open interest remains low near 10 million shares, which is a decade low suggesting low leverage," Amit Gupta of ICICI Direct said.

Despite the market remaining under pressure, the decline in India VIX suggests some consolidation is expected around 8,000 levels, he added.

Macro Data

Markit Services PMI data for March will be released on April 6, while foreign exchange reserves for the week ended April 3 will be announced April 10.

Country's foreign exchange reserves increased by $5.65 billion to $475.56 billion in the week ended March 27, after falling by $17.32 billion in previous two consecutive weeks.

On April 10, deposit and bank loan growth data for the fortnight ended March 27 will also be released.

Industrial output data for February will be released on April 9.

Corporate action

Here are key corporate actions taking place in the coming week:

Global cues

Here are key global data points to watch out for in coming week: