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

The market was on a strong footing in the truncated week that ended on April 9 as the bulls, after a sharp correction and consolidation, were back with a vengeance. Investors turned wealthier by Rs 12 lakh crore during the week.

The BSE Sensex and Nifty50 climbed nearly 13 percent, the biggest weekly gain since May 2009, amid hopes of a stimulus, renewed FII buying interest and positive global cues on reports that new daily infections from the novel coronavirus may be receding in the United States and Europe.

Buying was seen across sectors as all were beaten down badly. Nifty Auto, Bank, Infra, Metal, Energy and Pharma gained 10-23 percent, while Midcap/Smallcap indices rose 11/10 percent, respectively.

Experts are not convinced with the rally and feel that the market's mood will largely depend on global cues and developments related to the lockdown, than the March quarter earnings, which seem to have priced in.

"The COVID-19 situation remains fluid and uncertainty still looms on the possible economic impact of the outbreak. However, in the coming week it is expected that market will be guided by global sentiments with sudden gap ups or gap downs. Any negative surprises with respect to the lockdown will also have an impact on bourses," Jimeet Modi, Founder & CEO at SAMCO Securities & StockNote told Moneycontrol.

The market will remain shut on April 14 on account of Dr Bhimrao Ramji Ambedkar Jayanti.

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

COVID-19 to remain on everyone's lips

The novel coronavirus or COVID-19 pandemic has been spreading so fast that it is expected remain the talking point across the world. The pandemic has brought economies to a standstill. Globally, experts feel it remains unabated, though reports indicated that new confirmed cases being reported each day in the US and Europe may be declining.

The disease has so far infected over 17.7 lakh people and caused at least one lakh deaths globally, as per data from the Johns Hopkins University Coronavirus Resource Center.

With over five lakh cases and 20,000 deaths reported so far, the United States is worst affected by the outbreak. The US is followed by European countries such as Spain, Italy, France and Germany.

In India, the total confirmed cases of COVID-19 stand at 7,529. According to the Health Ministry, 242 people have died in the country so far.

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

Lockdown

The 21-day nationwide lockdown announced by Prime Minister Narendra Modi was expected to end on April 14. Delhi Chief Minister Arvind Kejriwal said on April 11 that the prime minister has decided to extend the lockdown. While so far there has been no confirmation on the same from the Centre, many states, including Odisha and Maharashtra, have already declared extension of the lockdown by at least two weeks.

It is widely expected that the Centre will extend the lockdown till the end of April given the rising number of cases and deaths each day.

The market will read these details and will react accordingly as the extension will mean further impact on the economy and industries.

Earnings

The January-March quarter earnings season was expected to be delayed. The Securities and Exchange Board of India (SEBI) has allowed for a delay due to the ongoing lockdown. However, beginning with IT companies, results will start pouring in from this week.

Wipro is the first to announce its quarterly and full year results on April 15, followed by TCS on April 16 and HDFC Bank on April 18.

Experts do not expect major impact of COVID-19 on March quarter earnings as the lockdown during the quarter was only for a week or so. But, Q1FY21 is expected to be hit as April is completely under lockdown.

"The IT sector is expected to post a mixed set of Q4 results, with companies having exposure to BFSI and telecom sector (essential services) remaining unaffected, but companies with exposure to the aviation, tourism and hospitality sectors may see a fall in revenue. The recent depreciation of the dollar-rupee will be a positive for the sector," Vinod Nair, Head of Research at Geojit Financial Services said.

The banking sector should see its earnings largely unaffected by the present situation as the lockdown began towards the end of Q4 and lenders with size and scale are expected to have decent Q4 with good deposit growth, he added.

Crude and Indian Rupee

Oil prices remained largely volatile last week amid hope of production cuts by OPEC and its allies, with international benchmark Brent crude futures closing at $31.48 a barrel, down against $34.11 a barrel in previous week.

The oil prices fell for the week as Mexico was the only country to refuse production cut in the meeting on April 9, though OPEC and its allies agreed to cut production by 10 million barrels per day in May and June.

Hence, it raised doubts over their efforts to lift oil prices that went to near two-decade low due to demand-hit by the novel coronavirus pandemic and Saudi-Russia's price war. Therefore, key things to watch out for would be the decision of Mexico with respect to production cuts and its impact on oil prices in coming days.

Meanwhile, the Indian Rupee recovered from record lows to close at 76.28 against the US dollar on April 9, but depreciated by 15 paise for the week. The currency, which hit an intraday record low of 76.55 during the week amid continued economic uncertainty and fragile investor sentiments due to growing concerns of coronavirus-led economic slowdown, is expected to be under pressure, experts feel.

"The local unit has breached the crucial support of 76.25 levels, and now seems primed to test further lows of around 77.50 mark in coming days," Sugandha Sachdeva VP-Metals, Energy & Currency Research at Religare Broking said.

FII flow

Finally, foreign institutional investors (FIIs) returned to Indian equity market as they turned net buyers for the week after several weeks' of outflow. In fact, they was net inflow in April against net outflow in previous three months.

FIIs net bought Rs 4,422.8 crore during the week, helping them to turn net buyers to the tune of Rs 1,345.04 crore for April against Rs 65,816.70 crore of selling in March. The FII inflow lifted market sentiment in the week gone by, but the key thing to watch out for would be whether they continue buying further or not, because it is expected to dictate market trend in coming days.

Macro data

CPI inflation for March, which will be released on April 13, is going to be a key due to the nationwide lockdown. Experts feel that the inflation is expected to decline further due to lower crude oil prices, favourable base effect and impact of COVID-19 on commodity prices. CPI dropped 6.58 percent in February from 7.59 percent in previous month due to fall in prices of food and beverages.

WPI inflation and Balance of Trade for March will be announced on April 14 and April 15 respectively. On April 17, the minutes of monetary policy meeting held on March 27 and foreign exchange reserves for week ended April 10 will be released.

Technical view

The Nifty50 closed above 9,100 levels for first time since March 16, registering 4 percent rally on April 9 and nearly 13 percent during the week gone by. As a result, there was a bullish candle formation on daily and weekly scale.

Experts feel the market is in a broad consolidation zone of 8,000-9,500 levels and bullish momentum is unlikely till the index decisively crosses 10,500 levels.

"I would still not aver at that stage that we are on the road to recovery. If we turn from levels between 9,550 and 9,850, it would still be a continuation of the existing bear market! In order to move into bull territory, we would need to see this market trading above 10,500. Until then one can continue seeking short term trading opportunities," Manish Hathiramani, Proprietary Index Trader & Technical Analyst at Deen Dayal Investments told Moneycontrol.

F&O cues and India VIX

The recovery seen last week was largely supported by short covering and fresh long positions. The Option data indicated that the Nifty could trade in a range of 8,500 to 9,500 levels in coming days.

Maximum Call OI has been shifted to 10,000 then 9,000 strike while maximum Put open interest is at 8,000 then 7,500 strike. Put writing was seen at 8,500 followed by 9,000 strike whereas Call unwinding was seen at all the immediate strike with minor call writing at 10,000 strike.

The volatility measured by India VIX moved down below 50 levels, which is expected to cool off further and may provide more stability to the bulls with short covering activities, experts feel.

"Volatility has come down to 50 percent from 85 percent showing the cool-off in jitters. This may continue for a while as it is supported by FII buying. The noticeable Put base is placed at 8,500, which would act as good support on any extended profit booking. The Nifty can extend its move towards 9,300 and 9,500 levels," Amit Gupta of ICICI Direct said.

Corporate action

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

Tata Steel and Punjab & Sind Bank will hold meetings of their board of directors for fund raising on April 13 and April 15, respectively.

Global cues

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