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

The market, after a rebound in previous two weeks, lost its strength in the week that ended on April 24 amid rising number of novel coronavirus cases and a delay in announcement of a larger financial package to support the economy.

While the BSE Sensex corrected 0.83 percent, the Nifty50 lost 1.2 percent and the broader markets fell around 3 percent.

Rising expectations of an extended lockdown and its severe impact on June quarter earnings, the closure of debt schemes by Franklin Templeton fund and volatility in oil prices also kept market under pressure, though volatility cooled off. Globally too, markets remained in wait-and-watch mode after the recent rally.

Experts expect rangebound trade to continue in this truncated week amid hopes of a big stimulus package and global cues. Stock-specific activities can be seen as we are in the March quarter earnings season.

"Markets are constantly facing headwinds as the prevailing lockdown has completely derailed the economy and the news of a further delay in the stimulus package has dampened the sentiment," Ajit Mishra, VP Research at Religare Broking told Moneycontrol.

"At the top of it, there is no relief on the COVID-19 front as the numbers are not showing any signs of slowing down yet and that could result in further extension of the lockdown. In such a scenario, we doubt the recent recovery can extend further," he said.

The market will remain closed on May 1 on account of Maharashtra Day.

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

Lockdown decision

This week, we will know whether the government will end the nationwide lockdown on May 3 or if it will be extended further. While efforts are on to curb the spread of the novel coronavirus so that the economy can be reopened, rising number of cases in Maharashtra, the National Capital Region (NCR), Gujarat and Madhya Pradesh, among other states, has led to concerns over what happens next.

Reports suggest that the government may consider extending the lockdown beyond May 3 in areas majorly affected by COVID-19. This would allow industries to work with minimum employees/workers. But, travelling (except for essential services) may remain banned.

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

Rising infections from novel coronavirus

The rising number of infections and deaths due to COVID-19, which has been hurting the market sentiment for last three months, will remain the talking point not only on Dalal Street but across the world, as it has stalled economies and forced people to stay home.

Confirmed COVID-19 cases in India have crossed 24,900. There have been at least 779 deaths due to the outbreak in the country so far.

Total confirmed cases of COVID-19 have reached 28.9 lakh globally, according to the Johns Hopkins Coronavirus Resource Center. This figure includes patients who have recovered and the overall global death toll of two lakh.

With 9.3 lakh cases reported so far, the United States is the worst-affected country. The US is followed by Spain, Italy, France, Germany and the United Kingdom. The World Health Organization (WHO) has also raised fears of possible reinfection.

Catch Moneycontrol's full coverage of the COVID-19 pandemic here

Bigger stimulus package?

The market stabilised and has been moving in a particular range in the last couple of weeks after a sharp fall of 38 percent. Apart from a rally in global peers, this is based on hopes of a big stimulus package.

Experts feel that further delay in release of this bigger package would raise questions over the government's stance with respect to small-medium companies, which could find it difficult to survive in the time to come.

"Market is awaiting round two of an economic stimulus package from the government. Although given the limitations government has with its finances, not much is expected. But at least some sectors (labour oriented) with deep trouble should expect some solace. Nonetheless, if the status quo is maintained by the government it would continue to create heightened pressures on NBFCs and financials in the economy," Jimeet Modi, Founder & CEO at SAMCO Securities & StockNote told Moneycontrol.

Earnings and April auto sales

We are entering in the third week of the earnings season and so far, management commentaries have been weak with respect to business in the first half of FY21. Hence, brokerages have already cut their FY21 estimates considerably and are hoping for a strong revival in FY22.

This week, key earnings to watch out for would be IndusInd Bank, HDFC Life, Ambuja Cements, Adani Power (April 27); Axis Bank (April 28); Hexaware Technologies (April 29); HUL (April 30); Tech Mahindra and ICICI Lombard (May 2).

Auto sales data which will be released over the weekend, is expected to be disappointing due to the nationwide lockdown in April.

Axis Bank, IndusInd Bank and HUL

Private sector lender Axis Bank is expected to report around 15 percent loan growth YoY in Q4FY20 with retail focus and stable margin. But likely higher loan loss provisions may hit profitability. Slippages could be around 3-3.5 percent of loans against 4.6 percent in previous quarter.

IndusInd Bank is likely to face pressure on its operating earnings due to decline in deposits and the impact on rural as well as MFI segments. Loan growth could be around 15-20 percent (slower than earlier quarters), but higher cost of funds may dent net interest margin. Higher provisions are expected to hit profit significantly.

FMCG major Hindustan Unilever in Q4FY20 may report around 3-4 percent volume growth (against 7 percent in Q4FY19) with around 2 percent revenue growth YoY as business impacted in last week of March due to the lockdown. Operating earnings are expected to be strong due to lower cost and cost measures, which along with lower tax rate may boost profits.

Oil prices

International benchmark Brent crude futures after hitting fresh two-decade low (of $17.51 a barrel) initially, recovered in later part of the week.

The WTI crude falling below the zero-level in the futures market due to high supply and lack of demand amid COVID-19 crisis, and lower-than-expected production cut by OPEC+ hit the sentiment.

The recovery in oil prices was partly due to cut in oil drilling rigs by producers in the United States and Canada and amid hope of further production cuts by OPEC and its allies in the wake of collapse in demand worldwide.

"Unless there are signs of economies moving back to normal, crude prices are likely to trade lower. The side effect of lower crude oil prices has not been factored in by the market participants – possibility of projects going haywire, oil economies getting into trouble and infra companies being affected in India are very high," Jimeet Modi said.

Technical view

The Nifty50 formed Gravestone Doji pattern on daily charts on April 24, indicating lack of conviction among bulls and saw Hanging Man kind of formation on the weekly scale, indicating bearish reversal trend ahead.

The index consistently failed to sustain 9,300 levels and has been struggling to head higher since the past few sessions.

"Fatigue is visible which should be read as a sign of caution. We have been contrarian bearish on Nifty as we had been contrarian bullish earlier. We continue to maintain a broader negative stance on the index as believe overall index is likely to retest lows of 7,500 which is substantial downside from here. We continue with view of very limited upside beyond 9,500 zone on the upside," Amit Shah, Technical Research Analyst with Indiabulls Securities said.

F&O expiry

This week, April derivative contracts will be expired and positions will be rolled over to next month. The options data indicated that the maximum Put base has shifted to 9,000 followed by 8,800 strike.

The significant unwinding was seen in 9,000 and 9,300 Put strikes, which hints that Put writers may be covering their shorts fearing that Nifty may slip below 9,000 levels, Nilesh Jain of Anand Rathi feels.

The Call writers were active in 9,300 and 9,500 strikes, where 9,500 holds the maximum open interest. "So continuous call writing at 9,500 hints that Nifty is unlikely to surpass 9,500 in the April series," said Nilesh Jain.

The above-mentioned options data indicated the Nifty could trade in a broader range of 8,800 to 9,500 in coming days and expiry could be between 8,900-9,200 levels, according to experts.

Corporate action, board meetings and macro data

Madhav Infra Project will trade ex-split (face value reduced from Rs 10 to Rs 1) with effect from April 27 while Britannia Industries will quote ex-dividend (Rs 35 per share) from April 29.

Among others, on April 27, Pfizer will consider dividend and Manappuram Finance will mull fund raising, while TVS Motor will consider fund raising on April 28 and Sundaram Clayton on April 30. JK Paper will mull the proposal of share buyback on April 28.

On the macro data front, infrastructure output for March will be released on April 30 and foreign exchange reserves for week ended April 24 will be announced on May 1.

Global cues

Bank of Japan, Federal Reserve and European Central Bank will announce their interest rate decision on Tuesday, Wednesday and Thursday respectively.

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