Market Week Ahead: 10 key factors that will keep traders busy
The market had to remain under severe pressure for the third consecutive week that ended on 22nd May with the BSE Sensex and Nifty50 as well that fell over one percent each.
With that, it rose tensions between the United States and China, deficiency of demand-boosting measures from the Center, most likely NPA pressure on banking and financial after the expansion in the moratorium period until August 31st, unwavering FII selling and heightening number if COVID-19 in the nation, hurt the sentiments of market.
Yet, the hope of the future easing of the lockdown restrictions and expectancy of more fiscal measures supported the market up.
At first, the market could witness few bounce this week after falling consistently previously in the three weeks. But, with the provision of reasons aforementioned and expected procrastination in the development of COVID-19 vaccine, it might in the future, remain a volatile week. Experts suggest that all eyes will stay stuck on the number of COVID-19 cases being reported and on the economy opening.
“The firm stance taken by governments across the world against China may lead to further deterioration in economic relations which would keep markets under pressure in the medium term. Non-occurrence of good news in the horizon may take markets lower with a soft landing and market is expected to reach 8,500 levels in the near term,” Jimeet Modi, Founder & CEO at SAMCO Securities & StockNote has informed Moneycontrol.
Vinod Nair of Geojit Financial Services advised the investors to tread cautiously in the coming week. “Any news regarding the slowdown in number of infections or specific sectoral news will have an impact on the markets,” Nair mentioned.
The market will need to remain closed on May 25th (Monday) for Eid-Ul-Fitr.
Here are 10 key factors that will keep traders busy this week:
Will lockdown ease?
As we draw closer to the end of the fourth lockdown phase, the market will have to start focusing on future re-opening of the economy. So far, the essential services, few industries railways and more lately, domestic aviation was allowed to recommence.
Now, all the eyes will be on what other segments will start reopening from the commence of June. Yet, nonetheless, experts also suggest that companies will not be able to restore work in full capacity even if measures were to ease significantly in June.
Innumerable European nations and regions in the US have already reopened, while keeping the social distancing norms. Although globally, there have been over 53 lakh confirmed cases of COVID-19. At least 3.42 lakh people have died, as well, so far.
Rising COVID-19 infections
India has completed the nationwide lockdown of two months, meant to clampdown the wide spreading of novel coronavirus pandemic. Still, the number of confirmed cases seems to rise time to time.
Certainly also, in the week that passed by, India’s tally crossed the one lakh-mark (is is currently around 1.25 lakh with over 3,700 deaths).
Thus, the key factor to survey this week would be if we are moving closer to the peak of infections being reported.
US-China trade tensions
The reawakening of tensions between the US and China could be a real threat to global economic growth as suggested by experts.
Donald Trump, the president of US, in his comments have also raised doubts over the implementation of phase one deal amid the world’s two largest economics which was signed in January 2020.
Further, China is expected to soon impose a new national security law in Hong Kong that could ruffle the US and other western countries.
Around 100 companies will have to report their March quarter earnings this week with the inclusion of HDFC, Sun Pharma, Lupin, Dabur India, TVS Motor Company, United Spirits, Voltas, etc.
Also among others, Astral Poly Technik, Bata, JSPL, Max Financial Services, Torrent Pharma, VIP Industries, KPIT Technologies, Ujjivan Financial Services, Ceat, Equitas Holdings, RCF, Amber Enterprises, Usha Martin, etc. will also release their earnings tally.
FII stance although remained bearable in India as compared to other highly developed economies which enticed flow in their risky assets with huge liquidity stimulus packages.
FIIs net sold Rs 6,920.28 crore worth of shares in the past week, in addition to Rs 5,951.15 crore of selling in the proceeding one—which was one reason too many for correction in equity market last week and 85 paise fall in the Indian Rupee against the US dollar in May so far.
Government’s Rs 20 lakh crore financial package also seemed to have suffered a failure to lift the mood at the FII desk. Thus, FII flow will be closely and succinctly watched in the coming days.
Crude and Rupee
The prices of oil continued its run for the fourth consecutive week following the ease of lockdown restriction in many parts of the globe, supply cutbacks and fall in the shale oil production in the US.
The international benchmark Brent crude futures ascended even above $35 a barrel at the end of week passed by, which is expected to rally in coming days with the easing of lockdown measures. There is hope of shale oil production back in the market, but the upside is as hoped to be capped as provided the virus fears, the demand is unlikely to revive to pre-COVID levels just as early.
The Nifty50 descended 67 points on May 22nd and created an indecisive Doji kind of formation on the daily charts, whilst it lost 1 percent for the week and saw Hammer kind of formation on the weekly scale. But the Bank Nifty had also lost 8 percent, which is a massive ongoing concern for the Nifty50.
Therefore, the trend could possibly remain in favour of bears. But, as it has surveyed a bearish candle for the third consecutive ongoing week, there might be few rebound firstly in the coming week as what experts are deeply feeling.
“Due to the recovery, Nifty index has formed a Hammer candlestick pattern with a long lower shadow which is considered as a trend reversal pattern. So, we might see some pullback towards 9,200 levels which is a major resistance level and if Nifty manages to sustain above the same, then we can expect a continuation of a current pullback towards 9,350 and then 9,500 levels. On the contrary, if Nifty breaks below 9,000, then it may retest 8,800 levels,” Nilesh Ramesh Jain, Derivative and Technical Analyst – Equity Research at Anand Rathi stated.
This week, May series derivative contracts expire and traders will have to walk over their position due for next month. The the options data slightly hints that the maximum put base is placed at 9,000 with the following of 8,800 Strikes, that must likely act as a support zone.
The Call writers were very much active in 9,300 and 9,500 strikes, just where 9,500 clasps the second-highest open interest.
“So continuous Call writing at 9,500 hints that Nifty may find it difficult to surpass 9,500 in the May series. The Options data indicates a broader range of 8,800 to 9,500. Based on the data, we are expecting some broader consolidation in the coming week,” Nilesh Jain said, adding with the cooling off in the volatility, he expects some stability and pullback in the coming week.
The India VIX fell 15 percent to end near 32 levels.
Corporate action and macro data
As witnessed likely, Infosys will trade ex-dividend (Rs 9.50 per share) from May 29th.
On the macro front, however, Q1CY20 GDP data, infrastructure output and budget value for April, and foreign exchange reserves for week ended May 22th will be released on May 29th