Selling pressure took over Indian markets after Nifty50 hit an all-time high of 15,431 on Tuesday. The benchmark index is currently down 450 points from its peak, with Nifty settling at 14,981 on Friday. As the week progressed, bears took control of the markets across the globe amid worries of increasing US bond yields and prospects of higher inflation kept investors mood gloomy. PSU banks outperformed during the week due to developments around privatisation. Another stock market benchmark Sensex fell over 400 points on Friday to finish the week at 50,889.
Here are 10 factors to watch out for this week:
1) “We expect volatility to remain high next week due to the scheduled expiry of February month derivatives contracts. On the data front, participants will be eyeing the important macroeconomic data viz. GDP numbers and core sector data on February 26,” says Ajit Mishra, VP – Research, Religare Broking Ltd.
2) Besides, the update on covid cases will also remain on their radar, he added. India reported 14,264 new covid cases in the last 24 hours, according to the data released by the Union Health Ministry on Sunday. Some states have been witnessing a worrying uptick in infection numbers this month.
3) “A decisive break below 14,800 may result in further slide in Nifty. On the downside, the 14,450-14,650 zone would act as a cushion. Considering the scenario, we advise limiting naked leveraged positions and keeping extra caution in the selection of stocks,” added Ajit Mishra of Religare Broking.
4) Nirali Shah, Head of Equity Research, Samco Securities, says going ahead, Nifty could witness some pressure from the likelihood of strengthening of US dollar. “The weekly chart of USD-INR shows a strong appreciation in the rupee from November levels of 74.6/$ to 72.5/$ now. However, current week’s performance suggests there could be a broad consolidation in the currency pair.”
5) “In the forthcoming weeks, any weakness seen in the rupee may build up some additional pressure in Indian equities giving a reason for FPIs to book profits in the short term,” she added.
6) “Nifty50 made a new high of 15431 but closed the week on a negative note. The index has made a bearish engulfing candlestick pattern which indicates price rejection at higher levels. The bulls are getting tired as the index is trading much higher than its mean levels and at an accelerated rising channel resistance. Hence, a brief corrective dip cannot be ruled out,” adds Nirali Shah.
7) “In the coming week, investors should be cautious in benchmark indices and take note of any major movements in global markets. Domestic bourses are expected to be swamped with IPOs given that the sentiment encircling listing gains continues to persist. Going ahead, markets are expected to remain dull and range-bound in absence of any major positive triggers. Therefore, investors are suggested to count on this opportunity to alter their portfolios by withdrawing monies from the weaker quality stocks and investing new monies in quality bets only on dips,” says Nirali Shah.
8) Vinod Nair, Head of Research at Geojit Financial Services, says, “We expect the domestic market to continue following the global markets in the coming week due to lack of any major domestic events. While, GDP data for the 3rd quarter which is to be released towards the end of next week, is expected to show signs of economic recovery adding positive momentum in Indian market.”
9) Technically, Nifty formed a bearish candle on daily scale and a Bearish Engulfing candle on weekly scale, says Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services. “It continues its formation of lower highs – lower lows of the last three trading sessions. Now, till it remains below 15150, weakness could continue towards next key support of 14800-14700 while on the upside hurdles are seen at 15250-15400,” he said.
10) “Going ahead the market may continue with its consolidation for some time till the concerns over rising bond yields and inflation recedes. Even spike in virus cases is worrying the market. Further Nifty valuations at 21 times FY22 EPS are not inexpensive anymore and demand consistent earnings delivery ahead, adds Siddhartha Khemka.
“Rising bond yields may cap equity valuations as the RBI may have to do a balancing act to keep bond yields at lower levels while managing the government borrowing program. Thus the market would track rising inflation, increasing covid cases along with prospective US stimulus in the near term for further direction.”