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The bear attack in last couple of sessions, tracking weak global cues, was so sharp that the market wiped out all the gains seen from the beginning of current week as well as previous week. The reaffirmation of continuity of aggressive policy tightening by Fed Chair Jerome Powell in his testimony and the fresh turmoil in the US banking space dented sentiment across the globe.
The BSE Sensex tanked 674 points or 1.13 percent to 59,135, and the Nifty50 fell 181 points or 1 percent to 17,413 for the week ended March 10, as the selling pressure was seen in banking & financial services, technology, healthcare and metal stocks.
However, the bulls favoured oil & gas, and energy stocks. The broader markets also outperformed equity benchmarks as the Nifty Midcap 100 and Smallcap 100 indices closed flat.
Initially next week, the market will first react to industrial output data, US jobs data released after market hours on Friday along with the news of SVB Bank collapse in the US.
But overall, the volatility is likely to be theme for Dalal Street in the coming week too, with focus more on global cues including US inflation, ECB interest rate decision and Chinese industrial production numbers, while on the domestic front, we will have CPI and WPI inflation data for February, experts said.
“The market will closely track global cues as well the India inflation data due next week. The current heatwave and the unseasonal rains have led to crop damage and is likely to keep food inflation higher in the coming months,” Mitul Shah – Head of Research at Reliance Securities said.
Here are 10 key factors that will keep traders busy next week:
1) CPI Inflation
The monthly retail inflation for February will be released on March 13 and WPI inflation on March 14. The market will closely watch both data points as it is expected to decide the next course of action by the Reserve Bank of India in its next policy meeting scheduled in the first week of April.
Most of experts expect the CPI inflation to be above 6 percent but lower than 6.5 percent in January, while core inflation may be around 6 percent, which is expected to be still supportive for another interest rate hike by RBI in April.
“We expect CPI inflation to have moderated in February, after the material upside surprise in January. We forecast February CPI inflation at 6.3 percent YoY and expect the RBI’s preferred core inflation measure to have edged down to 6 percent YoY in February, partly due to a high base,” Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said.
The overshoot of inflation for two straight months, combined with a hawkish set of minutes from the last MPC meeting suggests that the balance of risks is tilted towards another hike at the April meeting, he said.
Among other data points, Balance of Trade numbers for February will also be announced on March 14, while foreign exchange reserves for week ended March 10 will be released on March 17.
2) US inflation and SVB Bank crisis
Globally investors will keep an eye on US inflation numbers scheduled on March 14, which is more important for the Federal Reserve before taking decision on interest rates in next policy meeting on March 22.
Fed Chair Jerome Powell in his testimony last week continued with his statement saying higher and potential aggressive policy tightening is needed to control and bring inflation to 2 percent target, but that will still be data dependent.
Most of experts feel the US inflation may drop to around 6.0-6.1 percent in February, from 6.4 percent in January.
After recent mixed data on the jobs front, there was decline in US Dollar index to 104.64 on Friday, down from around 105.6 in mid of last week, while 10-year treasury yields dropped to 3.7 percent on Friday, from more than 4 percent in previous week.
Investors will also keep an eye on the updates with respect to SVB Bank that was shuttered by regulators on last Friday, which is the second banking failure in the US since the 2008 global financial crisis. CNBC reports indicated that big names in Silicon Valley and the finance sector are calling publicly for the federal government to push another bank to assume Silicon Valley Bank’s assets and obligations.
3) ECB Interest Rate Decision
Next week, we will also have an interest rate decision to be taken by the European Central Bank on March 16 and February inflation of European Union on March 17.
Largely experts expect the 50 bps increase in interest rate by ECB in its meeting, to 3.5 percent, to combat elevated inflation and as a result, deposit facility rate may jump to 3 percent, from 2.5 percent earlier, while the inflation in February is expected to be around similar levels or tad lower than January (8.6 percent).
4) Global Economic Data Points
Here are other global economic data points to watch out for next week including Chinese industrial production data for January-February:
5) Adani Group Stocks
Adani Group stocks may remain in focus as a Financial Times reported that Gautam Adani, who owns diversified Adani group, is planning to sell stake worth around $450 million in Ambuja Cements. The group holds 63 percent stake in Ambuja Cements which was acquired for $10.5 billion last year.
Further, both the leading bourses NSE and BSE on March 10 said two Adani Group firms — Adani Transmission and Adani Total Gas — will be put under the second stage of the long term additional surveillance measures framework, effective from March 13 as per the circular available on the exchanges.
Adani Enterprises, Adani Power and Adani Wilmar are already under the short-term additional surveillance measure (ASM) framework Stage – I since March 9, while NDTV and Adani Green Energy are already under the long term ASM framework Stage – II.
6) FII Flow
Foreign institutional investors remained net buyers for yet another week ended March 10 as they have net bought more than Rs 1,700 crore worth shares, taking the total current month’s buying to Rs 14,361 crore which largely included the Adani Group block deals of March 2nd.
On the other side, domestic institutional investors played vital role and provided great support to the market which has been witnessing FII flow volatility for several months now.
“If block deals aren’t included, FIIs are still in a selling mode. But, given that it is the final month of FY23, we can anticipate a cushion from domestic investors. Institutional flows will therefore be crucial,” Santosh Meena, Head of Research at Swastika Investmart said.
7) Primary Market
The primary market will see a bit active in the coming week as Global Surfaces, which processes natural stones and manufactures engineered quartz, will open its Rs 155-crore initial public offering for subscription on March 13, with a price band of Rs 133-140 per share. The offer will close on March 15.
The IPO comprises a fresh issue of Rs 119.28 crore, and an offer for sale of Rs 35.70 crore by selling shareholders. The company already raised Rs 46.49 crore via anchor book on March 10, ahead of its IPO.
Also we will have a listing of Divgi TorqTransfer Systems, the auto ancillary company, on March 14. Currently, its shares are trading with a moderate 3-5 percent premium over expected final issue price of Rs 590 per share, experts said.
8) Technical View
From a technical perspective, the Nifty50 has formed Hammer sort of candlestick pattern on the daily charts on last Friday, which is a bullish reversal pattern, but for the week, it has seen a Bearish Engulfing kind of pattern on the weekly timeframe, indicating possibility of further weakness.
The index failed to cross the crucial resistance area of 17,800 mark and defended 17,300 levels. The index closed above 17,400 but during the week went closer to previous swing low of 17,255 levels.
Hence, going ahead 17,255-17,300 is expected to be crucial area for the Nifty50 as breaking of the same can drag the index down to 17,000 mark, whereas 17,600-17,700 may be crucial hurdle in coming sessions, experts said.
“Technically, Nifty has been trading in a declining channel and the lower band of the channel exists around 17,000, which could act as a support. In case of any rebound, participants can look for shorting opportunities around the 17,600 zone,” Ajit Mishra of Religare Broking said.
While most of the sectors are trading in line with the benchmark, the performance of banking and financials would continue to play a key role in deciding the next directional move, he feels. Bank Nifty lost around 1.9 percent on Friday as well as for the week.
9) F&O Cues and India VIX
Option data indicated that 17,400-17,300 are the crucial support levels in coming sessions, followed by 17,000, whereas the critical hurdles in the near term may be 17,500-17,700 area.
We have seen maximum Call open interest at 18,000 strike, followed by 17,500 strike and 17,700 strike, with Call writing at 17,500 strike then 18,000 and 17,400 strikes. On the Put side, the maximum open interest was seen at 17,400 strike, followed by 17,300 and 17,000 strikes, with writing at 17,400 strike, then 17,300 strike.
“It is important to note that Nifty is in a demand area and has support up to the 17,250 level. Only a close below this level will make these short sellers of PE run for cover, but until that happens, markets will try to make a move in the positive direction above 17,500,” Rahul Ghose, Founder & CEO – Hedged said.
Santosh Meena, Head of Research at Swastika Investmart said, “If we examine the derivative data, the put call ratio has dropped to 0.89 and the short exposure of FIIs to index futures has once more increased to 84 percent, which is reviving the possibility of a short covering rebound. But, for any significant short-covering rise, the market needs a strong bullish catalyst.”
India VIX, the fear index increased sharply by more than 10 percent during the last week to 13.41 levels, up from 12.18 levels, making the bulls a bit uncomfortable. If the volatility increases further, then there could be some instability in the market.
10) Corporate Action
Astral will trade ex-bonus next week, while Allcargo Logistics, CG Power, SBI Life Insurance, and Taparia Tools will go ex-dividend.
Here are key corporate actions taking place in the coming week:
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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