BackBanking crisis, F&O expiry, FII flows to drive Indian equity markets this week
‘The volatility in the market is expected to continue in the short term as the global banking system is yet to fully recover from the crisis, especially in Europe’
PremiumThe trading activity in the domestic equity markets is expected to remain volatile this week as investors will focus on global cues for further direction, analysts said. F&O expiry, FII activity, and movement in the rupee and crude will also be watched by traders as global trends have been dictating the direction of the local stock markets currently.
Equity benchmark indices Sensex and Nifty buckled under selling pressure in metal, energy and realty stocks for the second straight session to settle nearly 1 per cent lower on Friday.
"Nifty slipped below the crucial level of 16950 as the bears gained control of the market. Furthermore, the Nifty fell after a few days of consolidation, indicating an increase in bearish bets. The momentum indicator RSI is in bearish crossover," said Rupak De, Senior Technical Analyst at LKP Securities.
"The volatility in the market is expected to continue in the short term as the global banking system is yet to fully recover from the crisis, especially in Europe," said Vinod Nair, Head of Research at Geojit Financial Services.
Below are the key factors that will keep traders busy this week:
Global markets
Global stock markets swooned on Friday as fears about contagion among banks hobbled shares of lenders such as Deutsche Bank, with the flight from risk shoring up the dollar and driving bond yields lower.
Deutsche, which had announced plans on Friday to redeem $1.5 billion of tier 2 debt not due to be repaid until 2028, slumped 8.5 per cent. For the month so far, Deutsche has shed 27.6 per cent.
The moves highlight just how frail sentiment remains after turmoil in the US and European banking sectors in the past two weeks have revived memories of the 2008 global financial crisis.
Traders have also priced in US rate cuts of about 90 bps basis points to about 3.9 per cent by the end of the year.
The Fed raised its main interest rate by a quarter point to a range of 4.5 per cent-4.75 per cent on Wednesday, but signalled it would consider a pause in light of banking system stresses.
Markets, however, are betting on a US recession and incoming rate cuts.
Derivatives expiry, FII flows
This week will see further increase in volatility due to monthly F&O expiry amidst the highest FII short position. Also, it would be a shortened trading week due to a holiday on Thursday.
“The coming week is a holiday-shortened one and we expect volatility to remain high due to the scheduled expiry of March month derivatives contracts. Besides, global cues, foreign flows and movement in crude could further add to the choppiness," said Ajit Mishra, VP - Technical Research, Religare Broking.
“FIIs are on a selling spree and feeble global cues are further deteriorating the mood. Besides, we can see cracks across sectors and a fresh decline in the broader indices may further dampen the sentiment," Mishra said.
Corporate action
A host of companies have scheduled their board meeting this week for considering dividend payments, share buy back, and fundraising.
Hindustan Zinc, SBI Cards and Payment Services, Angel One, CRISIL, Dwarikesh Sugar Industries, and Indraprastha Gas will trade ex-dividend.
Meanwhile, Symphony, and Godawari Power & Ispat are going to turn ex-buyback next week.
HDFC's board will meet tomorrow to consider the issuance of unsecured redeemable NCDs.
The board of Vedanta will meet this week for approving a fifth interim dividend for the current fiscal. PNB Housing Finance's board will mull raising funds through the rights issue of shares.
Technical Observation
A long bear candle was formed on the daily Nifty chart, which indicates a sell on rise action in the market around 17200 levels. The recent swing high of 17207 could now be considered as a new lower top of the sequence and the market is on the way down to the new lower bottom - below 16800 levels in the near term, says Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
"The short term trend of Nifty continues to be weak. Immediate resistances are left unchallenged and strong supports have started to break on the downside one after another. One may expect Nifty to slide down to 16800-16700 levels by next week. On the upper side, the area of 17050 could be a crucial overhead resistance," he added.
"In the short term, the Nifty index may fall, with a potential drop to 16750. On the higher end, resistance is visible at 17200," Rupak De said.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
