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The Indian market is set to begin this week's trading session with a host of factors to trigger its performance. Worries over a possible recession, soaring inflation, and rate hikes have dominated markets' moods since the start of this month. The trading week which is set to begin on Monday will continue to witness higher volatility.

Last week, after a couple of dangling sessions, markets ended on a positive note tracking gains in global cues. Sensex settled at 54,326.39 up by 1534.16 points or 2.91%. Nifty 50 closed at 16,266.15 up by 456.75 points or 2.89%.

Ajit Mishra, VP Research. Religare Broking said, "Markets ended 5-week losing streak and gained over 3% amid excessive volatility. Global cues viz. fear of aggressive rate hike by the US Fed, Russia-Ukraine crisis, largely dictated the trend and kept the participants on their toes. Finally, the benchmark indices, Nifty and Sensex, ended higher by 3.1% and 2.9% to close at 16,266 and 54,326 levels. Most sectoral indices, barring IT, participated in the rebound and the broader indices too posted gains in the range of 3-4%."

Here are 10 factors that will trigger markets performance this week: 

Earnings:

The market is currently in the last leg of the earnings season. Companies like Divis Laboratories, SAIL, Adani Ports, Grasim, Coal India, Zeel Entertainment, Gail, and JSW Steel, will announce their numbers during the week.

F&O expiry:

The week will be in focus amidst the expiry of the May series derivatives that is scheduled on May 26. The market volatility is expected to remain higher as investors move towards the F&O expiry.

ICICI Direct in its derivatives weekly view report stated that going ahead, a move above series VWAP of 16350 will be crucial for continued recovery in the settlement week.

In regards to data perspective, ICICI Direct guides that FIIs short positioning reduced drastically as their net shorts in Index futures have declined to 77,000 contracts from 1.25 lakh contracts along with increased long positions in stock futures segment. Hence, the continuance of up move is likely towards 16800 if the Nifty sustains above 16350

Further, ICICI Direct explained that the volatility index has risen further and tested 25 levels before closing the week near 23. Considering roll activities, intraday volatility may remain higher. However, with low open interest in both the Nifty and Bank Nifty, fresh accumulation in May series should pave the way for further directional movement

Inflation:

Inflation continues to hold dominance in swaying market sentiments broadly. CPI inflation has accelerated sharply to 7.79% in April galloping to an eight-year high due to rising food prices.

WPI inflation has climbed to the highest level in at least nine years to 15.08% in April on the back of rising prices of metal, crude, food articles, and more. This will also be the thirteenth straight high of double-digit gains.

Also, markets will react to the government's cut on excise duty by 8 per litre on petrol and by 6 per litre on diesel.

FOMC minutes meeting:

Markets will also react to the Federal Open Market Committee Meeting Minutes that are scheduled on May 25. FOMC Meeting Minutes are a detailed record of the committee's policy-setting meeting held about two weeks earlier.

Foreign investors selling bias: 

Foreign investors have been net sellers for the entire month. The unabated foreign funds' outflow has led to a weakening in the rupee and further intensified the volatility in the market.

Year-to-date, the FPI pulled out a whopping 1,62,299 crore from the Indian equity market.

Listings:

Two companies will make their market debut this week. Delhivery and Venus Pipes & Tubes are most likely to list on Tuesday.

Delhivery launched its 5,235 crore initial public offering, while Venus' 165.42 crore IPO also entered earlier this month. Both the IPOs have been fully subscribed.

IPOs:

Digital signature certifier, eMudhra's 412.79 crore will continue for bidding till May 24th. Meanwhile, speciality chemical manufacturer, Aether Industries is set to launch its initial public offering (IPO) for subscription on May 24 and the bidding will continue till May 26th at a price band of 610 to 642 per equity share.

US GDP data:

The gross domestic product (GDP) data of the US for the first quarter is expected on 26th May 2022 i.e. Thursday next week.

Dollar Index:

After the US currency climbed to a record 20 year high, there has been some retreat in the greenback. Rupee's performance against the dollar will be keenly watched.

Jateen Trivedi, VP Research Analyst at LKP Securities said, the dollar index yet holds firm near above $102. And Crude around $110 gives the rupee little strength. Rupee yet keep taking resistance on 20dma around 77.25 hence some gains can be witnessed towards 77.25 as rupee keeps testing 20dma resistance close above 77.25 will change the trend for rupee until then rupee broadly remains weak. Rupee can be seen in a range of 77.25-77.75"

China's Covid situation:

The rapid rise in China's Covid-19 cases continues to pose a threat to the global markets as industry activities are getting impacted due to dent production and supply chain constraints. China currently has strict lockdown and restrictions in major regions. Any resurgence in Covid cases could dampen market sentiments.

What do experts say about this week's trading session?

Vinod Nair, Head of Research at Geojit Financial Services said, "This week the domestic market was moving in tandem with global peers. The worries over global economic slowdown and rate hikes took control over the market sentiments. UK’s soaring retail inflation number along with Fed Chair’s reassurance on bringing down the inflation, disturbed the risk appetite on fear of a sharper rate hike. The recent earnings reported by the US retailers reflected the heat of high retail inflation, resulting in the rout in Wall Street. FIIs continued their selling spree as they chased high yield US bonds adding volatility to the Indian market. However, the improved outlook of Chinese tech stocks and Chinese Central bank cutting a key interest rate to support growth, injecting optimism into emerging markets."

Mishra expects choppiness to remain high due to the scheduled monthly expiry. Besides, the monsoon-related updates will also be in focus. In line with the prevailing trend, global factors viz. performance of global markets especially the US, China’s COVID update and Russia-Ukraine news will remain on participants’ radar.

"Markets have been witnessing wild swings within the 15,700-16,400 range and currently trading closer to the upper band. Participants should wait for a decisive close above 16,400 to change the bias. In case of a breakout, the 16,650-16,800 zone act as a hurdle," Mishra added.

ICICI Direct in its weekly market outlook report said, " Going forward, cool off in volatility will help Nifty to surpass 16400 levels and head towards 16800 in nonlinear fashion. Buying dips towards 15800-16000 would be rewarding as strong support exist around 15600 levels."

What should investors do?

Nair stated that as the investors are now investing with caution, value stocks should do well during this consolidation period, which is supported by moderate valuation.

Meanwhile, Mishra guides that among the sectoral indices, defensive like FMCG and pharma looks poised to surge further while others may continue to trade mix. Traders should align their positions accordingly and maintain positions on both sides.

Which stocks to pick?

According to ICICI Direct report, sectorally, Auto, Metal, BFSI and capital goods stocks provide favourable risk-reward at current juncture.

The report said, "In large caps, we prefer Reliance industries, SBI, Kotak bank, ITC, Maruti Suzuki, Hindalco, Cipla while in midcaps we prefer ABB, Ashok Leyland, Apollo Tyres, Automotive Axles, Hindustan Aeronautics, Indian Hotel, PVR, Tata Chemicals, SRF, NMDC, Elecon Engineering."

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