Indian stock markets have been very volatile in the past few trading sessions, with elections and the earnings season keeping investors cautious. Since hitting a new high of 11,856 on April 18, Nifty has struggled to break above the 11,800 mark. On the downside, Nifty has rebounded when it came closer to its support of 11,550. And there could be more volatility in store in the run-up to the election results, to be announced on May 23. “We expect markets to continue to remain volatile in the near term given the earnings outcome and Lok Sabha election progress," says Jayant Manglik, president of retail distribution at Religare Broking.
Sahaj Agrawal, head of derivatives of Kotak Securities, says any breakout above 11,860 could push the Nifty towards 12,300-12,500. “Nifty continues to consolidate in the range of 11,550 and 11,860. We expect this consolidation to continue for few more trading sessions before a breakout is witnessed on the higher side. Any meaningful dip remains an opportunity to add to long positions," he adds.
Key things to watch for the month of May:
Election results: The biggest event for India markets this month is perhaps the Lok Sabha elections results. “Outcome of general elections would be a key event as a sharp deviation from major expectations or an unexpected outcome is likely to spur volatility," says ICICI Securities.
US-China trade talks: China and the US resumed trade talks in Beijing on Wednesday and will continue discussions in Washington next week as the countries try to end their trade war. Chinese Vice Premier Liu He goes to Washington next week for another round of talks in what could be the end game for negotiations.
The Federal Open Market Committee interest rate decision: The US Federal Reserve is due to release its latest policy statement later today with Chairman Jerome Powell scheduled to hold a press conference shortly after. US President Donald Trump Trump, who has accused the US central bank of undercutting his efforts to boost economic growth, said on Twitter on Tuesday that the Fed should cut its key overnight lending rate by a full percentage point and renew the quantitative easing program that saw it pump trillions of dollars into the economy in response to the 2007-2009 financial crisis and recession. Fed officials were in the middle of their latest two-day policy meeting when Trump made his comments. Despite Trump’s latest criticism, the Fed is expected to leave borrowing costs unchanged today as it maintains a 'patient' monetary policy stance. The Fed’s dovish turn in January-end, after hiking rates four times last year, had triggered a rally in risk assets like equities and also qflows into emerging markets like India.
Oil prices: The Trump administration surprised Iran's oil customers, including India, China and Turkey, last week by saying no waivers on the sanctions would be granted after May 1, ending six months of exceptions to the sanctions for reductions in purchases. Oil prices shot up to six-month high of above $75 a barrel, impacting Indian markets and currency. But oil prices have since cooled off to around $73 a barrel.
“On the global front, movement in crude oil prices and currency would be closely monitored by the market participants," says Jayant Manglik of Religare Broking.
US employment data: US April employment data for April, to be released on May 3, would be in focus as March had witnessed a slowdown in hourly earnings growth.