7 Key Factors that will keep Traders Busy this Week
Early signs of peaking in COVID-19 cases limited downside. The BSE Sensex corrected 473.92 points to close at 48,732.55, and the Nifty50 declined 145.35 points to 14,677.80 after rising around 3 percent in previous two consecutive weeks, dragged by banking & financials, IT and metals stocks.
"In the coming week, the market is expected to have a stock-specific rally based on the forthcoming results. The effectiveness of vaccination in curbing COVID spread will be a key in determining the long-term trend in the market," said Vinod Nair, Head of Research at Geojit Financial Services said.
Ajit Mishra, VP Research at Religare Broking believes global indices would remain volatile in the near term and movement in key commodities would be actively tracked. He advised maintaining extra caution in selection of stocks and managing overnight risk management.
Here are 10 key factors that will keep traders busy this week:
We will enter into the sixth week of March quarter earnings season and more than 170 companies will release their quarterly scorecard. The names include Bharti Airtel, Tata Motors, Hindalco Industries, State Bank of India, Shree Cement, Indian Oil Corporation, HPCL, Bosch, Colgate Palmolive, Federal Bank and more.
2. State Bank of India
The country's largest lender on May 21 is expected to report strong earnings growth for the March 2021 quarter on the back of decline in provisions, and strong net interest income & pre-provision operating profit.
Brokerages largely expect more than double profit growth in Q4FY21.
"We expect a healthy operating profit growth of 15 percent YoY led by 11 percent YoY revenue growth. Solid NII growth will be partly aided by a lower base. Loan growth to be subdued at around 5 percent YoY and NIM (core) unchanged QoQ at around 3.1 percent," said Kotak Institutional Equities.
The fall in COVID-19 cases in the last few days to near 3.26 lakh, from the crucial 4 lakh mark, seems to be playing a supportive role for the market and as a result the market seems to have got a support at 14,500 levels on the Nifty50.
"For the last many days, the number of states reporting the daily cases were higher than the previous day. But, lately, it seems to be consistently going down," said Sachin Shah of Emkay Investment Managers.
4. Commodity-led Inflationary Pressure
The commodity prices, especially metals, increased significantly in the last few days. The Nifty Metal index itself shot up around 250 percent outshining all leading sectors.
The US President Joe Biden's big infrastructure push could be one of factors pushing metals (especially steel) prices higher.
"With these production cuts in steel, copper etc., supply-side constraints will exaggerate further pushing prices higher. Therefore, the rise in commodity prices will continue to play an influential role in inflationary tendencies going ahead but the real question is how long will the rally continue," said Nirali Shah, Head of Equity Research at Samco Securities.
5. FII Flow
The total outflow by foreign investors increased further in the month of May, to Rs 8,700 crore, which could be a bit of concern for the market. But experts feel if the cases continue declining in coming weeks then the flow could reverse and that could take the market towards record levels again.
6. Technical View
Experts feel the Nifty could get crucial support around 14,300-14,400 levels, while 15,000 is expected to continue to act as the crucial resistance levels.
"Nifty on the weekly chart, formed a negative candle at the highs, which signal an inability of bulls to sustain the highs. After the upside breakout of down sloping trendline resistance in the previous week, Nifty has slipped into weakness on the weekly chart and is now placed at the previous upside breakout area of around 14,650-14,700 levels. The, market is also above another support of weekly 10 period EMA around 14,650 levels. Both of these action indicate a possibility of an upside bounce in the market from the lows in coming sessions," said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
"The present market action signals chances of an upside bounce in the coming sessions. The confirmation of a higher bottom at 14,591 (Friday's Low) is expected to pull the market on upside. The next upper levels to be watched around 14,900-15,000 in the next one week. Immediate support is placed at 14,590," he said.
7. F&O Cues
Maximum Call open interest was seen at 15,000 strike, followed by 15,300 and 14,900 strikes, while maximum Put open interest was seen at 14,000 strike, followed by 14,500 and 14,600 strikes.
"Going ahead, sustainability of 14,700 seems crucial for fresh positive bias from a trading perspective. Even from the options perspective, continued writing was experienced at ATM Call and Put strikes suggesting range bound bias to continue with significant activities seen at OTM Call strikes," said ICICI Direct.
"Sustainability above 14,700 may trigger closure among Call writers, which may pull the Nifty towards the higher band of the consolidation. On downsides, we expect levels near 14,500 to provide support to the index,' the brokerage added.
Invest wisely after doing thorough research. As the market is certainly improving but the threat of covid and lockdown is still intact.