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Election, Q4 earnings, and FII flows among 10 factors that will steer D-Street this week

1 month ago 149

The Nifty 50 ended with weekly declines of 2.6% amid significant volatility where the India VIX shot up to a 52-week high. When markets resume trading on Monday, a host of important domestic and global events lined up during the week are likely to impact them.

"Indian stocks witnessed a sharp correction after reaching record highs. Investor sentiment turned cautious due to the upcoming elections and aggressive selling by foreign institutional investors (FIIs). This selling pressure overshadowed a strong performance in global markets, keeping domestic indices under pressure throughout the week," said Santosh Meena, Head of Research at Swastika Investmart.

The fear gauge India VIX surged over 25% last week and high-beta sectors faced the brunt of the selling while defensive sectors like FMCG, buoyed by positive earnings reports, performed well.

These factors are likely to impact market movement this week:

1) Polls

Indian markets fell last week amid jitters regarding uncertainty over elections. The fourth voting phase will happen on Monday, May 13 and Street will keep track of it. The perception that the BJP may not get as many seats as projected earlier, has also prompted investors to cut some of their bets.

2) Q4 earnings

Over 530 BSE-listed companies will announce their March quarter earnings this week, including DLF, GIC Housing Finance, INOX India, Jindal Steel & Power, Varun Beverages, Zomato, Bharti Airtel, Bharti Hexacom and Colgate-Palmolive (India).

The markets will also react to earnings declared by Eicher Motors, and Tata Motors, among others reported on Friday.

3) US Markets

Major indices on Wall Street ended mixed on Friday. While Dow 30 ended at 39,512.80, up by 125.08 points or 0.32%, the S&P 500 settled at 5,222.68, higher by 8.60 points or 0.16%. Meanwhile, the Nasdaq Composite declined by over 5.40 points or 0.03% at 16,340.90 on Friday.

When Indian markets reopen on Monday, they will take cues from the Friday closing of the US markets. They will also track movement in GIFT Nifty futures on Monday. The latter is an early indicator of movement in the Nifty50.

4) Rupee vs Dollar

The Indian rupee closed nearly flat on Friday, tracking subdued moves in its Asian peers and as expectations of the central bank's intervention blunted the pressure of dollar demand from local oil companies and foreign banks. The rupee ended at 83.50 against the US dollar, barely changing from its previous close at 83.5025. The local currency declined nearly 0.1% week-on-week.

At 83.50 we expect exporters to hedge for one month and watch poll results and then take a call for further hedging," said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.

5) Corporate Action

May 14, Tuesday will be an ex-date and record date for the interim dividend of Godrej Consumer Products and Gravita India; May 15, Wednesday will be ex-date and record date for the sub-division of Canara Bank. It will also be the ex-date and the record date for Aptus Value Housing Finance and Coforge,

6) Technical Factors

Going ahead, Meena expects market volatility to remain high as we inch closer to the voting phases, and investors will be bombarded with economic data on both domestic and global fronts.

He sees a potential buying opportunity exists if Nifty holds above its previous low of 21,777, and a successful defense of this level could trigger a recovery. On the upside, the 22,200-22,400 zone presents a potential resistance area, and if Nifty can overcome this hurdle, a short-covering rally might ensue, he added.

Conversely, a breach below 21,777 could lead to further selling pressure, pushing the index towards 21,550 and even 21,200.

Bank Nifty is finding a psychological barrier at 50,000 and is currently hovering near its crucial 100-day moving average (DMA) at around 47,200, a support level while the initial hurdle on the upside is around 48,200, Meena said, adding that a breakout above this level could trigger short covering, propelling the index towards 48,600 and even 49,500.

In his view, a breakdown below 47,200 could exacerbate selling pressure, dragging the index down to 46,600 and potentially even 46,200.

7) FII/DII Action

The foreign institutional investors (FIIs) were net sellers of Indian equities and off-loaded shares worth Rs 2,117.50 crore on Friday, while the domestic institutional investors (DIIs) were net buyers at Rs 2,709.81 crore.

The performance of domestic and foreign investors will impact how movement happens in the domestic stock markets.

8) IPO Action

After a hectic week, the primary market is geared up for one of the most-awaited IPOs of the year -- Go Digit -- which will launch its maiden public offer on May 15. The SME segment will see four new IPOs - Quest Labs, Indian Emulsifier, Mandeep Auto, and Veritaas Advertising - opening this week.

Apart from the new issues, as many as 12 listings are scheduled for this week, which includes the three mainboard companies of TBO Tek, Indegene, and Aadhar Housing Finance.

9) Crude Oil

Oil prices remain critical for markets with their impact on inflation and the rate trajectory of global central banks including India's.

10) Bond Yields

Indian government bond yields were little changed on Friday amid a lack of fresh cues, with the focus shifting to US and domestic inflation prints due next week. The benchmark 10-year yield ended at 7.1276%, following its previous close of 7.1321%. The yield fell 2 basis points (bps) this week, after declining 4 bps last week.

Yields have shown a downward bias over the last few days tracking US peers on hopes of the Federal Reserve cutting interest rates this year, which were bolstered by weaker-than-expected April nonfarm payrolls data last week.

The local and US inflation prints are now expected to provide directional cues.
Inputs from agencies

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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