Dalal Street Week Ahead | 10 key factors that will keep traders busy

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A spiralling selling pressure dragged the benchmark indices below their crucial levels of 60,000 for the Sensex and 18,000 for the Nifty50 last week. The rising inflation concerns on the global front which, in turn, may indicate faster-than-expected rate hikes, consistent FII selling, higher valuations, and weak listing of Paytm dampened the investor sentiment further in a truncated week ended November 18.

The BSE Sensex was down 1,050.68 points or 1.73 percent to close at 59,636.01, while the Nifty50 fell 337.95 points or 1.87 percent to 17,764.80, while the broader markets were also under pressure with the BSE Midcap and Smallcap indices falling 1.71 percent and 1.5 percent. All the major sectors, barring auto, closed in the red.

In the coming week, the market will first react to the news of scrapping of the controversial farm laws and the decision of Reliance Industries and Saudi Aramco to re-evaluate the proposed investment in the oil-to-chemicals business. The market is expected to be under pressure along with volatility in the F&O expiry week, according to experts.

“As the result season is through, D-Street will look for cues from international factors to decide its movement. In the absence of any positive triggers, the indices are expected to remain under pressure as the markets have been embracing a ‘sell on rise’ mood,” said Yesha Shah, Head of Equity Research at Samco Securities.

In the coming week as well, she feels, stock-specific movements will be more prevalent than movements in the market as a whole. “As global macros will continue to dominate, investors should observe FII activity to weigh the sentiment and adopt a selective approach, rather than venturing in any aggressive trades.”

Here are 10 key factors that will keep traders busy next week:

US Dollar Index

Global cues are expected to remain in the forefront, given the absence of major domestic cues. The US dollar index, which measures the value of the dollar against a basket of world’s leading six currencies, inched up further in the passing week which, experts feel, is a cause for concern for emerging markets like India in terms of FII flow.

The US dollar index closed at 96.07 on Friday, up from 95.12 levels seen in the previous week. In the last three weeks, the dollar index gained 2.9 percent, given the increasing expectations for rate hikes in the US in the coming year with the strong economic data points, including retail sales (that rose 1.7 percent in October as against 0.8 percent a month back despite rising prices).

On the contrary, the Indian rupee remained rangebound for the last week, closing almost flat at 74.35 against the US dollar on week-on-week basis.

Inflationary Pressure

The sharp rising inflationary pressure in the US is another cause for concern for the equity market as experts feel it could force the Federal Reserve to turn more hawkish in the upcoming policy meeting in December 2021 with likely higher quantum of tapering and rate hikes in 2022. The US CPI inflation, which was announced in the previous week, jumped 6.2 percent, the highest since December 1990.

“The rise in retail sales and prices indicated a further increase in inflationary pressures, and the Fed may be forced to tighten monetary policy more than previously expected in response to recent inflation statistics,” said Kshitij Purohit, Lead, International and Commodities at CapitalVia Global Research.

He further said that strong consumer spending as well as the spill-over effects of rising prices, prompted the Federal Reserve President to call for the central bank to take a more hawkish stance to prepare for the possibility that inflation will persist longer than expected, and to maintain the Fed’s forecast that rates will need to be raised twice in 2022.

Investors are also worried due to rising inflation in Eurozone at 4.1 percent YoY in October.

Oil Prices

Oil prices corrected sharply in the passing week with the Brent crude futures falling below $80 a barrel which could be a positive as India imports around 80-85 percent oil requirement.

International benchmark Brent crude January futures closed at $78.89 a barrel, down 4 percent, from the last week amid demand worries due to rising COVID cases in Europe. It corrected 9 percent from its recent multi-year high of $86.70 a barrel.

FII Flow

Foreign institutional investors continued to be in a mood of selling, though on the other side, DIIs have been supporting the market with their consistent buying. Given the rising expectations of sooner-than-later rate hike in the US, the FII behaviour will be watched closely by the street.

FIIs have net sold Rs 4,410.9 crore worth of shares, while DIIs net purchased Rs 3,926.53 crore of shares in the week ended November 18. In the current month so far, FIIs have net offloaded nearly Rs 10,000 crore worth of shares and DIIs almost bought same amount of shares.

IPO and Listings

The primary market will remain active in the coming week as well, as the subscription for the initial public offering of Go Fashion will close on November 22. So far, the IPO has seen 2.45 times subscription with retail investors putting in bids 12.81 times the portion reserved for them and non-institutional investors bought 37 percent shares of the reserved portion, while the qualified institutional buyers’ portion booked 3 percent.

Data analytics services provider Latent View Analytics will make a debut on the bourses on Tuesday, while the listing of life sciences company Tarsons Products will take place on Friday.

Coronavirus

India is reporting less than 13,000 COVID cases daily, the positivity rate is below 1 percent, and the recovery rate is above 98 percent, while in the US, UK, France, Germany, Spain, Italy, Poland, and the Netherlands, the graph stays upward bound. This, experts feel, is expected to be a supportive factor for the Indian markets.

The vaccination in India has been progressing well as more than 115.79 crore vaccine doses were administered in the country so far, with 34.17 percent of people completing their second vaccine dose.

Technical View

The Nifty50 has formed a bearish candle on the daily as well as weekly charts, as it corrected 0.75 percent on Thursday and 1.87 percent during the week which, experts feel, is largely negative sign.

“The index has broken the important support level of 17,800 and closed below the same. For the traders, 17,950 would be the immediate hurdle. If the index rises above the level, a pull-back momentum can continue up to 18,025-18,150-18,200 levels. On the flip side, trading below the 50-day SMA or 17,900, the index could slip up to 17,600-17,500 levels,” said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.

Contra traders can take a long bets near 17,500 with a strict support stop loss at 17,425, he advised.

F&O Cues

The November contracts will expire on Thursday and positions will be rolled over to the next month contracts. The current options data indicate that the Nifty50 could trade in a range of 17,500-18,000 in the coming days, while the volatility cooled down below 15 mark.

Maximum Call open interest was seen at 18,000, then 18,500 and 18,600 strikes with Call writing at 18,600 strike then 17,900 and 18,000 strikes, while maximum Put open interest was seen at 17,500 then 17,400 and 17,000 strikes with Put writing at 17,300, then 17,000 and 17,200 strikes.

“Significant Call addition was observed at 18,000 Call strike for the coming monthly settlement. At the same time, no major Put base is visible and highest Put base is at 17,500 strike. The VWAP (Volume Weighted Average Price) of the series is at 17950,” said ICICI Direct.

“Considering settlement week, continued directional move is expected and VWAP levels of 17,950 should remain a critical resistance for the monthly settlement. On downsides, we believe the Nifty may move towards 17,500 in the coming sessions,” the brokerage said.

India VIX was down by 2.4 percent to 14.86 levels, from 15.22 levels on a week-on-week basis.

Corporate Action

Key corporate actions up for next week:

Global Cues

Key global data points to watch out for next week:

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