Domestic Bonds

Weekly market tips: 10 factors that trigger sentiment, what investors should do

Last week, after a couple of suspended sessions, markets ended on a high note as they trailed gains in global indices. Sensex stood at 54,326.39 up 1534.16 points or 2.91%. Nifty 50 closed at 16,266.15 up 456.75 points or 2.89%.

Ajit Mishra, vice president of research. Religare Broking said: “Markets ended a 5-week losing streak and gained more than 3% amid excessive volatility. Global signals, namely fear of an aggressive rate hike by the US Fed, the Russia-Ukraine crisis, largely dictated the trend and kept participants going Finally, the benchmarks, Nifty and Sensex, ended up 3.1% and 2.9% to close at 16 levels 266 and 54,326. Most sector indices except IT participated in the rebound and broader indices also posted gains in the 3-4% range.”

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

Earnings:

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

M&O expiration:

The week will be in the spotlight amid the May series derivatives expiry which is scheduled for May 26th. Market volatility is expected to remain higher as investors head towards the F&O expiry.

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

Regarding the perspective of the data, ICICI Direct reports that the short position of FIIs has declined significantly as their net short positions in index futures have declined to 77,000 contracts from 1.25 lakh contracts, as well as increased long positions in the equity futures segment. Therefore, further bullishness is likely towards 16800 if the Nifty holds above 16350

Further, ICICI Direct explained that the volatility index rose further and tested 25 levels before closing the week near 23. Given rolling activity, intraday volatility may remain higher. However, with low open interest in the Nifty and Bank Nifty, further accumulation in the May series should pave the way for further directional movement.

Inflation:

Inflation continues to dominate the overall shift in market sentiment. CPI inflation accelerated sharply to 7.79% in April, hitting its highest level in eight years due to rising food prices.

WPI inflation hit its highest level in at least nine years to hit 15.08% in April due to higher prices for metals, crude, food and more. It will also be the thirteenth straight high for double-digit gains.

In addition, markets will react to the government’s reduction in excise duties by 8 per liter of petrol and per 6 per liter on diesel.

Minutes from the FOMC meeting:

Markets will also react to the minutes of the Federal Open Market Committee meeting scheduled for May 25. The FOMC meeting minutes are a detailed record of the committee’s policymaking meeting held approximately two weeks earlier.

Foreign investors sell biases:

Foreign investors were net sellers all month. The relentless outflow of foreign funds has led to a weakening of the rupee and further intensified market volatility.

Since the beginning of the year, the REIT has released a huge 1,62,299 crores from the Indian stock market.

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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 IPO, while Venus The 165.42 crore IPO also entered earlier this month. Both IPOs were fully subscribed.

IPOs:

Digital signature certifier, eMudhra’s 412.79 crores will continue bidding until May 24. Meanwhile, specialty chemicals maker Aether Industries is set to launch its initial public offering (IPO) by subscription on May 24 and the bidding will run until May 26 at a price range of 610 to 642 per share.

US GDP data:

US gross domestic product (GDP) data for the first quarter is due on May 26, 2022, which is Thursday next week.

Dollar index:

After the US currency hit a 20-year high, the greenback retreated. The performance of the rupee against the dollar will be closely watched.

Jateen Trivedi, VP Research Analyst at LKP Securities, said the dollar index is still holding near $102. And crude around $110 gives the rupee little strength. The Rupee continues to pick up resistance at the 20-dma around 77.25, from where some gains can be seen towards 77.25 as the Rupee continues to test the resistance of the 20-dma above 77.25, this which will change the trend of the Rupee until the Rupee remains weak overall. The Rupee can be seen in a range of 77.25 to 77.75″

Covid situation in China:

The rapid increase in Covid-19 cases in China continues to threaten global markets as industry operations are affected due to production and supply chain constraints. China currently has a strict lockdown and restrictions in major regions. Any resurgence in Covid cases could dampen market sentiments.

What are the experts saying 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 its global peers. Concerns about the global economic slowdown and rate hikes took control of market sentiment. The president’s assurances of lower inflation have disrupted risk appetite on fears of a steeper rate hike. Recent profits reported by US retailers reflected the heat of high retail inflation, sending rout on Wall Street. FIIs continued their selling frenzy as they chased US high yield bonds, adding volatility to the Indian market. However, the improving outlook for Chinese tech stocks and the Chinese central bank’s cut in a key interest rate to support growth are injecting optimism into emerging markets.

Mishra expects volatility to remain high due to the expected monthly expiration. Additionally, monsoon-related updates will also be a focus. In line with the prevailing trend, global factors viz. the performance of global markets, especially the US, China’s COVID update and Russia-Ukraine news will remain on attendees’ radar.

“Markets have witnessed wild swings in the 15,700-16,400 range and are currently trading closer to the upper band. Participants need to wait for a decisive close above 16,400 to change the bias. , the 16,650-16,800 zone is acting as an obstacle,” Mishra added.

ICICI Direct, in its weekly Market Outlook report, said, “Going forward, lower volatility will help Nifty break above the 16,400 levels and head towards 16,800 in a non-linear fashion. Buying dips towards 15,800-16,000 would be rewarding as strong support exists around the 15,600 levels.”

What should investors do?

Nair said that as investors are now investing cautiously, value stocks should do well during this period of consolidation, which is supported by subdued valuation.

Meanwhile, Mishra indicates that among sector indices, defensive indexes like FMCG and Pharmaceuticals look set to rise further while others may continue to trade. Traders should align their positions accordingly and maintain their positions on both sides.

Which actions to choose?

According to the ICICI Direct report, from a sector perspective, autos, metals, BFSI and capital goods stocks offer favorable risk-reward in the current environment.

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

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