Domestic equity markets remained under pressure for the second straight week last week, tracking sentiment-toothed cues including snarky remarks from the Fed and Russia-Ukraine tensions. The BSE Sensex ended the week down 1,836.95 points or 3.11 per cent at 57,200.23 and the Nifty 50 fell 515.20 points or 2.92 per cent to end at 17,101.95, ending the two-week loss of over 6 per cent. The broader markets were also caught in a bearish trap as the BSE Midcap and Smallcap indices fell in line with the benchmarks.
IT stocks were the biggest hit with the Nifty IT index falling over six per cent, followed by metal, FMCG, pharma, realty, infrastructure and financial services. However, amidst good earnings performance, Nifty Bank outperformed others with a gain of one-third per cent.
Vinod Nair, Head of Research, Geojit Financial Services, said: “This highly volatile week, domestic markets followed the global reactions to the Fed policy meeting, Russia-Ukraine tensions and rising oil prices amid pre-budget shocks. The Fed made its policy announcement. In 2014, it confirmed its plans to end the bond buying program and indicated a possible rate hike during the March session. Rising geopolitical tensions in Ukraine further exacerbated volatility in global markets, leading to increased supply tensions for oil. Prices went up.”
Here are the key factors that traders need to keep an eye on:
Union Budget
Next week all the focus will be on the much-awaited Union Budget which will be presented by Finance Minister Nirmala Sitharaman on February 1. The entire country would expect some major relief from the government to support the economy hit by the pandemic and boost consumption demand. Income tax exemption and reduction in fuel taxes will be the main points which should be looked into.
“We are confident that the Union Budget will set the tone for the domestic markets amid a global sell-off. Volatility remains high during the budget week, hence participants should continue with a cautious approach and prefer hedge positions,” said Ajit Mishra, VP Research. Religare Broking.
global signal
The ongoing conflict between Russia and Ukraine has kept global equity markets volatile lately, with supply concerns putting pressure on oil prices. Russia wants the West to promise that Ukraine will not join its NATO defensive alliance.
exit yourself
Market participants will be eyeing the January sales figures of auto companies, which will present their numbers in the coming week. Despite uncertainties around semiconductor chip shortages and high input costs, most Indian automakers are showing signs of a recent recovery in sales, due to increased demand for personal transportation after the pandemic.
quarterly earnings
It will also be an important week for earnings as we move into the second half of the December quarter earnings season. Over 500 companies including State Bank of India, BPCL, HPCL, IOC, Tata Motors, Sun Pharma, UPL, Adani Ports, Tech Mahindra, HDFC, GAIL India, ITC, Titan Company, Divis Labs will release their quarterly figures next week. Tata Consumer Products, Shree Cement and Tata Steel.
PMI number
The release of PMI data for January will be another key domestic data point that will be watched by investors. Industrial and service production numbers for the first month of the new year will give an indication of how the country fared during the third wave of the pandemic.
Nifty Technical Outlook
Nifty closed negative for the week and is trading around its 100 day EMA on the daily chart. “Technically, Nifty is respecting a very strong demand zone of 16800-16600 where 200-DMA is currently placed at 16640 levels, however 17400-17800 is a significant supply as a conglomerate of important moving averages area, while a move above 17800 could lead to a downside. Big short-covering rally in the market to move towards fresh all-time high. There is a high probability that 16800-16600 is the floor for Nifty for some time. But if Nifty goes below 16600 level, things may turn ugly,” said Santosh Meena, Head of Research Swastika Investmart Ltd.
FII Sailing
Market sentiment weakened on continued selling by FIIs amid rising expectations of a Fed rate hike till March to tackle inflation, though domestic institutional investors (DIIs) continued to invest in some funds. “The relentless sales by FIIs was a major thing as they had sold Rs 22000 crores last week, however DIIs tried to offset 50 per cent of FII sales as they bought around Rs 11000 crores in the cash market. It will be interesting to see how FIIs behave after the massive sell-off.”
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