Week Ahead – Caution Approach as COVID-19 fear reappears as a threat to market …Global Market and FIIs Activities to decide local market trend
Weekly update
· (Previous week report sent on Week Ahead – Market Shows on weak trend) - Equity stocks plunged as the detection of a new coronavirus strain rattled investor sentiment globally, raising concerns over a likely setback to the nascent economic recovery. Sensex lost 4.2% (down 2529 points) to close at 57107, the biggest weekly drop since January. Nifty declined by a similar magnitude by 739 points or 4.2% against the previous week close. Stock markets in India joined global markets in a sell-off as investors reacted with panic to the emergence of a heavily mutated variant of the coronavirus in Africa and the continuing surge of infections in Europe. The fall in markets was also driven by anxiety that the US central bank may wrap up its stimulus programme and raise interest rates sooner than expected in the wake of rising inflation. Foreign portfolio investors (FPIs) have been pulling out funds from emerging economies, including a net of Rs 14,700cr crore from Indian equities over the last three trading sessions (Weekly net sellers Rs21100cr and over Rs31000cr during the month of November). The movement in the domestic markets yesterday (declined 3%) was in line with those in other global markets and wiped out over 6lakh cr market cap while European equities los $560bn on a single day.
Week Ahead
· Expect the downtrend may continue in the Dalal Street. Traders apply caution approach in the market as the emergence of a new Covid-19 strain and the threat of fresh lockdowns clouded the outlook. Moreover, new cases of COVID in major economies of Europe like Germany and Austria and the imposition of total lockdowns may so dampen market sentiment. Continued FIIs selling ($3bn net sellers this week) and many foreign brokerage firm downgraded emerging market outlook like India may continue negative sentiment in the market. Investors have been wary of global factors that are adding uncertainty to the markets. The impending stimulus taper and interest rate hikes by the US Federal Reserve and other central banks are the major concern in the market. There was only positive factor that the oil fell to 2-month low at $72/bbl. Traders avoid aggressing buying interest and buy only for long term prospects (Infosys, HDFC Bank, Tata Motor, ACC, UltraTech Cement, Hindustan Unilvere, Bharti Airtel). Expects momentum continue on pharma stocks on account of India is a global hub. Rising covid cases may positive for Indian pharma players like Dr Reddy, Sun Pharma, Cadila, Divi’s Lab, Aurobindo Pharma. Telecom stocks (Bharti, Idea) focus after tariff hiked. Expects more pain on Hotel and Aviation stocks.
Sectorial Index (WoW)
· Most of the sectors witnessed sharp decline. Nifty auto Index witnessed biggest loser this week and fell over 8% against the previous week close. Realty, Bank, IT, mid-cap Index slipped 4-6%. However, BSE Telecom Index gained 3% against the previous week close after tairff hiked by telecom major Bharti Airtel and Vodafone Idea. Pharma Index gained over 2% on expectation of global demand will be back amid growing concern of new delta variant.
Global market update
· Global market – U.S. stocks slid in a selloff across global markets amid growing fears a new coronavirus variant identified in South Africa could spark fresh outbreaks and scuttle a fragile economic recovery. US market, European and Asian markets declined by 2-5% against the previous week close. Moreover, anxiety that the US central bank may wrap up its stimulus programme and raise interest rates sooner than expected in the wake of rising inflation. The WHO and scientists in South Africa were said to be working “at lightning speed” to ascertain how quickly the B.1.1.529 variant can spread and whether it’s resistant to vaccines. The new threat adds to the wall of worry investors are already contending with in the form of elevated inflation, monetary tightening and slowing growth.
FIIs and DIIs (week on week )
· FIIs were net sellers Rs21125cr
· DIIs were net buyers Rs10935cr
Commodity (W on W)
· Gold - After surging to a five-month high at $1860/ounce, the precious metal is on the cusp of a second straight weekly drop yo $1802/ounce, down 3% on against the previous Week close. Prices have come under pressure as a slate of Fed policy makers said they were open to a more rapid removal of pandemic-era stimulus in response to accelerating inflation
· Crude - Commodities from copper to crude and cotton plunged as the emergence of a highly mutated Covid-19 strain raised concerns about the outlook for global demand and sent financial markets spiraling. Industrial metals including zinc and nickel fell more than 3% in London. Brent Crude nosedived 18% to close 2-month low at below $73/bbl against the previous week.
· Corporate Action – Apollo Pipes Bonus (2:1) – Thursday, IEX Bonus (2:1) – Friday
Global Data
· India – Tuesday – Quarterly GDP and GVA. Wednesday – Manufacturing PMI. Friday – Service PMI and Composite PMI
· China – Tuesday – Non-Manufacturing PMI, Manufacturing PMI and Composite PMI. Wednesday – Caixin Manufacturing PMI. Friday – Caixin – Service PMI and Composite PMI
· US - Monday – Pending Home sales. Tuesday – Housing Price Index. Wednesday – MBA Mortgage Application and Manufacturing PMI. Thursday – Initial Jobless Claims. Friday – Non-firm payroll and Private payroll
· Euro Region – France – Consumer Confidence (Monday). UK – Consumer Creditand Mortgage Approval (Monday), France – House Price Index and Trade Balance (Tuesday), Germany – Retail sales (Wednesday). UK – Manufacturing PMI (Wednesday)
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