Nifty50 and Banknifty Outlook for the Week - ( 28 Nov - 3 Dec , 2021 )
The correction in global equity markets due to rising fears of new COVID-19 variant in South Africa, and resurgence of COVID-19 cases in several European nations, increasing expectations for rate hikes in the US amid inflationary pressures, large selling by FIIs due to overvaluation concerns and likely Fed rate hike, and government's decision to repeal farm laws caused selling pressure in the market.
The Nifty50 plunged 738.35 points or 4.16 percent to 17,026.45, the lowest closing level since August 30 this year, while the BSE Sensex was down 2,528.86 points or 4.24 percent at 57,107.15 as the selling was seen across sectors barring Pharma.
The broader markets, too, witnessed similar kind of pressure as the BSE Midcap and Smallcap indices fell 4.14 percent and 2.52 percent respectively.
Experts largely feel the nervousness is expected to continue in the coming week as well, with more focus on severity of new COVID-19 variant, monthly auto sales numbers, Q2 GDP data, and FII flow.
"Going ahead, the market is likely to continue being under pressure till clarity emerges over how dangerous this new COVID-19 variant can be. Already, the market is precarious over the timing of Fed raising interest rate," said Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services.
He further says with emergence of new, highly mutated COVID-19 variant and EU announcing temporary ban of flights from South Africa along with few EU countries already under full lockdown scenario, market sentiments have taken a big blow.
In such a scenario, it is wise to grab the opportunity and invest in stocks that are backed by strong fundamentals and sound management, he advised.
Here are Some key factors that will keep traders busy next week:
India has largely been seeing a constant fall in daily addition of cases with having reported less than 11,000 cases on daily basis for last couple of weeks, but the resurgence of COVID-19 cases in several European nations leading to implement new COVID-19 restrictions and finding of new COVID-19 variant in South Africa forcing several nations to close borders is a renewed global concern leading to bring forward the uncertainty over growth of these countries, which going forward will be closely watched by the markets. New COVID-19 variant cases were found not only in South Africa but also in Hong Kong, Belgium, Israel and Botswana.
Vaccination in India has been going on smoothly as around 121 crore COVID-19 doses were administered in the country so far with more than 35 percent of people being vaccinated with second COVID-19 doses.
Crude Oil Prices
Oil prices took a big hit during the week, especially on November 26, as new COVID-19 variant cases raised fears of demand slowdown when the supply started increasing. Several major economies including the US and China decided to release some of their reserves to bring down prices in the international markets.
Brent crude futures, the international benchmark for oil prices, fell more than 12 percent from its recent high and dropped around 3 percent during the week. Falling oil prices are good for countries like India which is a net oil importer, but if there is too much volatility then that could be a risk for the country, experts feel.
"The volatility in crude is of major concern as it fuels inflation and India, being a major net importer, is at risk. The strategy to tame prices seems sustainable in the short term but if OPEC+ fails to join in, the prices could rally even further," says Yesha Shah, Head of Equity Research at Samco Securities.
The FII selling intensified in the month of November given the valuation concerns and rising expectations of sooner rate hikes in the US if there is consistent increase in inflation. Even DIIs failed to cover up the FIIs' selling quantum. Hence it will be closely watched.
Foreign investors have net sold more than Rs 21,000 crore worth of shares in the passing week, taking the total monthly selling to over Rs 31,000 crore in November on top of more than Rs 25,000 crore of offloading in October. On the contrary, domestic institutional investors have net bought nearly Rs 11,000 crore of shares, and in November their buying stood at over Rs 20,000 crore so far, in addition to Rs 4,470 crore of buying in October.
Auto sales for November month will be keenly watched as chip shortage issue is likely to hit passenger vehicle (PV) sales growth though month-on-month there could be some improvement in volumes. Two-wheeler and tractors sales could also see a decline but commercial vehicle (CV) sales may increase, experts feel. Hence Bajaj Auto, Hero MotoCorp, Maruti Suzuki, Tata Motors, Eicher Motors, M&M etc will be in focus.
"Channel checks indicate that CVs should maintain positive momentum in November 2021. PV volumes are likely to be hit by the chip shortages, though volumes should be slightly better MoM. 2Ws and Tractors are likely to decline due to the moderation in rural demand and high base effect on account of pent-up demand last year. The festive season has been subdued for PVs, 2Ws and Tractors," says Emkay Global.
IPOs and Listing
The primary market continued to remain active in the coming week with Go Fashion, the owner of women’s bottom-wear brand Go Colors, will make a debut on the bourses on November 30. The final issue price has been fixed at Rs 690 per share.
Ace investor Rakesh Jhunjhunwala-backed Star Health and Allied Insurance Company will open its Rs 7,249-crore IPO for subscription on November 30 and the offer will close on December 2. The price band for the offer has been fixed at Rs 870-900 per share.
Tega Industries, the second largest producer of polymer-based mill liners, will also launch its Rs 619-crore IPO in the coming week, during December 1-3, 2021, with a price band of Rs 443-453 per share.
The gross domestic product (GDP) data for July-September, 2021 will be released on November 30, along with infrastructure output & fiscal deficit numbers for October. The GDP numbers for the quarter are expected to be in the range of 7.5-9 percent, experts feel, against the 20.1 percent GDP growth rate seen in Q1FY22 on a low base effect.
Markit Manufacturing PMI for November will be released on December 1, while Markit Services & Composite PMI for November will be announced on Friday.
Deposit & Bank Loan growth for the fortnight ended November 19, and foreign exchange reserves for the week ended November 26 will also be announced on November 26.
The Nifty50 witnessed large bearish candle on the daily as well as weekly charts as there was a Black Friday for the index that saw the third biggest fall in current year correcting nearly 3 percent, and it was down more than 4 percent to 17,026 for the week, indicating overall negative sentiment and volatility in the coming week. 17,000 is expected to be crucial for further correction or rebound, experts feel.
"On the way down, the index breached the lower end of a falling channel as well as the swing low of 17,216. As a result, the Nifty has dipped into the crucial support zone of 17,200-17,000," says Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas.
He further says, "In terms of the Fibonacci retracement, the Nifty has retraced 50 percent of the July – October rally. There is potential for a recovery from this support zone as long as the index holds on to the 17,000 mark on a closing basis." On the other hand, "breach of 17,000 on a closing basis will allow the Nifty to slide towards the 61.8 percent retracement mark, which is near 16,700," he adds.
The option data indicated that the Nifty could trade in a broader range of 16,500-17,500 levels in coming days, while the spike in volatility is clearly a concern and supports bears, experts feel.
On option front, in the beginning of December series, maximum Call open interest was seen at 17500 then 18000 & 17300 strikes, and Call writing was seen at 17300 followed by 17500 & 17400 strikes, while maximum Put open interest was seen is at 17000 then 16800 & 16500 strikes, and Put writing was seen at 17000, followed by 16800 & 16300 strikes with Put unwinding at 17500, 17400 & 17300 strikes.
"From an options perspective, Put writers are finding it tough to hold their positions due to increased volatility and sharp declines. Currently the major Put base for the coming weekly settlement is placed at 17000 strike, which may work as an intermediate support," says ICICI Direct.
However, "a breach of these levels may trigger downsides towards 16,700 in the coming sessions. On the higher side, sustainability above 17,500 would be crucial for fresh upward bias," the brokerage adds.
India VIX shot up by 40 percent from 14.86 to 20.80 levels on a week-on-week basis. "Volatility spiked above its multi-month high levels signalling the dominance of bears in the market," says Chandan Taparia of Motilal Oswal .
Have a Great Week Ahead Everyone