Nifty50 and Banknifty Outlook for the Week - ( 20 Dec - 24 Dec , 2021 )
The market wiped out previous week's gains as it fell sharply by 3 percent in the week ended December 17, attributing to hawkish stance taken by the Federal Reserve, surprise rate hike by Bank of England, increasing worries of Omicron and consistent FII selling.
After reaching inflation above comfort levels, Federal Reserve turned aggressive by saying in last meeting that it would end the bond purchases in March 2022, hinting three rate hikes in coming year.
All sectors, barring IT, caught in bear trap with the Realty hitting the most, down more than 8 percent. Auto, Bank, Financial Service, FMCG, Infra, and Metal corrected 3-5 percent, while IT index gained 2 percent after Accenture results and full year outlook.
The BSE Sensex tanked 1,775 points to close at 57,012, and the Nifty50 plunged 526 points to close below the crucial 17,000 mark at 16,985.20. The broader markets also followed the same trend as the BSE Midcap and Smallcap indices declined 4.5 percent and 2.75 percent respectively.
The nervousness along with volatility at Dalal Street is expected to continue with all eyes on global cues, in the absence of domestic events, while the primary markets will remain busy with several listings in the coming week, experts feel.
"In the absence of major domestic events, Mr. Market will seek indications from global indices and macroeconomic data, such as the US GDP growth rate, to decide its movement," says Yesha Shah, Head of Equity Research at Samco Securities.
According to her, markets are expected to remain under pressure in the absence of any positive occurrences.
As global macros are expected to dominate, investors should keep an eye on FII activity to assess trends and stick to a stock-centric investing strategy in the midst of range-bound index moves, Yesha advised.
Here are Some key factors that will keep traders busy next week:
Rising Worries of Omicron
Omicron, a new variant of Covid-19, seems to be an increasing risk worldwide as media reports indicated that the new variant, which was first detected in South Africa, has been spreading to 89 countries including India that, so far, reported 126 cases. Experts feel if the Omicron cases continue rising then that could be a major risk for the economy as the Covid restrictions might get increased again, though the overall coronavirus situation is under control.
On December 18, World Health Organisation said the number of cases is doubling in 1.5 to 3 days in areas with community transmission.
Globally, the Covid cases graph in the United States, United Kingdom, France, Spain, Argentina, Italy, South Africa, Canada etc has been in a northward direction, which experts feel may be creating a risk to global growth.
India consistently added less than 9,000 Covid cases on a daily basis for a couple of weeks now, with falling active cases and rising recoveries with recovery rate remaining above 98 percent. We have been seeing a single-day testing count increase to over 12 lakh for the last few days, while more than 136.66 crore Covid vaccine doses were administered, so far, with nearly 40 percent of which have already completed a second Covid vaccine dose.
"The next few weeks could see higher volatility in the markets as Omicron is slowly spreading in India, though the absolute case count continues to be low. Investors need to be watchful as it will be interesting to see how the Covid and Omicron situation pans out. Markets will be focused on the spread of the new variant for the next few weeks," said Mohit Nigam, Head - PMS at Hem Securities.
FII Selling
The relentless selling pressure from FII desk is another concern for the market as every attempt of recovery in the last few weeks failed to sustain, though domestic institutional investors have been trying hard to offset the impact. Hence, the mood at the FII desk will be closely watched by the street as it is crucial for market recovery.
FIIs have net sold Rs 10,452 crore worth of shares in the cash market during the week, continuing selling for the 23rd day on December 17. On the other side, DIIs have supported the market with net buying of Rs 6,341 crore worth of shares.
Rupee Weakness
The hawkish stance taken by the US Federal Reserve, consistent FIIs outflow and rising oil prices pushed the Indian currency below 76 against the US dollar. Experts feel the rupee could remain range-bound given the lack of domestic cues but will closely watch the Omicron updates.
"As we proceed towards the year-end, USDINR spot will be sluggish in between a broad range. Also next week, there is no major data or event to focus on, so Omicron news will likely be the key catalyst for the forex market," said Emkay Global Financial Services.
As long as the USD-INR spot is trading above 75.75, we can expect a bounce in the spot towards 76.40-76.50 levels, he added.
The US dollar index, which measures the value of dollar against the basket of world's six leading currencies, jumped to 96.64 at close on December 17 (the highest level since November 25), rising from 96.1 levels on week-on-week basis after Federal Reserve's action and indications, but US bond yields dropped to 1.40 percent, from 1.48 percent on week-on-week basis.
Oil Prices
Oil prices corrected by 2 percent on a week-on-week basis amid Omicron uncertainty, but remained range-bound above $70 a barrel levels. Falling oil prices are definitely a positive factor for the markets as India is the net oil importer. Experts expect the range-bound trade to continue going ahead.
Brent crude futures, the international benchmark for oil price, fell to $73.52 a barrel on December 17, down from $75.15 a barrel on a week-on-week basis, while US crude futures dropped to $70.29 a barrel, from $71.67 a barrel during the same period.
"Crude oil remains stuck in a range above $70/bbl as support from bigger-than-expected decline in US crude oil stocks and weakness in US dollar and Fed’s upbeat outlook for US economy is countered by rising virus concerns, mixed US and Chinese economic data and prospect of higher supply from OPEC and US," said Ravindra Rao, VP-Head Commodity Research at Kotak Securities.
Crude oil may remain within recent range however virus risks and oversupply concerns may keep prices under pressure, according to him.
Listings
There would be lot of action in primary market as five IPOs Shriram Properties, MapmyIndia, Metro Brands, Medplus Health Services and Data Patterns will make their debut on the bourses next week. Every day there would be one listing, next week.
South-based real estate developer Shriram Properties will list its equity shares on December 20, while CE Info Systems, which runs the brand MapmyIndia, a leading provider of advanced digital maps, geospatial software and location-based IoT technologies, will debut on Tuesday.
The listing of ace investor Rakesh Jhunjhunwala-backed retail footwear company Metro Brands will take place on December 22, pharmacy retailer Medplus Health Services on December 23, and finally on December 24, defence and aerospace electronics solutions provider Data Patterns will debut on Friday.
IPOs
India's largest cash management company CMS Info Systems will open its initial public offering for subscription next week, during December 21-23, 2021. The price band for the offer has been fixed at Rs 205-216 per equity share.
The company is planning to raise Rs 1,100 crore through its IPO, which is entirely an offer for sale by promoter Sion Investment Holdings Pte Limited.
Pharmaceutical company Supriya Lifescience will close its Rs 700-crore public issue on December 20, December 20. The offer, so far, has been subscribed 5.69 times.
Technical View
The Nifty50 has seen a formation of large bearish candles on the daily as well as weekly charts, falling 1.5 percent on December 18 and correcting 3 percent to close below the crucial 17,000 mark in the passing week, indicating nervousness in the market.
Experts expect the bearishness in the market to continue and feel 16,900 is expected to act as a crucial support in the near term, followed by 16,782, the low touched on November 29.
"A long bear candle was formed on the daily chart that has broken below the immediate support of the ascending trend line, which was connected to rising swing lows. This market action indicates sharp downward reversal in the market post upside bounce of the early part of the month. Hence, one may expect further weakness in the short term," said Nagaraj Shetti, Technical Research Analyst at HDFC Securities.
He further said the weekly chart pattern indicated a formation of falling three methods (not a classical one) and this could be considered as a bearish continuation pattern.
"One may expect further weakness down to 16,750 and lower by next week. Immediate resistance is placed at 17,180 levels," he added.
F&O Cues
On the option front, maximum Call open interest was seen at 18000 strike, followed by 17300 & 17500 strikes, with Call writing at 18000, followed by 17200 & 17100 strikes.
Maximum Put open interest was seen at 17000 strike, followed by 16000, 16500 & 16000 strikes. Put writing was seen at 17000 strike, followed by 16500 & 16000 strike, with Put unwinding at 17300 strike, then 17200 & 17400 strikes.
Option data indicated that the Nifty could see a trading range of 16,500 to 17,300 levels in coming days.
"From a data perspective, the Nifty holds the highest Put concentration at ATM 17000 strike for the coming weekly settlement. In contrast,
Call option bases are much higher with immediate concentration placed at 17200 strike. We still believe that recent lows should be held while a move above 17,200 may trigger a fresh round of short covering in the index," said ICICI Direct.
The brokerage further said the volatility index did not move much higher despite the Nifty closing below 17,000, suggesting continued weakness is not expected. "However, a move towards 16700 may cause a sharp rise in volatility, which may also trigger fresh weakness. Hence, from the current levels, 17,200 remains important for short covering to happen."
India VIX was up by 1.74% from 16.06 to 16.34 levels on a week-on-week basis.
Have a Great Week Ahead Everyone