Vaccination, Q4 earnings, F&O expiry among key factors that will guide markets next week

NEW DELHI: Buying in banks and financials along with autos pushed benchmark indices higher by nearly three per cent last week which turned out to be one of the best weeks in the last four months.

Easing covid concerns, fluctuating global cues, and robust corporate results were the factors that drove the market last week. Amid inflation worries, Fed meeting minutes signalled a plausible slowdown in bond buying “at some point”, a shift in policy in the future, which will have an implication on EMs. However, that does not seem a near term concern.

“The Indian market has started to outperform the developed market which is expected to continue due to a fall in covid cases. High cases were the reason for India to trade weakly, but now INR has started to appreciate. Hence the market will continue to focus on covid numbers to pump in more optimism into the market due to a relatively quiet week for economic data,” said Vinod Nair, Head of Research at Geojit Financial Services.

Here are key factors that may steer the market next week:

Covid-19 caseload: India is reporting comparatively lesser number of daily cases than a couple of weeks back, in a relief to authorities and traders on Dalal Street. However, the country is still reporting about 2.5 lakh cases daily, which is adding to the overall caseload. Deaths due to the disease remain near an all-time high.

India’s tally of Covid-19 cases climbed to 26,528,515 on Saturday, with 240,566 new cases. The toll due to the disease rose to 299,309 with 3,734 fresh fatalities.

Vaccination: With the approval of the third vaccine and more states opening up new centres, vaccination has picked up. But overall, the number of vaccinated people remains a fraction of the population. As of the latest available data, nearly 15 crore individuals have got at least one jab of the two required.

“The entry of new vaccines in the market which will ease supply crunch and a steady decline in the new covid cases are factors boosting investor confidence in the market,” said Nair.

Q4 earnings: March quarter earnings have entered the last phase with a few largecap companies and a multitude of small businesses scheduled to publish their numbers. They include Grasim, Mahanagar Gas, Barbeque Nation, CAMS, Ramco Systems, BPCL, Pfizer, Dixon Tech, Eicher Motors, Page Industries, Sun Pharma, GMM Pfaudler, M&M, Divi’s Labs and Bank of Baroda among others.

Inflation: Rising inflation in not just in the US but also in India could emerge as a worry for investors, as it will force the central banks to raise policy rates. April’s wholesale inflation reached record levels at 10.49 per cent as high fuel costs weighed on the economy. Though higher inflation is disturbing the Street, its near-term impact was outweighed by the declining covid cases in India.

FII buying: After selling massively for the first two days, foreign institutional investors resumed buying on the last few days. Overall in May, FII still remained a net seller worth Rs 6,370 crore. Domestic investors though have been on a buying spree recently, keeping the balance tilted in favour of bulls.

F&O expiry: The May futures and options contracts of Nifty and Bank Nifty will expire on Thursday. This may induce some volatility in the next few days as traders will race to square their positions.

Technical outlook: Nifty50 index closed the week on a positive note and crossed the previous short term resistance of 15,050. “Although it is trading very close to its all-time highs, it is still below the rising channel and has not given any directional move to break it yet. Nifty needs to close decisively above 15,200 to start a fresh bullish up move within the channel. As long as it does not take a decisive direction, we maintain a sideways to mild bullish outlook,” said Nirali Shah, Head of Equity Research, Samco Securities.