Markets Weekly Tips: 10 Sentiment Triggers, What Investors Should Do

Last week, after a couple of dangling sessions, markets ended on a positive note following gains in global signals. Sensex settled at 54,326.39, up 1,534.16 points or 2.91%. The Nifty 50 closed at 16,266.15, up 456.75 points or 2.89%.

Ajit Mishra, Vice President of Research. Religare Broking said: “Markets ended a 5-week losing streak and gained more than 3% amid excessive volatility. Global signals, namely fear of an aggressive rate hike by the Fed Lastly, the benchmark indices, Nifty and Sensex, ended up 3.1% and 2.9% higher to close at levels of 16,266 and 54,326. Most of the sector indices, except TI, participated in the rally with broader indices also posting gains in the 3-4% range.

Here are 10 factors that will trigger markets to perform this week:

Profits:

The market is currently in the last stage of earnings season. Companies like Divis Laboratories, SAIL, Adani Ports, Grasim, Coal India, Zeel Entertainment, Gail and JSW Steel will announce their numbers during the week.

F&O expiration:

The week will focus on the middle of the May Series Derivatives expiry which is scheduled for May 26th. Market volatility is expected to remain higher as investors approach the F&O expiration.

ICICI Direct in its derivatives weekly view report indicated that going forward, a move above the 16350 VWAP series will be crucial for the continued recovery in the sell-off week.

Looking at the data outlook, ICICI Direct indicates that IIF shorts fell sharply as their net shorts in index futures fell to 77,000 contracts from 1.25 lakh contracts along with an increase in long positions in the futures segment on shares. Therefore, continuation of the move up is likely towards 16800 if the Nifty holds above 16350

Furthermore, ICICI Direct explained that the volatility index increased further and tested 25 levels before closing the week close to 23. Considering the rolling activities, intraday volatility may remain higher. However, with low open interest on both Nifty and Bank Nifty, the new build in the May series should pave the way for further directional movement.

Inflation:

Inflation continues to dominate market sentiment across the board. CPI inflation accelerated sharply to 7.79% in April, reaching an eight-year high due to rising food prices.

WPI inflation has risen to the highest level in at least nine years at 15.08% in April due to rising prices for metals, crude oil, food items and more. This will also be the 13th consecutive maximum double-digit earnings.

In addition, the markets will react to the government’s excise tax cut $8 per liter in gasoline and for $6 per liter on diesel.

FOMC Meeting Minutes:

Markets will also react to the minutes of the Federal Open Market Committee meeting that is scheduled for May 25. The FOMC meeting minutes are a detailed record of the committee’s policy-setting meeting held about two weeks earlier.

Foreign Investor Sell Bias:

Foreign investors have been net sellers throughout the month. The incessant outflow of foreign funds has caused the rupee to weaken and has further intensified market volatility.

So far this year, the FPI has pulled out a huge $1,62,299 crores from the Indian stock market.

listings:

Two companies will make their market debut this week. Delhivery and Venus Pipes & Tubes are more likely to list on Tuesday.

Delhivery launched its $IPO of Rs 5,235 crore, while Venus $The initial public offering of Rs 165.42 crore also came in earlier this month. Both IPOs have been fully subscribed.

IPO:

Digital Signature Certifier, eMudhra’s $412.79 crores will keep bidding until May 24. Meanwhile, specialty chemicals maker Aether Industries will launch its initial public offering (IPO) for subscription on May 24 and the offering will continue until May 26 at a price band of $610 to $642 per share of capital.

US GDP data:

The US gross domestic product (GDP) data for the first quarter is expected on May 26, 2022, that is, on Thursday of next week.

Dollar Index:

After the US currency rose to a 20-year all-time high, there has been some pullback in the dollar. The rupee’s performance against the dollar will be closely watched.

Jateen Trivedi, research analyst vice president at LKP Securities, said the dollar index is still holding steady near $102. And crude around $110 gives little strength to the rupee. The rupee is still taking resistance at the 20-day moving average around 77.25, so some gains can be seen towards 77.25, as the rupee continues to test the resistance of the 20-day moving average around 77, 25, which will change the trend of the Rupee until the Rupee remains weak overall. The rupee can be seen in a range of 77.25-77.75″

The Covid situation in China:

The rapid increase in Covid-19 cases in China continues to pose a threat to global markets as industry activities are affected due to production and supply chain constraints. China currently has a strict lockdown and restrictions in major regions. Any resurgence in Covid cases could dampen market confidence.

What are the experts saying about this week’s trading session?

Vinod Nair, head of research at Geojit Financial Services, said: “This week, the domestic market moved along with its global peers. Concerns about the global economic slowdown and rate hikes took control of market sentiment. Rising UK Retail Inflation Alongside Fed President’s Assurances on Inflation Reduction Disturbed Risk Appetite on Fears of a Sharper Rate Hike Recent Earnings Reported by US Retailers reflected the heat of high retail inflation, resulting in a Wall Street crash chased US high-yield bonds which added volatility to the Indian market However, the improved outlook for Chinese tech stocks and the Chinese central bank cutting a key interest rate to support growth, injecting optimism in emerging markets”.

Mishra expects the turmoil to remain high due to the scheduled monthly expiry. Additionally, monsoon-related updates will also be in the spotlight. In line with the prevailing trend, global factors viz. the performance of global markets, especially the US, China’s COVID update, and news from Russia and Ukraine will remain on participants’ radar.

“Markets have seen sharp swings into the 15,700-16,400 range and are currently trading closer to the upper band. Participants should wait for a decisive close above 16,400 to change the bias. the 16,650-16,800 zone acts as a hurdle,” added Mishra.

ICICI Direct in its weekly market outlook report said: “Going forward, cooling volatility will help Nifty break above 16400 levels and head towards 16800 in a non-linear fashion. Buying dips towards 15800-16000 would be rewarding as there is a strong support around 15600 levels.”

What should investors do?

Nair stated that as investors are now investing cautiously, value stocks should do well during this period of consolidation, which is supported by a dovish valuation.

Meanwhile, Mishra notes that, among sector indices, defensive ones such as FMCG and Pharmaceuticals look poised to rise further while others may continue with the trading mix. Traders should align their positions accordingly and hold positions on both sides.

What actions to choose?

According to the ICICI Direct report, by sector, autos, metals, BFSI and capital goods stocks offer a favorable risk-reward ratio at the current juncture.

The report said: “In large-caps, we prefer Reliance Industries, SBI, Kotak Bank, ITC, Maruti Suzuki, Hindalco, Cipla, while in mid-caps we prefer ABB, Ashok Leyland, Apollo Tyres, Automotive Axles, Hindustan Aeronautics , Indian Hotel, PVR, Tata Chemicals, SRF, NMDC, Elecon Engineering”.

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