Inflation data, Covid crisis likely to influence direction for Indian equities next week
Domestic markets remained choppy throughout the week and traded in a narrow range to end flat on Friday. The emergence of the second Covid wave is taking a toll on the domestic market and the indices managed to recoup some of their losses towards the latter half of the week aided by a dovish monetary policy and supportive global cues. Finally, the Nifty index closed at 14,834; down 0.2 per cent.
The global markets on the other hand are on the recovery path and the US markets are scaling new peaks on a regular basis on the successful vaccination drive fuelling hopes of faster revival.
The Indian markets now keenly await the unveiling of the fourth quarter earnings season which is expected to begin on Monday with software major TCS. The market will watch out for the management commentary after the result announcement, which may provide some clue to the direction-less market. The next week will be a truncated one as the Indian markets will remain closed for trading on April 14 on account of Ambedkar Jayanti.
Among the key events, the RBI’s monetary policy review largely came in on expected lines wherein the MPC decided to hold rates and maintain its accommodative stance. The Monetary Policy Committee (MPC) maintained its growth guidance and stated that there is both upward and downward pressures on inflation. The biggest announcement was GSAP 1.0 through which the central bank plans to buy government securities worth Rs 1 trillion in the first quarter of this fiscal.
Next week, the participants will be eyeing macroeconomic data like IIP, CPI and WPI. Besides, updates related to Covid cases, vaccination drive and global cues will be watched closely.
“The market is expected to have a stock-centric rally in the coming days which has a very broad positive view. IT and banking stocks will be in focus ahead of the upcoming fourth quarter earnings. Banking stocks will remain on the radar as the market awaits the impact of a Supreme Court judgement on banks’ asset quality and income recognition,” says Vinod Nair, Head of Research at Geojit Financial Services.
The markets have been hovering in a range for the last two months and the recent movement does not indicate the next directional move. On the benchmark front, the Nifty needs a decisive close above 14,900 for an up move while the 14,600-14,450 zone would act as a cushion in case of any dip.
“The continued weakness in banking stocks, due to increased fear of a spike in NPAs, is limiting the upside despite strong performance from other sectoral pack so the alignment between the benchmark and the banking index is critical, else, the consolidation will continue. Amid all, we reiterate our cautious view and suggest traders preferring hedged bets,” says Ajit Mishra, V-P, Research, at Religare Broking.