Covid, Q4 earnings, vaccination among key factors that may guide market this week

NEW DELHI: The domestic equity market began the week on a high note, hoping that the pandemic will eventually peak out and the economy will recover sooner than expected. However, the euphoria fizzled out soon as investors turned wary of inflation in India and the US, with analysts expecting central banks to start tapering soon. Higher bond yields globally may result in further outflows. However, upbeat Q4 numbers provided some breather, but the action remained stock specific.

“The Covid situation in India is no doubt grim and hence the health issue is something that could keep the market volatile in the near term. Going forward, the market will likely track the pace of vaccinations, trajectory of active cases curve and management commentary of companies. Roll-back of localised lockdowns and trend of inflation in many global commodities like crude oil and steel will be other key factors to watch out,” said Shibani Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company.

In the absence of any major event, participants will be closely eyeing the performance of global indices, US bond yields, movement of rupee against the US dollar and crude oil prices, said Ajit Mishra, VP (Research), Religare Broking.

Key factors that will decide market action this week:


Covid-19 cases
The concerns of Covid-19 infection are looming on the domestic market. India was expected to hit a peak during the second half of May and investors would be closely watching for any such signs. Any respite on that front may encourage investors. However, if the situation worsens, the curbs might extend and get stricter.

Vaccination
The drive to vaccinate the world’s second most populated country is on a bumpy road. Most of the states have started vaccination for 18-45 age group but a shortage of jabs is dragging the speed of inoculation. However, Russia’s Sputnik is likely to hit markets this week. About a dozen states, including Delhi, Maharashtra and Tamil Nadu, have floated global tenders to get Covid-19 vaccines, but uncertainty persists over supplies. Investors would keep an eye on progress on this front.

Q4 Earnings
The fourth quarter earnings season has peaked with many large companies lining up to declare their numbers. Among Nifty stocks, Bharti Airtel, Tata Motors, Indian Oil Corporation, State Bank of India, Shree Cement, JSW Steel and Hindalco will announce the march quarter earnings. Investors will closely look out for mid and smaller companies that are also scheduled to declare their results. The list includes Gland Pharma, Colgate Palmolive, Federal Bank, Torrent Pharma, PI Industries, Endurance Technologies, Indiabulls Housing Finance, Havells, Hindustan Petroleum, Relaxo Footwears and United Spirits, among others.

Macro Numbers
India will release wholesale prices data of food, fuel and manufacturing for April on Monday. Also, India is likely to release fortnightly data of bank deposits and loan growth on Friday. Besides, Federal Reserve Vice Chair Richard H. Clarida and other FOMC members will be speaking at a function during the week.

Nifty Outlook
Nifty50 behaved in line with global indices and closed in the red on a weekly basis. The index failed to retest the immediate resistance zone of 15,000 as it is facing pressure at higher levels. Given the indecisiveness within institutional players and inflation worries coming in from developed countries, the index continued to trade in a range bound manner.

“The benchmark index is lacking directional move after a prolonged rally and is now contained within a consolidation range of 14,400 to 15,000. Nifty Bank and other indices are also forming similar patterns. We maintain a bearish bias on the markets in the short term at least till the immediate resistance levels aren’t broken, said Nirali Shah, Head of Equity Research, Samco Securities.