Stock Market: Macroeconomic data, bond yields, vaccine progress likely to impact market in holiday-shortened week
On NSE, all sectors but one pushed higher, led by media, IT, automobile and FMCG spaces, rising 2.83 per cent to 6.58 per cent. State-run lenders bucked the trend, with the Nifty PSU Bank index finishing the week 2.14 per cent lower. Broader markets continued their outperformance compared with benchmarks last week, much like the week before. The S&P BSE Midcap and Smallcap indices surged 4.86 per cent and 5.69 per cent, respectively.
This week, macroeconomic data along with bond yields, which have rattled the global markets, and progress on the Covid-19 vaccination front are likely to impact the market, say analysts. The market will remain closed on Thursday for Mahashivratri holiday.
“We expect volatility to remain high this week. Participants will be closely eyeing macroeconomic data viz IIP, CPI and WPI inflation. Needless to say, the US bond yields will remain in focus as any further uptick may trigger a decline in the equity markets again. Meanwhile, on the domestic front, the progress of vaccine drive amid the scare of rising COVID cases in certain states will also attract participants’ interest,” said Ajit Mishra, VP Research, Religare Broking.
Here are some key factors that are likely to impact the market this week:
Macroeconomic data
Official data on industrial production in January and consumer inflation in February will be released on Friday. Data on manufacturing for January will also be published on the same day.
Bond yields
Any gain in US bond yields, a surge in which has taken the global markets off guard recently, are likely to raise the alarm bells for market. Changes in bond yields overseas enable investors to assess risk in the equity markets going forward, with any rise reducing the profitability for lenders on their bond holdings.
Fed policy decision
Globally, the Federal Reserve’s policy meeting is slated for this week, with the outcome expected on Wednesday. Global markets are hoping for a strong and clear confirmation from the US central bank that it will maintain its accommodative policy.
Besides, US economic data points such as inflation and jobless claims will be monitored closely for more clarity on the state of the world’s largest economy in the battle against the coronavirus pandemic.
Crude oil
Brent futures returned above the $69 per barrel mark last week, returning to levels not seen in nearly two years, after OPEC and its oil-producing allies said the group would keep production largely steady through April. Saudi Arabia also said that it would extend its one million barrels per day voluntary production cut into April. Optimism on US economic recovery helped investors shrug off inflation concerns, boosting oil prices.
Although gains in benchmark oil rates boost domestic oil and gas stocks, they cause inflationary pressure for the RBI while threatening the government’s fiscal math. India meets more than 80 per cent of its oil requirement through imports.
FII fund flow
Foreign institutional investors, which have supported the market rally heavily in the recent past, turned net sellers of Indian equities last week, offloading shares worth Rs 881.05 crore ($121.84 million). They had been net purchasers in the past five months, pumping Rs 1,87,175 crore into the Indian share market. Any further foreign fund outflows are likely to dampen the sentiment for Dalal Street, say analysts.
IPO buzz
Market participants will keenly watch Easy Trip Planners’ Rs 510 crore initial public offer (IPO) this week. While analysts remain mixed on this issue, all seven of the IPOs launched so far this year have received strong investor interest. Out of them, IndiGo Paints, Heranba and RailTel have been the biggest hits, securing subscription of 117 times, 83 times and 42 times, respectively.
Technical outlook
Nifty managed to close the week on a positive note led by heavyweights such as Reliance Industries, TCS and Infosys amid some volatility and negative market breadth. The index appears to be is losing momentum on the upside, said Nirali Shah, Head of Equity Research, Samco Securities.
“On the upside, Nifty is likely to remain capped at immediate resistance of 15,270 whereas on the downside immediate support is now placed at 14,630. We suggest traders maintain a neutral outlook,” she added.
