West Bengal election results, COVID, Q4 earnings to set market’s tone this week

MUMBAI: Benchmark equity indices are likely to move in a narrow range in an event heavy week for the market as investors will react to multiple conflicting cues on the economic and political front.

Analysts expect the benchmarks to sustain the gain seen in the previous week but also suggested that profit booking is likely at the slightest hint of nerves in the Street.

“The recent bounce is certainly encouraging but sustainability above 15,000 is critical in Nifty for any directional up move else consolidation will continue. On the downside, 14,200 will continue to act as a major cushion. We reiterate our view to stay with defensive names and keep a check on the leveraged positions,” said Ajit Mishra, vice president of research at Religare Broking.

Here are major factors that will move the market’s needle this week:


West Bengal elections
Investors will react to the outcome of West Bengal assembly elections. A victory for the Bharatiya Janata Party, which rules the Centre, will ease concerns that the second wave has dented Prime Minister Narendra Modi’s political support. A defeat will make the market nervous as it will bring an element of uncertainty for BJP in the upcoming UP elections in 2022 and general elections in 2024.

COVID-19 restrictions
The relentless surge in COVID-19 cases in the country has led to calls for a national level lockdown to break the chain of infections. The government so far has resisted the demand but with deaths surging and key medical infrastructure scarce, investors may soon start to weigh the possibility of a short national lockdown, said analysts.

GST collections data
While the market has so far been fretting over the impact of the localized restrictions on economic activity, GST collections data released on Saturday will boost its confidence. India reported record GST gross collections of over Rs 1.4 lakh crore in April suggesting that business faced limited impact from the burgeoning heath crisis in the country.

March quarter earnings
Investors will continue to parse through the incoming March quarter earnings from India Inc. As many as five Nifty50 companies will report their March quarter earnings this week including heavyweights like Housing Development Finance Corp and Kotak Mahindra Bank.

F&O watch
On the futures and options front, traders enthusiastically bought out-of-money call options of Nifty50 expiring on Thursday, suggesting that they expect more gains in the market this week.

Nifty is likely to start the coming week on a soft note. The levels of 14,730 and 14,900 levels are likely to act as key resistance, while 14,500 and 14,350 levels are likely to offer support. In the event of any corrective move, this trading range is likely to widen, said Milan Vaishnav, consultant technical analyst and founder of Gemstone Equity Research & Advisory Services.

Data flow
Investors will react to the April automobile sales by companies to gauge the extent to which demand has been hit by the ongoing rise in infections. Further, all eyes will be on the jobless claims data in US and manufacturing activity update by Markit for India on Monday.