F&O expiry, Budget among key factors to guide the market this week

F&O expiry, Budget among key factors to guide the market this week

NEW DELHI: Domestic benchmark equity indices ended last week with marginal losses on a weekly basis as both foreign and domestic investors booked profits amid mixed domestic and global cues.

Strong data points on the economy like power demand, GST collections and auto sales, along with the launch of Covid vaccine, has helped the sentiments but many say those were already priced in and a consolidation may have begun.

“Markets will first react to the Reliance numbers in early trade on Monday. The coming week is a holiday-shortened one and we expect volatility to remain high due to the scheduled derivatives expiry. Besides, budget-related news and global cues will also be in focus,” said Ajit Mishra, VP – Research, Religare Broking.

Key factors that may guide the market this week:

Q3 earnings
A number of prominent companies, including some large private banks, are scheduled to report their quarterly earnings during the week. The list includes Kotak Mahindra Bank, L&T, Axis Bank, Hindustan Unilever, Lupin, Maruti Suzuki, Cipla, Dr Reddy’s Laboratories, IndusInd Bank, Indian Oil, Sun Pharma, Tata Motors, Tech Mahindra, Vedanta and ICICI Bank.

Fed policy meet
The FOMC of the US Federal Reserve will meet on 26-27 January to decide and discuss the monetary policy it should adopt as the country is still reeling under record cases of Covid-19. It will also be the first time the Fed will meet after Joe Biden took oath as the new President of the US.

Commentators say it is unlikely to change its policy but commentary about economic outlook amid the coronavirus, vaccine and weak jobs data would be key to watch out for.

FII flows
There are signs that the conviction of foreign institutional investors is faltering. On Friday, they were net sellers for the first time after early January, withdrawing Rs 635.69 crore from the domestic equity market. However, so far this month, they have invested a net Rs 24,469 crore on Dalal Street.

Another IPO
The IPO mart continues to be buzzing with kitchen appliances maker Stove Kraft coming with Rs 413-crore public issue for subscription on January 25. Meanwhile, First Home Finance Company India is also likely to garner interests from institutional and HNIs on the last day of subscription period on Monday.

F&O expiry
Volatility, which is already at a heightened level, is expected to rise further as monthly contracts for January are scheduled to expire on Thursday. The rollover data for the next month will also give a signal on how many traders think the market will continue to rally going into February.

Budget expectations
The market will also keep reacting to expectations and stories around Budget, which is scheduled on February 1. Auto segment is eyeing scrappage policy, clarity on PLI scheme and tax cuts, while broadly, the policy focus is expected to shift from ‘repair’ to ‘growth’, said some analysts.

Technical outlook
Nifty50 closed the week on a negative note after a weak opening. The index made an outside bar and it seems like it has started to feel the turbulence, as it is already trading in the overbought zone.

“The week remained highly volatile which could continue unless Nifty breaks below the 14,200 mark which is its immediate support in the short term. A break below the same can trigger a huge profit-booking move to 13,100 on the downside. Considering the time period of the up moves it would be interesting to see that previous phase and the current phase coincides which hints that a bigger correction could play out this time around. Hence, traders are suggested to be light on the long side,” said Nirali Shah, Senior Research Analyst, Samco Securities.

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