Bulls and bears engaged in a tough fight; FY-ending woes to keep market subdued

Markets remained buoyant during the week gone by and, in fact, went higher, which indicated that the coronavirus fears have been factored in to an extent. However, any further escalation of the issue could have a negative impact on the bourses in the near future.

Calm is returning after the dual storm of the Budget and the ‘mini-Budget’ – RBI’s last monetary policy for FY20. In spite of concerns clouding Dalal Street in the past couple of weeks, FIIs and DIIs have remained net buyers of Indian equities this week, which shows renewed confidence from marquee investors on India’s growth story. SIP flows again crossed the Rs 8,000 crore mark for the 14th consecutive month in January. The government, indeed, has a big hand in reviving confidence despite the retail inflation touching highs of 7.59 per cent in January, the highest since 2014 and monthly IIP contractions continuing to portray a gloomy growth picture.

To sum it all, the economy is currently in the mending phase, which will start showing green shoots soon. At the same time, there are global pressures that could impact the market and increase volatility. India, being China’s second largest trade partner, could experience supplier disruptions due to coronavirus. Sectors that are likely to get impacted most include electrical machinery, metals especially iron and steel, auto and raw materials as they have large import components from China.


Textiles and specialty chemical players, on the other hand, are rejoicing, as global companies are resorting to India for these products.

Event of the Week

December quarter earnings were a mixed bag with consumption and financials segments logging a disappointing performance. In the auto space, medium and heavy commercial vehicles are still struggling to find a firm footing, whereas PVs have started improving slowly. Cement and specialty chemical companies have surprised the Street.

The recent Supreme Court ruling on AGR dues is a big jolt to Vodafone and Airtel. Only time will tell how they manage to repay the dues. Given the fundraising done by Bharti Airtel, it seems it would remain largely unaffected by this judgment, while Vodafone is likely to take a bit hit.

Technical Outlook

After forming a big bullish candle last week, Nifty formed a long-legged Doji pattern this week, signalling a tough fight among the bulls and the bears. In fact, Nifty is facing stiff resistance at 12,200 level since last three days and formed a three Inside Down bearish candlestick patterns in the resistance zone.

Going forward, Nifty is likely to trade in the negative. The broader market breadth remained negative on the last trading day as well as on a weekly basis. Traders may sell on rally.

Expectations for the Week

With the earnings season in its fag end and no key event lined up for the near future, the market is likely to take cues from the domino effect of forthcoming challenges due to coronavirus. Given the current uptrend in the market, it would be no surprise to see a slew of IPOs such as IRFC, SBI Cards and Burger King hitting the market in the days ahead. This would entail a rush of liquidity to the primary market, which would be a positive for retail investors, as they get an opportunity to invest in good companies. Broadly, the market could be dilly-dallying as it soaks in the developments of the past couple of weeks.

Investors are advised to hunt for quality stocks in this ongoing correction. Nifty50 closed the week almost flat at 12,113, up just 0.12 per cent.