Virus spread, Opec meet & FII mood among 7 factors that will sway market in 3-day trading week

After shedding weight for the seventh consecutive week, domestic equity indices will continue to be swayed by developments in the battle against coronavirus. Direction of FII flows will also be a key factor in coming week, which has two trading holidays on account of Mahavir Jayanti on Monday and Good Friday.

The government is yet to announce anything substantial for Indian businesses, especially those that have been hurt badly by the lockdown. Any announcement may cheer market participants.

“The market trend will be driven by any sign of peaking of virus infections in the worst-affected countries. India’s efforts to keep the infection under control have been met with some success and some hurdles, and any news about possible withdrawal of the lockdown may bring positivity,” said Vinod Nair, Head of Research at Geojit Financial Services.

Going by the buzz on Dalal Street, these factors may guide market in the coming week:

Coronavirus spread
India reported a rapid increase in the number of confirmed coronavirus cases in the last couple of days showing early signs of community transmission. There are fearing of a sharp increase in new cases going forward. The number of reported cases has surpassed the 3,000 mark, with Maharashtra leading the tally. The number of deaths has crossed 70. The government says there would be staggered easing of the lockdown from April 15. But if the virus is not contained, it will be difficult for the authorities to fulfill that promise. The first sign of a possible lockdown extension came after Air India stopped booking till April 30.

FII outflow continues
Foreign institutional investors (FII) have continued to dump Indian stocks even this month. They have taken out a net of Rs 6,750 crore, including Rs 3,802 crore from equities so far this month. This came on top of Rs 1,18,203 crore outflow in March.

Rupee depreciates further
After regaining some lost ground following RBI’s policy rate cut, the rupee has again slipped, weighed down by continued outflows from domestic equities and renewed strength in the dollar index. Analysts fear a further slide in the currency even as the central bank has shortened trade timing in the forex market to curb volatility. “As of now, the overall trend remains skewed towards the downside, amid the uncertainty as to how long this pandemic will last. A convincing breach of the crucial level of 76.25 would further accentuate a rupee fall towards the 77.50 mark,” said Sugandha Sachdeva, VP-Metals, Energy & Currency Research, Religare Broking.

Three-day week
The upcoming week will be shortened one as there are two holidays and all markets will be shut. On Monday, April 6, the markets will be shut for Mahavir Jayanti while on April 10 for Good Friday.

Lockdown to hit growth
The lockdown in India has entered the third week. Businesses across India have suffered heavily due to the prohibitory orders. Barclays estimated the cost of the lockdown at $120 billion (approximately Rs 9 lakh crore), or 4 per cent of the GDP. Analysts have projected an imminent recession if the lockdown continues. “The base case GDP growth forecast by our economists for FY21 is 2.5 per cent, and if this is prolonged, then India’s GDP could even decline by 0.2 per cent in FY21,” warned Gautam Chhaochharia, Managing Director and Head of Research at UBS Securities, India.

Opec to meet on April 6
The group of oil producers are likely to hold a meeting on April 6 via video conference, which will be keenly watched by investors. Oil prices staged a record jump on Friday in anticipation that the grouping will agree on a possible production cut at this meeting. Investors will be watching the quantum of cut in production and if that will be enough to shore up the prices given a huge drop in demand due to enforced lockdown in many countries.

Technical outlook
After opening lower last week, NSE flagship Nifty traded in a comparatively narrow range between 8,130 and 8,680 levels and continued to consolidate. “Indian markets, in line with global indices, are trying to stabilise for now despite escalating health risks worldwide. The recent sell-off caused significant price damage in a very short time and, hence, the market is likely to oscillate in a broad range of 1,000 points,” said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote. He advised traders to go long if Nifty sustains above 8,000 level, keeping that level as stop loss for long positions.