The market witnessed a bear attack for another week that ended on March 6.
The situation was volatile since the beginning of the week, and tried to recovery amid the rapidly-spreading novel coronavirus outbreak beyond China. But, the surprise Yes Bank fiasco weighed heavily on March 6.
As a result, the BSE Sensex and Nifty50 lost nearly 1.9 percent, each, during the week. This was on the top of the 7 percent loss seen in the previous week. The BSE market capitalisation was down by over Rs 14 lakh crore from February 20 when the actual fall started, partly led by FIIs selling.
The broader markets also joined the bear party as the BSE Midcap and Smallcap indices lost over 2.5 percent in the passing week, in addition to 7 percent loss seen in previous week.
Given the rising number of novel coronavirus cases across the world, volatility is likely to stay in this truncated week, though the market looks oversold after 11 percent correction from its record high. All eyes will also be on developments related to the Yes Bank resolution plan, experts feel.
“We continue to maintain our cautious view on Indian markets and expect volatility to remain high in the near term. The updates on spread of Coronavirus cases would be the single biggest factor dictating global markets going forward,” Ajit Mishra, VP – Research at Religare Broking told Moneycontrol.
On the domestic front, updates on resolution plan for Yes Bank along with spread of Coronavirus cases would be actively tracked by traders and investors, he said.
According to Jimeet Modi, Founder & CEO at SAMCO Securities & StockNote, the Reserve Bank of India (RBI) may deliver a surprise rate cut and Yes Bank situation will be taken care off by the bellwether mother of all financial institutions of India — the State Bank of India (SBI) and the Life Insurance Corporation of India (LIC). This should calm the nerves of the market.
Investors and high tax payers will have a very good opportunity to invest in ELSS funds before the year-end, to take advantage of 10-12 percent correction in frontline stocks, he advised.
The market will remain shut on March 10 on account of Holi.
Here are 10 key factors that will traders busy this week:
Novel coronavirus (COVID-19)
The novel coronavirus outbreak, also known as COVID-19, will continue to remain on top of the list of factors, though Yes Bank ruined the sentiment last March 6. The reason is that the outbreak has been spreading fast outside China, where it started.
The total number of confirmed cases has crossed the one lakh-mark, with the death toll at around 3,600 across the world. There have been over 21,500 cases with around 420 deaths outside China. The number of cases has steadily increased in Italy, Iran and South Korea, among others.
In addition, the data points coming from China showed how severely the country has been affected. Exports have contracted 17.2 percent YoY in January-February, after several days of shutdown.
Remember, China is the largest consumer and supplier of several products. Hence, several rating agencies and brokerages have lowered their Gross Domestic Product (GDP) growth forecast for Q1CY20 and CY20.
Further, the aviation industry has been affected by the outbreak and many other companies started cutting their revenue forecast. Therefore, if the spread of the outbreak continues for couple of months, there could be a severe impact on global economy, experts feel.
Yes Bank and SBI
The coming week is crucial for cash-starved Yes Bank, the country’s fourth largest private sector lender, as SBI has been allowed to pick up to 49 percent stake (including the 26 percent stake which will remain for next three years), and will present its resolution plan in next few days (possibly by March 9) after reading Yes Bank’s books.
Rajnish Kumar, Chairman of SBI, in a press conference said that the bank has been meeting several co-investors who have also been doing due diligence, which can help it to bring liquidity for Yes Bank.
The RBI surprised everyone on March 5 evening by taking control of Yes Bank with 30-day moratorium period and appointed administrator Prashant Kumar, especially after Yes Bank failed to raise Rs 14,000 crore in multiple attempts in last one year.
While assuring depositors (who are allowed by RBI to withdraw only up to Rs 50,000) and employees of Yes Bank, Rajnish Kumar said that once the 30-day moratorium period ends, which the legality of RBI process, SBI will take the control of the bank by infusing Rs 2,450 crore, initially, and can pour in up to Rs 10,000 crore in three-year period if required.
Further, sources told Moneycontrol that the RBI is likely to offer Rs 8,000-10,000 crore of special liquidity window for Yes Bank.
Hence, not only the share price of Yes Bank that crashed 56 percent on March 6, but also SBI (which fell 6 percent) will be in focus next week.
Crude and Rupee
Existing concerns over weakening demand due to the coronavirus outbreak that has affected international travel and now OPEC and its allies having failed to agree to a production cut, the oil price took a plunge on March 6 losing 10 percent in a day — the worst in more than five years.
International benchmark Brent crude futures dropped to $45.27 a barrel against $65 a barrel last month, the $20 difference which is quite big for a country like India that imports 80-85 percent of its requirement.
The sharp fall in oil price played a big supportive role, which could be one of reasons for 550 points recovery on the Sensex from day’s low on March 6, as there would be less pressure on fiscal deficit.
On the contrary, the worry for India is the fall in rupee which weakened and breached 74 against the US dollar intraday and closed 161 paise down at 73.78 during the week, hitting 17-month low amid virus fears, though there was likely RBI intervention to support the currency.
“On upside crucial resistance lies at 74.47 (all-time low) and if rupee consistently trades above 74.47 then 75.0-75.50 is expected. However, these levels are highly unsustainable and are more likely to witness a reversal thereafter. But, any updates about rise in cases on coronavirus will lead to sharp depreciation in rupee,” Rahul Gupta, Head of Research- Currency at Emkay Global Financial Services said.
FIIs selling
The consistent selling by FIIs in emerging markets including India due to the coronavirus outbreak is a cause of worry for the market and it could be closely watched by the Street. However, on other side, DIIs continued to support by pouring in around similar amount in equities.
FIIs net sold Rs 10,720 crore during the week gone by, taking total selling to over Rs 28,000 crore since January, whereas DIIs invested Rs 10,093 crore in March so far, taking total net buying to over Rs 28,000 crore in 2020 so far.
Macro data
Key macro data point to watch out for would be the January industrial production and February CPI inflation numbers which will released on March 12 evening.
India’s industrial output contracted 0.3 percent in December 2019 against a growth of 1.8 percent in November 2019 due to fall in manufacturing output which accounts for more than three-fourths of the entire index.
Retail inflation in January jumped to near six-year high of 7.59 percent, up from 7.35 percent in the previous month due to rise in prices of vegetable and pulses. It is the key reason behind decision of further rate cut by RBI. Hence, it will be closely watched.
Among other data points, deposit and bank loan growth for fortnight ended February 28, and foreign exchange reserves for week ended March 6 will be released on March 13.
Antony Waste Handling Cell IPO
After the Rs 203-crore IPO failed to garner enough subscription on the last day of bidding (as per previous schedule) on March 6, Antony Waste Handling Cell on same day decided to extend the closing date by five working days till March 16.
Hence, all eyes are on its subscription levels, as the issue was subscribed 50 percent till the third day.
Further, after the oversubscription of 26.54 times, investors who applied for SBI Cards and Payment Services IPO, will check their demat accounts for shares. The company is expected to debut on March 16.
Technical view
The Nifty50 lost 1.9 percent to close below the psychological mark of 11,000 during the week as bears retained tight control over Dalal Street, forming large bearish candle on the weekly scale.
This volatility is likely to continue along with negative sentiment. But, as the index reached the oversold territory after losing 11 percent from record high in January, the short bounce back cannot be ruled out, experts feel.
“Now, if we see any follow-up selling then downside towards 10,650 cannot be ruled out, although the momentum indicator RSI has reached the oversold territory of 25 hinting some pullback towards 11,200,” Nilesh Ramesh Jain, Derivative Analyst- Equity Research at Anand Rathi told Moneycontrol.
“The overall trend for Nifty continues to remain negative until it reclaims 11,400 mark on the higher side. In the coming truncated week, we expect some consolidation in the range of 10,700-11,200,” he said.
F&O cues
On the derivative front, Call writers are scattered among a majority of the OTM strikes from 11,000 to 11,500 strikes, whereas Put writers are almost equally divided among 10,500 and 10,900 strikes.
F&O data indicates that a decisive break below 10,900 could take Nifty towards 10,700 and then 10,500, experts feel.
The sentiment indicator, India VIX also surged 12 percent to end at 9-month high of 26 levels, which is a major concern for the bull and it has to cool down below 20 levels to give comfort to the bulls.
“India market volatility has risen to 27 levels amid continued gap openings. The markets are entering a truncated week and may witness some short closure if the Nifty holds above 11,000. However, till clouds over Coronavirus remain, major short covering trend is unlikely to pan out,” Amit Gupta of ICICI Securities said.
“The highest Put base still remains at 11,000 strike while the Nifty recovered towards those levels despite the gap down opening below these levels,” he added.
Corporate action
Here are key corporate actions taking place in the coming week:
Global cues
The European Central Bank will announce its interest rate decision on March 12, which will be closely watched especially after several other central banks already cut interest rates in the range of 25-50 bps last week.
Here are key global data points to watch out for next week:
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