Key benchmark indices ended the week on a poor note, tracking the volatility in the global markets led by rate hikes by central banks and a sharp selloff from the global investors. The BSE Sensex plunged 2,225 points to close the week at 54,836, and the Nifty50 fell 691 points to 16,411, the lowest closing level since March 9, continuing downtrend for the fourth straight week. The surprised 40 bps increase in repo rate and 50 bps in cash reserve ratio by the Reserve Bank of India amid rising fear of aggressive rate hikes by the US Federal Reserve dampened the market sentiment in the week ended May 6 with the benchmark indices crashing over 4 per cent.
“Markets are reeling under tremendous pressure and indications are in favour of further decline ahead,” Ajit Mishra, VP – Research at Religare Broking, said.
Most sectors as well as the broader indices are trading in sync with the benchmark, however, select stocks are still holding strong. “Since global cues are largely dictating the trend, we recommend focusing more on the overnight risk management and maintaining position on both sides,” Mishra said.
Quarter Earnings
More than 300 companies will disclose their quarterly earnings scorecard in the coming week, including prominent names like UPL, Asian Paints, Cipla, Adani Ports, Larsen and Toubro, Tata Motors, Eicher Motors, State Bank of India and Tech Mahindra.
Among others, Vodafone Idea, Punjab National Bank, Bandhan Bank, Bank of Baroda, RBL Bank, Siemens, UCO Bank, Union Bank of India, Avenue Supermarts, CMS Info Systems, Godrej Agrovet, Infibeam Avenues, Vedant Fashions, PVR, Ajanta Pharma, Chalet Hotels, Gujarat Gas, Max Financial Services, Mahanagar Gas, MRF, Torrent Power, Birla Corporation, HSIL, Indian Bank, Petronet LNG, Aditya Birla Capital, Anupam Rasayan India, Apollo Tyres, Brigade Enterprises, Gujarat State Petronet, Honeywell Automation, Ujjivan Small Finance Bank, Windlas Biotech, CESC, Emami, Escorts, Nazara Technologies, Vakrangee, and Heranba Industries will also release quarterly earnings next week.
LIC IPO
The much buzzed initial public offering (IPO) of Life Insurance Corporation (LIC) of India will conclude for subscription on Monday. The largest ever issue of Indian primary market, raising about Rs 20,557 crore for 3.5 per cent stake of government, was open for subscription on Weekends too.
However, investors will keenly watch the bids from qualified institutional buyers (QIBs) and non institutional investors (NIIs) who rush to the streets on the last day of the bidding process.
IPOs Next Week
Three initial stake sales including Delhivery, Prudent Corporate Advisory Services and Venus Pipes & Tubes will be launched in the upcoming week. The trio will be raising close to Rs 6,000 crore from the investor via primary offering.
Ukraine War
The situation in war-hit Ukraine and Russia remains tense, which is hurting the traders across the globe. Also, Russia celebrates May 9 as its Victory Day, which is being remarked as a very important date. Any news that de-escalate tensions, would be welcomed by the markets.
Economic Data Points
The fiscal deficit numbers for March 2022 will be released on Monday, while CPI inflation figures for the month of April and industrial output data for March will be announced on Thursday.
CPI inflation is the key factor to watch out for in the next week, especially after the RBI shifted its focus to inflation that was at 6.95 percent in March, and surprisingly hiked repo rate to 4.4 percent and cash reserve ratio to 4.5 percent last week.
“We expect CPI inflation to hit 7.5 percent, as rising motor fuel, other energy and food prices keep upward pressures elevated. While we see a possibility that April inflation could overshoot our forecast, we do not think such a trend will sustain,” Rahul Bajoria, MD and Chief India Economist at Barclays, said.
Nifty Technical Outlook
The Nifty50 has formed Doji kind of pattern on the daily charts on Friday as the closing was near its opening levels but the index fell 1.6 percent to 16,411, while there was bearish candle formation on the weekly scale as the closing was lower than opening levels.
The charts indicated that bears have strong hold over Dalal Street as the index closed at lowest level since March 9 this year. Hence experts feel if the selling extends then 16,150-16,200 could be next logical target followed by 16,000 mark on the downside, whereas generally Doji formation after reasonable weakness indicates some bounce back which could be confirmed only if the index closes above 16,500 levels.
“The short term trend of Nifty continues to be negative,” Nagaraj Shetti, Technical Research Analyst at HDFC Securities said.
He further said having formed a Doji and unfilled opening downside gap signal a possibility of minor upside bounce from here or from the lows in the next 1-2 sessions. “Any upside from here could encounter strong resistance around 16,650 levels.”
However, eventually, Nifty could decline from the highs and reach down to the next support of 16,200 levels in the near term, he said, adding the larger degree of lower tops and bottoms is on the cards, and the present weekly chart indicates a possibility of new lower bottom formation below 15,671 levels in the coming few weeks.
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