Top five factors that are likely to chart market direction this week

NEW DELHI: What a week it was!

The benchmark equity indices hit fresh 52-week highs but closed on a flattish note with a negative bias, as traders preferred to take some profit off the table.

The Nifty50 closed 0.5 per cent lower while the S&P BSE Sensex ended 0.2 per cent down for the week ended March 3.

The coming week promises a lot of excitement as the benchmark indices are trading close to their 52-week highs and lifetime highs. A breakout may put the indices in the unchartered territory and it should most likely happen in March.

Markets will react to the comments that US Federal Reserve Chair Janet Yellen made during a business lunch in Chicago. Yellen signalled that the Fed was all set to raise interest rates this month if employment and other economic data hold up.

The US Fed will hold its policy review during March 14-15 and recent comments from Yellen have removed uncertainty, which should boost sentiment but could turn the rupee volatile and hit inflow from foreign institutional investors (FIIs).

On Friday, the US market ended higher, which should have a rub-off effect on Asian markets, including India, when trading resumes on Monday.

Nifty50 futures on the Singapore Stock Exchange closed 27 points higher at 8,949 on Friday, indicating a positive opening for the domestic market on Monday.

“The bets on a March Fed rate hike is rising after strong US labour market and rising inflation, but during the week, both FIIs and DIIs were net buyers in the market,” Vinod Nair, Head of Research at Geojit Financial Services, told ETMarkets.com.

“Market participants believe the hike may come on the expected line and the market has largely factored it in,” he said.

Going by the buzz on Dalal Street, here is a list of five factors that can chart market direction during the week:

Good news on GST: Shares of logistic companies will remain in focus after the GST Council at a meeting held on Saturday broadly agreed on the contours of two key legislations – CGST and IGST – but a final approval is likely only by mid-March. The July deadline remains intact.

“It (GST) looks on track. Subject to Parliament approval, it looks like July 1 would be the possible date for the implementation of GST,” Jaitley said after the 11th GST Council meeting.

“As many as 26 changes sought by the states have been accepted by the Centre. This shows the federalist character of India. CGST and IGST will come up for further discussion at the next meeting of the Council in mid-March,” West Bengal Finance Minister Amit Mitra said.

UP elections/exit polls: The next big trigger for the market would be the outcome of the UP Assembly elections, which will be out on Saturday, March 11. But exit poll results before that could turn the market volatile.

“With the election results just a few days away (i. e March 11) and uncertainty surrounding the outcome, we may see plenty of volatility in the market,” said D K Aggarwal, Chairman and MD, SMC Investments and Advisers.

“The outcome of the elections would be a key indicator for the 2019 general elections and on how people viewed the demonetisation scheme,” he said. A victory for the BJP could be a sentiment booster and would support the recent rally and vice versa.

IIP data for January: Market participants will also watch out for IIP data for January, which will be released on Friday, March 10, after market hours. Expectations are that the data could surprise on the upside, following a recovery in industrial and manufacturing activity.

Industrial production contracted in December 2016 due to a sharp drop in production of consumer goods, confirming the demonetisation-led contraction in demand.

The Index of Industrial Production (IIP) was 0.4 per cent lower in December 2016 compared with the same period a year ago. The number was well below the 5.7 per cent growth seen in November and consensus expectation of around 1 per cent growth in December.

IPO boom: The coming week will be an exciting one for retail investors and the primary market, as two IPOs from two different sectors open for subscription. Avenue Supermarts, owner and operator of supermarket retail chain D-Mart and Music Broadcast, a Jagran group firm that runs Radio City FM channel, will hit the primary market during the week.

Avenue Supermarts’ Rs 1,870 crore IPO opens on March 8 while Music Broadcast’s IPO comprises a fresh issue of equity shares of up to Rs 400 crore and an offer for sale of up to 26.59 lakh equity scrips. The offer will be open for subscription from March 6-8.

Music Broadcast already allotted shares to anchor investors at Rs 333 apiece on Friday, the upper end of the IPO price band of Rs 324-333 per share

Technical factors: The coming week will be a crucial one for the market as the Nifty50 closed slightly below its crucial psychological resistance level of 8,900. But traders should remain long in this market as long as the Nifty50 holds on to the 8,820-8,750 zone.

Despite all these small intermediate corrective moves, the index should hit a new all-time high soon. The ‘RSI-Smoothened’ oscillator has entered the 70 mark on the weekly chart, which would provide an impetus for the next leg of the rally.

“It would be early to take a call, but we will not be surprised to see this upward move get extended towards the 9,400–9,600 zone (price extension of the previous upmove from recent low of 7,893) over the next few weeks,” Sameet Chavan, Technical Analyst at Angel Broking, told ETMarkets.com.

“A strong support is seen in the 8,850–8,800 zone, whereas the immediate resistance level stands at 8,993. We would reiterate that the trend is strong and hence, one should look to utilise intra-week dips to create fresh longs rather than get worried about the overbought condition of the market,” he said.

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