Market awaits progress of AGR case

Indian equity markets slid to red this week with both Nifty50 and Sensex down -0.3%/-0.4% to close at 11,178/37,877 respectively. However, the broader market outperformed the benchmarks with Nifty Midcap100/Nifty Smallcap100 both closing in green, up 1.7%/2.0% respectively.

Sectorally, it was a mixed bag. Banks (-0.3%), Financials (-0.6%), FMCG (-0.8%) and Energy (-0.7%) dragged the market down, while the losses were capped due to strong gains in Media (+4.8%), Metals (+4%), Pharma (+2.7%), Auto (+1.6%) and Realty (+1.5%). FIIs continued to be net buyers this week, buying equities worth Rs 2,130 crore while DIIs continued to be net sellers to the tune of Rs 4,420 crore.

The global cues were weak due to mixed macro-economic data, heightened tensions between US-China and uncertainties over US fiscal stimulus which weighed on investor sentiments. Even European markets came under pressure after Britain added more European countries to its quarantine list.

On the domestic front, profit booking was seen as the valuations are no longer cheap and the earnings season is largely coming to an end. Market also turned cautious ahead of the SC’s AGR case hearing, which later got rescheduled for Monday.

Further the India’s macro-economic data points released during the week were also not encouraging. On the positive side, an embargo was imposed by the government on the imports of 101 defense items under the Atmanirbhar Bharat program, which boosted Defence-oriented stocks.

Further, the Department of Promotion of Industry and Internal Trade (DPIIT) proposed short-term and long-term measures to turn India into a manufacturing hub for 20 champion sectors, including aluminium, leather, and furniture sector under the Atmanirbhar Bharat program, which led to stock specific actions.

Going ahead, the market volatility is likely to continue, largely mirroring global cues. Investors would look out for fresh triggers amid continued surge in domestic coronavirus cases.

On Monday, the market would await further progress of AGR case hearing on the domestic front while on the global front, the US-China weekend meeting would provide some direction.

Technically, Nifty formed a small Bearish candle on a weekly scale which looks like a small pause in positive momentum. Now, it has to cross and hold above 11250 to witness an up move towards 11350-11400 while the support exists at 11100-11050.

(The writer is the head of Retail Research, Motilal Oswal Financial Services Ltd)