Markets keenly tracking budget

Indian equity markets ended the volatile week on the negative note led by global and domestic cues. The week started on profit booking due to poor results by some of the heavyweights and virus outbreak in China.

International Monetary Fund (IMF) also lowered India’s growth forecast for the year which dented market sentiments. But the selling was arrested over the last two days led by decent earnings announcement by select companies and built up of high expectations from the budget. Global sentiments got uplifted after the World Health Organisation designated coronavirus infection an emergency for China, but not yet for the rest of the world. Crude oil prices fell to their lowest in seven weeks on concerns that the virus outbreak in China may dent fuel demand.

Both Nifty 50 and Sensex were down 0.8% to close at 12,248/41,613 for the week. However, broader markets continued outperforming the benchmarks with Nifty Midcap100/Nifty Smallcap100 being up 1.6%/0.9%. Sectorally, the majority of the sectors ended in red led by Energy and Metals which were down about 2.5%. Realty and Media were the biggest gainers.

Foreign Institutional Investors (FIIs) continue to be net buyers, buying equities worth more than Rs 1,100 crore till Thursday while Domestic Institutional Investors (DIIs) were net sellers to the tune of Rs 3,000 crore.

IMF has lowered the GDP growth forecast to 4.8%/5.8%/6.5% for 2019/2020/2021 and listed the country’s much lower-than-expected GDP numbers as the single biggest drag on its global growth forecast for two years.

Markets are likely to be volatile due to the monthly F&O expiry just ahead of the Union Budget that would be presented towards the end of the elongated week. Also, stock-specific action is likely to continue with the ongoing results season which has been mixed so far. Markets are open on the Budget day i.e. 1st Feb.

Apart from these, investors would also watch out for the US Fed and Bank of England’s monetary policy. On the macro front, US Q4 GDP and India’s Fiscal Deficit data would be released. Further heavyweights like SBI, HDFC Ltd, HUL, Bajaj Finance, Maruti, Bajaj Auto, Indian Oil, HUL among others would be announcing their results next week which would also keep markets busy.

Technically, Nifty negated its formation of lower highs after four trading sessions which indicates strength. It formed a Bullish Candle on daily chart whereas Bearish Engulfing gets formed on the Weekly scale.

Momentum oscillator RSI is also taking support around its recent swing lows of 44–46 zone and turned northwards. Going forward, if Nifty holds above 12150 levels, then an up move towards 12,300 and 12,350 cannot be ruled out. However, major support remains intact at 12,100 and 12,050 levels.

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