Home barometers reflected global indices this week, with Sensex up 2,894 points and Nifty adding 858 points. According to traders, global indices will be the general trend in our markets.
As India reports biggest day-long jumps in new COVID-19 cases consecutively, reports of pandemic declines in virus-affected countries have kept bull markets in recent trading sessions . In addition, the anticipation of stimulus announcements has also kept investors optimistic locally. Global sentiment has improved as governments contemplated stimulus packages to control the crisis.
Indian markets rose about 11% on a weekly basis, said Vinod Nair, director of research at Geojit Financial Services, adding that the week’s trend was mainly synchronized with global markets.
While hopes for fiscal stimulus and a slowdown in new cases have sparked optimism, the prolongation of the quarantine period that has affected demand and supply chains has worried investors.
Here are the top 10 factors affecting the trend of financial markets in India:
1. Economic stimulation
Expectations of a coronavirus rescue program to help the already sluggish economy after the lockout have thrilled investors. “In India, the hardest hit sectors and MSMEs are expected to get relief in another package to be announced soon,” said Vinod Nair, director of research at Geojit Financial Services.
Markets mimic global indices, said Jimeet Modi-founder and CEO, SAMCO Securities & StockNote and added: “Indian stock markets have defied gravity by simply reacting to global peers while India is still working on the second tranche of the economic package to combat the COVID-19 Effects – first being just a stimulus of $ 22.50 billion. “
Experts have indicated that global stocks since the end of March are on a rally of relief, already incorporating the economic recovery induced by stimuli while the shock of companies remains uncertain.
2. Global market
Domestic investors have listened to their global counterparts for general market direction, with participants familiar with the 21-day lockout announcements and stimulus packages.
“It is also relevant to note that, with the exception of management warning comments from one of the fastest growing NBFCs on various foreclosure scenarios, the markets have always gone higher, which implies that the worst is discounted in the current scenario, “said Jimeet Modi.
According to experts, on a global scale, stock market indices have become very volatile, in the midst of an increasing number of cases and a likely extension of foreclosure measures. At the end of March, markets returned to an upward trend, with infection expectations peaking in the most affected countries.
“The rally in the domestic market was mainly due to strong relief seen in the US markets as the death toll for coronaviruses declined somewhat and thus gave early signs of the calming of this pandemic” said Sameet Chavan, chief analyst. Technical and derivatives, Angel Broking. He added: “Practically, the major impact of this epidemic has already been anticipated by markets around the world in recent weeks and there was only a small ray of hope needed to rebound suddenly in situations extremes of oversold or under-ownership. “
3. Short term gathering
Investors are urged to proceed cautiously around the world, as markets counteract the downtrend led by news of the coronavirus epidemics. With the start of the winning seasons, the revision of profit forecasts will be clearer, analysts have suggested a long-term approach and added that the recovery in consumer-led demand is the key to getting bulls back on top .
In the midst of the bullish recovery, Wall Street banks like Goldman Sachs, JP Morgan and Citigroup urged investors to be cautious as the markets became bullish and participants rushed into recovery bets, claiming that d other disruptions may occur.
Signs of a recession are already visible in some of the hardest hit countries, even after unprecedented financial aid from central banks and government, Wall Street bank experts have suggested.
The virus is sure to plunge the world into recession, and economists are less and less convinced of the potential for a strong recovery in growth.
4. Falling coronavirus cases
Investors around the world were optimistic about the slowdown in new virus cases since Tuesday, with the death toll in countries considered corona hotspots also signaling signs of a slowdown.
Since the spread of the virus, markets have taken into account the reality of the epidemic and reacted accordingly during the foreclosure situation, experts have suggested.
Although the longer the pandemic continues, the longer the lockdown remains, affecting the economy and businesses. The slowdown in records registered worldwide as well as on the national territory will be a major factor for the markets in the coming days.
“It should not be forgotten that the recent crisis is linked to” health “and therefore it would be important to see new developments with regard to coronaviruses over the weekend,” added Sameet Chavan in the daily summary note of the Angel Broking market).
According to technical experts also, the true trajectory of the market trend would be decided on the indices linked to the Covid-19 epidemic.
5. Extension of India’s foreclosure
Domestic investors remained fragile, fearing an increase in the number of cases and a likely prolongation of the foreclosure. The prolongation of the foreclosure will lead to a reduction in profits, potential supply disruptions.
Vinod Nair had earlier suggested that markets were also uncertain about the government’s response after the official 21-day lockout expired on April 14.
In addition, every day since last Monday has been the largest increase in new cases for domestic reasons. Coronavirus cases continued to increase despite a total lockout in the country.
The government told Reuters that the country would have been affected by 820,000 cases next week if it had not imposed a nationwide lockdown, and said it had initial success in fighting the coronavirus epidemic .
Prime Minister Modi suggested on Wednesday that the lockout would be extended and that the restrictions would not be lifted all at once after April 14, equity analysts said an extension would cause more trouble for the market.
“It seems that once the foreclosure is lifted, the markets will begin to recognize the reality on the ground and react accordingly, as the aftermath of the foreclosure will only begin to appear then,” added Jimeet Modi.
6. Publication of key data
Economic data has suggested the start of a vicious cycle of lower consumer spending leading to lower corporate profits, lower business investment, more job losses and a further decline in consumer spending.
Meanwhile, the Reserve Bank of India said that India’s prospects for economic recovery have been greatly affected by the coronavirus epidemic. Apex lender said the national foreclosure is expected to significantly affect growth in the March quarter, and analysts have cut their 2020/21 GDP growth projections to 1.5-2%, levels not seen in India for decades.
7. Oil production war
On the oil front, market players around the world were awaiting the outcome of the OPEC + meeting. According to reports, OPEC + is expected to discuss a massive reduction of up to 10 Mbps when it meets Thursday. Brent crude oil rose almost 56% from recent lows.
Global demand for fuel has dropped by around 30 million barrels per day, or 30% of global supply, as the coronavirus lockdown has dampened demand for the product.
Saudi Arabia’s Minister of Energy told Reuters on Friday that a final OPEC + oil pact to cut 10 million barrels per day (bpd) was agreed Thursday depends on Mexico joining the reductions.
India VIX, which measures intraday volatility, finished down 5% to 49.56 on Thursday. It rose to its highest level in 11 years, reaching 302.8% in the March series at 71.53 against 17, due to the current coronavirus crisis. This indicates a volatile swing in the market, which may not give traders a smooth ride and comfort. “Volatility also depends on the cooldown of markets around the world,” added Motilal Oswal in his note.
“The volatility will continue alongside global markets where the trend of global and local coronavirus cases will dictate the future direction of the market,” said Santosh Meena, senior analyst at TradingBells.
9. Gathering of pharmaceutical actions
In terms of sector, the Nifty pharma index remained in positive territory, up 3.5%, in line with gains in the automotive and FMCG sectors. In the past month, the pharmaceutical sector grew by more than 13%, followed by a 3.2% increase in consumer products. Nifty Pharma has increased by 10.87% since the start of 2020.
Jimeet Modi said the pharmaceutical sector was trending this week as the government approved partial exports of two key drugs to fight the new coronavirus. On indices, the pharma index rose 35% during the week. As this sector remained undervalued for the longest period of time, this week’s rally brought the index to relatively fair assessments.
He added: “However, investors should not take the leap and should stay away from this space for now as pharmacy is a crowded business and situations can change very quickly depending on FDA approvals American company or if a foreign actor starts manufacturing the same drug. “
10. Technical perspectives
Since the start of the year, the ESB and NSE benchmarks have fallen by 24% and 25% respectively. In March, the drop was 12% in the context of the coronavirus pandemic. Although, on a weekly note, Sensex and Nifty added 10%. According to Nifty’s short-term outlook, the resistance of the 9000-9300 area would be a big challenge for the bulls, while the major support is placed at the 7500 and 6800 levels.
Sameet Chavan said: “Nifty has now managed to exceed the EMA to 20 days for the first time since February 24. Since there has been a large participation in this movement, it can be considered robust. Looking at the the way the graphics are formed, we will not be surprised to see this rally extend to 9500-9700 over the next few days. “
“Looking ahead, we have a slightly positive outlook for next week with support and resistance placed at 7900 and 9400 respectively,” said Jimeet Modi of SAMCO Securities.
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