Last week, benchmark indices fell for the first time in five weeks given the pivot in US Federal Reserve’s thinking in interest rates and bond buying and concerns over frothy valuations in the broader market.
In the coming week, analysts expect the blue chip indices to hold fort and remain sideways, especially, as traders will display some nerves ahead of the expiry of the June derivatives series on Thursday.
“Markets are likely to spend some more time in a range and we expect volatility to remain high,” said Ajit Mishra, vice president of research at Religare Broking.
Following are the major cues that might shape the direction of the market this week:
RIL’s annual day
One of the biggest events of the year is upon us. On Thursday,
will hold its annual general meeting, which more often than not ends up dictating how the next 12 months for the company’s stock will fare. This time around, investors’ focus will be on the proposed launch of a Budget smartphone in tie-up with Google, progress on the 5G technology deployment, possible update on the deal to sell part of the energy business to Saudi Aramco and progress on the company’s e-commerce initiatives.
Powell’s Congress testimony
US Federal Reserve Chair Jerome Powell will testify to the US Congress on the economy and the central bank’s affairs. Investors will be hooked to every word of the chairman as they will look for further signs on when and where the US Federal Reserve’s policy is headed given the hawkish meeting last week.
Fedspeak storm
Besides Powell, as many as four members of the Fed’s Federal Open Market Committee will be speaking at public events this week. With investors keen to know the position of each member on future rate hikes, and more importantly, tapering of the bond buying program, global markets are likely to listen keenly.
June F&O expiry
The June derivatives series will expire on Thursday that will lead to heightened volatility in the market as investors head towards the expiry more uncertain then last month. The current open interest on the Nifty50’s June contract of 8.75 million is already very low suggesting that rollovers to the July series could be muted as traders brace for a weak June quarter earnings season.
Technical set-up
With the Nifty50 forming a first bearish weekly candle in five weeks, prospects of more profit booking remain high. The index ended below the crucial support 15,700 points on Friday and Nirali Shah of Samco Securities now sees possibility of the index testing 15,200 points going ahead.
For that to happen, the index will need to first fall below 15,400. In the event of a rebound, analysts believe 15,850-15,90 may not be breached.
Economic events
While the week will be low on economic data releases, there are two major events on Thursday. First, the Bank of England will announce its rate decision, which takes more significance in the wake of the Fed’s view last week. Right after the BoE’s decision, investors will shift attention to the March quarter GDP data in the US.
