The week kicked off on a stronger note as the benchmark indices scaled to new lifetime highs but ended marginally lower. The domestic market followed global peers and witnessed selling in all major sectors. The broader market led the meltdown with midcap and smallcap indices declining in between 1 to 2 per cent.
“Markets across the globe succumbed to profit booking during the week amid weak cues of fast-spreading delta virus, Fed’s taper plans and China’s ongoing regulatory crackdown. The domestic market also followed its global peers and witnessed selling in all major sectors,” said Vinod Nair, Head of Research at Geojit Financial Services.
In the absence of key domestic economic data points and awaiting its release, the market is expected to continue its focus on global events in order to gain momentum. Global rise in Covid cases is also a cause for worry, keeping volatility high, he added.
Markets are expected to remain volatile in the coming week ahead of the expiry of August month derivatives contracts. Along with it, Covid scare and momentum of the global indices would also be closely watched by traders.
Here are the key factors that may steer the market going ahead:
F&O expiry
The August futures and options contracts of Nifty and Bank Nifty will expire on Thursday. This may induce some volatility in the next few days as traders will race to square off their positions.
Three listings
Investors would be keenly awaiting the listing of three IPOs this week. Cement maker Nuvoco Vistas stock is expected to be listed on Monday, whereas plastic player Chemplast Sanmar and home loan provider Aptus Value Housing Finance are likely to begin their innings on Tuesday.
However, grey market premia is hinting towards a tepid debut amidst volatility in the broader market. Analysts said the companies have launched issues at very expensive valuations.
New IPOs
It is expected that specialty chemical and API manufacturer Ami Organics will launch its IPO this week. However, the company has not made the official announcement as yet.
The issue will consist of fresh equity shares worth Rs 300 crore and an offer for sale of up to 6,059,600 equity shares with face value of Rs 10 each by its existing shareholders and promoters.
Movement in Metals
Metal stocks plunged on Friday due to a crash in iron ore futures worldwide on expectations of waning demand from China and an increasing likelihood of Fed tapering. Investors will keenly watch the movement in metals in the coming days.
The Nifty Metal index plunged 6.43 per cent on Friday, its biggest single-day decline in the last 15 months.
Taper Talks
The Federal Reserve’s July meeting minutes suggested that most members think they can begin to taper their asset purchase program, which is meant to ensure smooth market functioning by the end of the year.
Investors are questioning if the economy can handle the Fed removing support on top of a Delta-driven soft patch in economic data.
Delta Variant
The widespread delta variant scare led to a market sell-off in the later part of the previous week as investors were worried over economic recovery. Market participants would not like a déjà vu moment this week.
The main fear for investors is that a Covid-19 resurgence could force economies to shut down again – meaning travel, leisure and riskier assets may look less attractive.
Technical Outlook
Samco Research in its note said that Nifty50 closed mildly negative for the week and formed a Shooting Star candlestick pattern which is a bearish sign. While Nifty has been outperforming major developed and emerging market indices, a Shooting Star candle hints at a mild retracement towards short-term averages.
“There could be a dip to 16,150. We suggest traders to maintain caution going forward and remain watchful of how the index reacts to the 16,150 zone, as any break below the same might lead to weakness in the short term,” it added.
