With too many developments taking place simultaneously, market participants in India as well as globally, essentially took a wait-and-watch approach in the week. The Nifty50 declined 1.2%, BSE Sensex fell 0.83%, while the broader market corrected by around 3% in the week. A scheduled meeting between the Prime Minister and the Chief Ministers, interest rate decision by the US Federal Reserve and announcement of quarterly earnings are among the various factors that will guide the market today and further during the week. The markets will remain closed on May 1, Friday on the occasion of Maharashtra Day.
Prime Minister Narendra Modi will interact with the state chief ministers today to discuss the way forward in the ongoing battle against the Covid-19 pandemic. The discussion could centre around a graded exit plan from the national lockdown that is scheduled to end on May 3. The central government and state governments have been slowly easing restrictions on economic activity, but complete removal of curbs seems unlikely. As per media reports, some state governments are in favour of extending the lockdown for a few more days. With cases in Maharashtra, Gujarat, NCR, West Bengal and Madhya Pradesh increasing steadily, the centre may opt for a region-wise modification in lockdown norms.
Shops lift shutter
In a late-night development on Friday, the central government allowed the opening of neighbourhood and standalone shops selling non-essential items in urban areas. Rural areas have been granted more freedom, with all shops allowed to open, except those situated in malls. However, shops in containment zones and COVID-19 hotspots will continue to remain shut and the prohibition on the sale of alcohol remains. More relaxation for businesses could be positive for the markets and investors will wait eagerly for similar announcements by the government.
Central bank meetings
The Federal Reserve, the Bank of Japan and the European Central Banks are slated to announce their interest rate decision in the week. The US Federal Reserve’s meeting will start on Apr 28 and the interest rate decision will be announced on Apr 28. The US central bank is unlikely to take any new action but may discuss the impact of the measures taken recently. The US markets had closed higher on Friday as several states formulated plans to roll back restrictions. Closer home, the Bank of Japan is likely to expand stimulus in its monetary policy meeting as the impact of Covid-19 on the economy deepens. The Japanese central bank will announce its decision on Apr 28. If the Bank of Japan boosts monetary stimulus, it will be the second straight month of stimulus expansion. The European Central Bank will announce its interest rate decision on Apr 30.
While the Covid-19 pandemic rages on, it is hard to predict its impact with certainty. Investors are keenly watching companies’ Jan-Mar earnings performance as they try to figure out the impact of the pandemic. A number of major companies are scheduled to report their March quarter earnings in the week. Ambuja Cements, HDFC Life Insurance Co and IndusInd Bank are slated to declare their results today, Axis Bank on Apr 28, while HUL and Tech Mahindra will report their earnings on Apr 30.
Crude Oil volatility persists
The crude oil market witnessed historic developments in the past week as the value of US West Texas Intermediate May futures turned negative. The times ahead are not going to be different as the demand situation continues to be weak and countries dependent on oil revenues are facing difficulties. At 0122 GMT on Monday, US West Texas Intermediate was down 7.2% at $15.72 per barrel. The international benchmark Brent Crude had ended last week at $21.44 per barrel and is down 1.5% at $21.11 per barrel in latest trade. The oil market will remain choppy as there are no signs of an uptick in demand and oil storage space fills ups rapidly. US crude inventories were near an all-time high at 518.6 million barrels in the week to Apr 17.
Foreign Institutional Investors remain risk-averse and were net sellers in April as the national lockdown roils the domestic economy. Overseas investors booked profit and withdrew Rs 3, 013 core in the last week. Foreign investors have withdrawn a net of Rs 10,347 crore from the Indian equity and debt markets in April so far. FIIs pulled out a net sum of Rs 6,822 crore from equities and Rs 3,525 from debt. Though the outflow remains high, it has reduced from March, when overseas investors had withdrawn a record Rs 1.1 lakh crore on a net basis from Indian markets.
The trading range is likely to be narrower this week as the Nifty has formed a wedge pattern. Support levels could be tested as the intermediate trend remains down. In the short term, markets could touch recent highs of 9390-9500, but a move below the key support level of 9050 could accelerate the downfall.
With the number of novel coronavirus cases in India nearing 28,000, investors will be wary of taking large positions. Death toll in the country has risen to 872, while the global toll has crossed 2 lakh. Markets are most likely to be range-bound as investors will wait for clarity on the government’s plan for the revival of the economy.