Volatility to rule markets; virus, Fed decision to drive equities: Analysts

Equity markets are likely to see more volatility this week and may also witness a relief rally after suffering a massive drubbing recently due to the coronavirus pandemic, analysts said.

In a nerve-wracking week for the markets, the BSE Sensex plummeted 3,473.14 points or 9.24 per cent while the NSE Nifty lost 1,034.25 points or 9.41 per cent, largely in tandem with global equities which succumbed to panic selling triggered by the coronavirus outbreak.

Domestic markets witnessed a roller-coaster session on Friday, with trading being halted for the first time in 12 years as benchmarks plunged over 10 per cent in opening trade, before staging a record-shattering comeback.

Analysts said participants would keep an eye on the spread of the coronavirus, as well as further stimulus measures by global central banks and governments. The US Federal Reserve is also scheduled to announce its rate decision this week.

"Markets would take a while to recover from this significant price damage. While volatility may continue in coming days, we could see intermittent relief rallies, however these are likely to be short-lived. In such times of global volatility, retail investors should keep calm and not panic," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.

The number of novel coronavirus cases in the country rose to 107 on Sunday, with 12 fresh cases in Maharashtra, the Union Health Ministry said.

The virus has infected more than 150,000 people worldwide and killed over 5,600.

On the macroeconomic front, WPI inflation data will be announced on Monday.

"Temporary relief was seen in the global markets based on stimulus hopes. Investors are still advised to be alert since the volatility, as measured by the volatility index has reached all-time highs. Sentiments around the spread of the virus will continue to drive the markets and any signs of the rate of infections falling will be a positive," said Vinod Nair, Head of Research, Geojit Financial Services.

"In the near term, we expect volatility to remain high and maintain cautious stance," Ajit Mishra, VP - Research, Religare Broking Ltd said.

According to IndiaNivesh, Head - Institutional Equities, Vinay Pandit, "Markets have seen a lower circuit for the first time after 2008. But equating this situation with 2008 is unfair. 2008 was a global financial meltdown whereas the 2020 correction due to concerns on account of coronavirus are overdone. Good quality stocks have taken an undue beating and I am expecting a sharp bounce back." The Indian benchmarks posted their biggest ever one-day falls in two sessions this week (March 9 and 12).

Investor wealth worth around Rs 15 lakh crore has been wiped off in the past four sessions.

Market Wrap, Dec 26: Sensex declines 298 pts, Nifty below 12,150

Indian equity markets declined for the third straight session as investors adjusted their positions on expiry of Futures and options (F&O) contracts for the December series.

Banking counters, led by YES Bank, HDFC Bank, and Punjab National Bank, coupled with heavyweights like Reliance Industries, L&T, and Infosys dragged the benchmark S&P BSE Sensex 297.50 points or 0.72 per cent lower to 41,163.76 level. Bharti Airtel, RIL, L&T, and Sun Pharma slipped over 2 per cent, and were the top drags on the 30-share index. On the upside, ONGC, Tata Steel, Bajaj Finance, and NTPC gained between 1 and 2 per cent. On the NSE, the broader Nifty50 settled with 88 points, or 0.72 per cent, cut at 12,126.55-mark.

Sectorally, all the indices on the NSE, barring Nifty Metal index (up 0.58 per cent), closed the day in the negative territory. Nifty PSU Bank index was the worst performer of the day, down 1.46 per cent at close, followed by Nifty Pharma index (0.94 per cent), and Nifty Private bank and Bank indices (0.8 per cent each).

In the broader market, the mid-caps followed the frontline indices, with the S&P BSE mid-cap index down 0.16 per cent to 14,794.78- level by close. On the contrary, the S&P BSE small-cap index settled 0.41 per cent higher at 13,439.24.

BUZZING STOCKS

Shares of Adani Green Energy were locked in the upper circuit limit for the third straight day, up 5 per cent at Rs 156 on the BSE on Thursday in an otherwise subdued market.

The stock of the Adani Group renewable power generation company is trading at its all-time high level on the bourses. It is the top gainer among the S&P BSE 500 index stocks in the calendar year 2019, with market price of the company zoom nearly four-times. In CY19, the stock soared 272 per cent from Rs 42 on the BSE. In comparison, the benchmark S&P BSE Sensex has gained 15 per cent, while the broader index S&P BSE 500 has gained 8 per cent during the year.

Shares of Dewan Housing Finance Ltd (DHFL) were locked in the upper circuit band of 5 per cen,t at Rs 15.8 on the BSE, on Thursday after media report suggested that the housing finance firm is expected to resume lending after a gap of seven months.

The corporation, which is under insolvency resolution process, is planning to resumt lending to "stay relevant in the business".

GLOBAL CUES

Asian shares ended higher on Thursday with Japan's Nikkei index up 0.6 per cent, while South Korea's Kospi closed 0.36 per cent higher.

In the commodity market, oil prices rose on Thursday, buoyed by a potential breakthrough in the Sino-US trade war and OPEC-led efforts to constrain supply. Brent crude was up 28 cents, or 0.4 per cent, at $67.48 a barrel. West Texas Intermediate was up 25 cents, also a 0.4 per cent gain, at $61.36 a barrel

Equity markets to sustain momentum after US-China ink trade deal: Experts

Equity markets are expected to sustain their positive momentum this week after the US and China reached their much-awaited trade deal, analysts said.

The US-China trade truce and Boris Johnson's win in the UK general elections drove global markets higher late last week.

The US and China have suspended additional tariffs on each other's goods after reaching a 'phase one' trade deal after prolonged negotiations.

"The recent developments on the global front have subsided the fear of prolonged crisis and that cheered the participants across the world markets including ours. And, we feel the positive momentum to extend further in the coming week too," said Ajit Mishra, VP -Research, Religare Broking.

The current market momentum can sustain this week as well, provided there is more clarity on the US-China trade settlement, said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.

Further, liquidity flows have been supportive which may continue for a while, he added.

While valuations remain high, positive global cues and liquidity flows may help sustain the market momentum this week as well, Khemka further said.

Among macroeconomic factors, participants would eye announcement of WPI inflation on Monday.

"We expect the market to continue to move higher as momentum is favouring the bulls while easing global sentiments is a much bigger boost for investors at this moment," said Mustafa Nadeem, CEO, Epic Research.

Market sentiment will also be impacted by factors such as rupee-dollar trend and crude oil movement.

Last week, the BSE 30-share Sensex advanced 564.56 points or 1.39 per cent. On Friday, the 30-share index zoomed 428 points, or 1.05 per cent, to close at 41,009.71.