Will Nifty reclaim 18000? Top 10 factors that are likely to drive markets in coming week

Indian market closed with losses of about 2 per cent for the week ended 18 November. In the holiday-shortened week, bears remained in control and pushed benchmark indices below crucial support levels.

The S&P BSE Sensex closed below 60,00 while the Nifty50 slipped below 17,800 levels.

After rising for 2 consecutive weeks the Nifty50 failed to hold on to the gains and closed in the red for the week ended 18 November. The Nifty small-cap index relatively outperformed with a cut of 1.3 per cent respectively.

Experts are of the view that the index looks oversold at current levels and some pullback could be on the cards in the coming week.

“We expect Nifty to hold 17500 in ongoing corrective phase amid oversold readings while extending broader consolidation in 17700-18200 amid stock-specific action,” Dharmesh Shah, Head – Technical, ICICIdirect, said.

Over the past 18 months, Nifty has attracted buying demand near its 50dema in each corrective phase measuring 7-9% price-wise and 4–5-week time-wise barring one instance.

“With four-week corrective phase measuring 5.5% behind us, we expect the index to maintain this rhythm. Hence, any dip should not be construed negative, rather be used as an incremental buying opportunity,” he said.

Shah further added that sectorally, Capital goods, Telecom, Auto are expected to outperform while BFSI provides a favorable risk-reward setup. Pullbacks in the Metal space are expected to be short-lived.

We have collated a list of 10 factors that are likely to drive market action in the coming week:

November F&O expiry:

The market is likely to remain volatile in the coming week as traders would roll over their positions from the current November series to the December series – the last series of the year 2021.

The index is likely to expire in a broad range of 17800 on the downside and 18200 on the upside, suggest experts.

“Based on options chain data, maximum OI concentration can be seen in 17,800 & 17,700 strikes of Put option, and on the upside 18,200 & 18,000 strikes have witnessed Call writing,” Vishal Wagh, Research Head, Bonanza Portfolio, said.

“Overall, a broad range of 17700 - 18200 in Nifty is expected in this series,” he added.

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Rise In Global Inflation:

The rise in inflation across the globe remains to be a big overhang on equities. US retail inflation jumped to 6.2%, the highest in over 3 decades, which was negative for global markets. A rise in inflation could force US Fed to raise rates earlier than expected, suggested experts. 

“The market is now recalibrating its expectations of the FED’s response to the rising inflation as it appears to be biased towards being non-transitory,” The market is now recalibrating its expectations, said.

“An anticipated higher quantum of tapering by the FED may lead to emerging markets including India receiving reduced foreign investments. FIIs have already been net sellers in the secondary markets this week,” he added.

Selling by FIIs:

Foreign institutional investors remained net sellers in the cash segment of the Indian equity markets last week, and so far in November. They have pulled out by about Rs 10,000 cr from the cash segment in the period starting from 1-18th November.

"The likes of Morgan Stanley have downgraded Indian equities on the back of high valuations. FII has been net seller In April, July, and October," Vishal Wagh, Research Head, Bonanza Portfolio, said.

"The month of October normally sees FIIs selling due to maturity redemptions, after which, November and December have normally seen inflow. India is trading at one of the highest valuations ever and it's premium to emerging markets is also at a very high level. This has led to some downgrades by global houses," he added.

Movement of USD:

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.51% to 96.029 on Friday. The dollar is up roughly 1% on the week, while the euro hit a 16-month low, said a Reuters report. The dollar's gains came at the expense of gold.

"Indian equity market witnessed some degree of consolidation over the last week amidst rising global inflation (especially in the US), move up of US Dollar index as well as higher headline valuations for the Indian equity markets," says Kurian of Kotak Mahindra Asset Management Company.

"Movement of the US Dollar index, among other factors, would also likely determine the trajectory of markets,” she said.

Movement Of Nifty Bank:

Bank Nifty opened flattish and moved within a wider trading range throughout the session on Thursday. It relatively outperformed the Nifty index but closed in red with losses of around 65 points.

“It made a small-bodied Bearish candle on the daily scale with long shadows on either side and is trending downwards. On a weekly frame, it formed a Bearish candle and has been forming lower highs from the last three weeks in a row,” Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited, said.

“Now till it holds below 38350 zones, weakness could be seen towards 37750 and 37500 zones whereas key resistance can be seen at 38500 levels,” he added.

Technical Factors:

The Nifty50 closed above the key support on a weekly basis, but overall things are positioned well for the long term. Crucial support for the index is placed at 17,700 levels and on the upside key resistance is placed at 18000-18200.

“A sustainable move below 17700 (which seems likely) would activate the pattern and, as a result of this, we could see a fresh leg of correction in coming days. After this, next levels to watch out for would be 17450 and 17200, where one needs to reassess the situation,” Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel One Ltd), said.

“On the flip side, if Nifty manages to hold 17700 and move higher first, then 18000 – 18200 are to be considered as strong hurdles, which as of now we do not expect to get surpassed in the near future,” he said.

Primary Market:

The three-day IPO of Go Fashion India was launched on November 17, 2021 and will be active till November 22, 2021. The company has fixed a price band of Rs 655-690 per share for this issue.

The initial public offer (IPO) of Go Fashion India was subscribed 6.87 times on the second day till 5:00 pm on Thursday.  Against 80,79,491 shares on offer, bids for 5,55,12,051 stocks were made around the same time on the second day of subscription.

Tarsons Products Limited's initial public offer (IPO) closed after being subscribed 77.49 times on November 17, 2021 could list in the coming week on November 26.

Farm Laws:

Repealing of farm laws could well hit the reform agenda of the government.

PM Modi in his address to the nation on Friday said that it has been decided that the three farm laws will be repealed. He further added that in order to make MSP more effective and transparent, a committee will be constituted to take decisions on all such matters keeping in view the future.

Movement of crude oil:

Market participants will keep a close eye on the movement of Crude oil prices. Oil prices fell about 3% to below $80 a barrel on Friday as surging COVID-19 cases in Europe threatened to slow the economic recovery while investors also weighed a potential release of crude reserves by major economies to cool prices, said a Reuters report.

Brent has surged almost 60% this year as economies have bounced back from the pandemic and as the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, have only raised output gradually, it said.

Rise in COVID cases:

India's COVID-19 infection tally rose by 10,302 in a day to reach 3,44,99,925 while the number of active cases declined to 1,24,868 during the same period, according to Union Health Ministry data updated on Saturday.

“The number of active Covid cases have now returned to levels seen before the start of the second Covid wave,” Shibani Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company, said.

“The pace of normalisation of monetary policy globally, the COVID case curve, and the movement of the US Dollar index, among other factors, would also likely determine the trajectory of markets,” she said.

COVID cases have been increasing not just in India but in Europe as well.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)