Earnings, govt stimulus, Covid-19 news among top 10 factors that will drive D-Street next week

After logging gains for two consecutive weeks on global cues and government stimulus hopes, the domestic equity market is going to have a reality check in the coming week as the earnings season is going to gather pace. This, along with developments on the coronavirus front, will be among the key factors guiding investors in the week ahead.

Coronavirus cases continued to mount across the world, including India, raising worries. However, possible resumption of economic activities for select sectors from Monday will provide some relief.

“There is not much expectation from the quarter earnings and the market seems to have already price in that disappointment. Nonetheless, investors will be watching out for management commentaries regarding the business outlook and earnings guidance,” said Vinod Nair, Head of Research at Geojit Financial Services.

Going by the buzz on Dalal Street, here are the key factors that will be steering the market in the days ahead:

Q4 earnings: Infy, ACC

March quarter earnings season is picking up speed. After TCS and Wipro announced their numbers last week, Infosys and Tata Elxsi will come out with their numbers on April 20; ACC, CRISIL, Den Networks, ICICI Prudential Life Insurance and Tejas Networks will follow suit on April 21. MindTree will announce its numbers on April 24 and Persistent Systems on April 25.

RBI’s liquidity booster

Market participants were left disappointed as the central bank did not announce fresh open market operations to buy dated securities that could have led to a fall in bond yields and increased liquidity in the market. However, RBI did announce TLTRO 2.0 (targeted long-term repo operation), aiming to inject Rs 50,000 crore in the market, targeted mainly at NBFCs and microfinance institutions.


Output cut impact on crude price

Despite an agreement among the oil producing nations globally to cut crude oil production from May, the prices have slumped amid falling demand. As many countries and regions are under a lockdown, transportation has come to a standstill, hitting demand and leading to a supply glut. Brent oil futures fell over 10 per cent to Rs 28.08 last week.

Rupee at record lows

Concerns over coronavirus and the consequent economic distress are weighing on the rupee, which along with outflows from local equities may push the rupee to sub-77 levels soon. A lower rupee will make imports more expensive for India.

“There is renewed strength in the Dollar Index, which has pressured the domestic unit further to a new record low of 76.86 mark. Market participants are looking forward to a second round of stimulus from the federal government, and that could trigger some gains. The domestic unit is likely to trade in the 75.30 – 78.00 band over the next two weeks,” said Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking.


FII outflow drops

Foreign institutional investors (FII) outflows have come down and the total exits last week stood at just Rs 857 crore and April outflow so far at Rs 3,808 crore. Overseas portfolio managers were earlier selling in hordes as they faced redemption pressures from clients. In 2020 till now, they have pulled out Rs 1,20,408 crore from Indian markets as per NSDL data.


Coronavirus count rising

Despite harsh measures to contain coronavirus, the number of cases in India has neared 15,000 and total deaths topped 500. Globally, confirmed Covid cases have crossed the 22.5 lakh market with nearly 1.6 lakh people dead. However, many countries and regions have reported plateauing of cases and plans to open their economies gradually.

Factories, construction to resume

Many agriculture-related and ‘essential’ factories and businesses are set to resume operations from April 20 after the government decided to relax lockdown in the less-affected areas. Construction work, which employs a large number of labourers, will resume. If India is successful in reopening the economic engines without any health hazards, it would give hope for others as well.


Economic stimulus awaited

Dalal Street is speculating on an economic stimulus package for businesses which, if announced during the next week, may soothe the nerves of investors. Finance Minister Nirmala Sitharaman on Friday reiterated India would soon announce fresh relief measures and economic stimulus. However, she did not provide any timeline for the same.


Covid drug found?

With reports claiming possible breakthrough in drug development for Covid-19 – Gilead’s remdesivir and a vaccine developed by an Oxford scientist – hopes of mitigating the pandemic are also rising. More drug trials are on across the world, and any further development on that front can help lift the morale of market participants in the days ahead.


Technical outlook weak

Nifty50 formed a Hammer pattern on the weekly chart, indicating subtle weakness. Such Hammer patterns are bullish when made near bottoms and bearish when made after rallies. “Nifty50 will face stiff resistance at 9,300, which is a 38% retracement of the entire fall. Any weakness below 9,000 level will trigger another round of selloff. Going ahead, the market is likely to consolidate and face selling pressure at higher levels. Selling on weakness is advisable for traders with weekly highs as stops,” said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote.