Ahead of Market: 12 factors that will decide stock action on Monday

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So how bad can it get? One analyst said Nifty behaviour against the 8,450 level will be key.
A major whiplash from Friday’s weak close of US markets and Sebi curbs on naked shorts awaits Dalal Street on Monday, even as the India and the world at large still struggle to contain the coronavirus contagion.

That kills the hope created by the sharp recovery that the equity indices had recorded on Friday after four sessions of bloodbath. BSE Sensex ended the session 1,627 points higher at 29,915 while Nifty surged 482 points to 8,745.

Going by all the indications, it’s going to be another manic Monday tomorrow.

So how bad can it get? One analyst said Nifty behaviour against the 8,450 level will be key.

“If Nifty opens below this level and is not being able to move past the 8,450 mark, we will stare at a possibility of the market entering a large consolidation zone,” said Milan Vaishnav, CMT, MSTA, and Consulting Technical Analyst at Gemstone Equity Research & Advisory Service.

Other analysts, too, cautioned that intermittent rallies in a bear market are not new and Friday’s bounce in the market cannot be trusted. They said high volatility would remain the norm on Dalal Street for the next few sessions.

That said, here are certain key indicators signalling what await the domestic equity market on Monday.

Sebi curbs may trigger adverse reaction
Sebi on Friday stepped in to ease volatility by clamping curbs on short positions in the F&O segment, increasing margins in non-F&O stocks in the cash market and revising the marketwide position limits. Analysts said the steps should calm the market in the near term. Analysts said the measures may trigger adverse reaction in the market on Monday. Sebi has made creating shorts much tougher; in the process, it will also reduce the amount of short-covering that usually fuels pullbacks, they said.

Mumbai brokerages to work from home

Indian stock and commodity markets will be excluded from lockdowns that Maharashtra has imposed in a bid to contain the spread of coronavirus. But most brokerages have implemented work from home after the stock exchanges relaxed rules to allow stockbrokers to work remotely and relocate trading terminals to locations other than those authorised. The exchanges said in view of the coronavirus pandemic, trading members will have the option of relocating their trading infrastructure subject to conditions. Most brokerages said most of their staff will be working from home except certain 'business-critical staff'. It remains to be seen if this fearful conditions lead to a drop in volumes.

Tech View: Nifty bullish candle nobody trusts
Nifty breached its immediate resistance level at 8,555 on Friday and formed a large bullish candle on the daily chart. At its close at 8,745, the index was at its five-day simple moving average. The NSE barometer rose 482 points, or 5.83 per cent, for the day after four-days of consecutive fall. But analysts said the index may need to show follow-up buying to instill confidence, as the weekly charts are still painting a negative picture.

F&O: Mixed signals, fingers crossed!

On Friday, Nifty managed to close above its previous session’s high for the first time in last one month. This would be a sign of relief for the bulls. The index also formed a positive candle on the daily chart with strong market breadth. However, it formed a Red Body Candle on the weekly scale, and ended the week with a loss of 12.15%, which is the biggest weekly loss since October 2008. At the current juncture, Nifty is sustaining below the Rising Trend Line breakdown level, the 100 EMA on the monthly chart, which is a negative sign for the market. But looking at the positive divergence of the RSI, a pullback move cannot be ruled out in the coming days.

Stocks showing bullish bias

Momentum indicator Moving Average Convergence Divergence (MACD) on Friday showed bullish trade setup on the counters of PNB, Cadila Healthcare, Lupin, Bliss GVS Pharma, Adani Green Energy, Sterling and Wilson, Responsive Industries, BASF India, Goldstone Tech, GlaxoSmithKline Pharma, CMI, Mindteck (India), Gallantt Metal, Archidply Industries, Umang Dairies and Vishwaraj Sugar Industries. The MACD is known for signalling trend reversals in traded securities or indices. It is the difference between the 26-day and 12-day exponential moving averages. A nine-day exponential moving average, called the signal line, is plotted on top of the MACD to reflect ‘buy’ or ‘sell’ opportunities. When the MACD crosses above the signal line, it gives a bullish signal, indicating that the price of the security may see an upward movement and vice versa.

Podcast: How will Sebi's curbs on short selling impact market

Stocks that saw buyers’ interest on Friday
Ruchi Soya Industries, Geekay Wires and Bafna Pharmaceuticals witnessed strong buying interest from market participants as they scaled their fresh 52-week highs on Friday signalling bullish sentiment.

Stocks that saw selling pressure on Friday
Piramal Enterprises, Quess Corp, Future Lifestyle, Ashok Leyland and General Insurance Corporation of India witnessed strong selling pressure in Friday’s session and hit their 52-week lows, signalling bearish sentiment on these counters.

Friday’s most active stocks in value terms

HDFC Bank (Rs 3846.22 crore), ICICI Bank (Rs 3030.23 crore), RIL (Rs 2847.71 crore), HDFC (Rs 1894.81 crore), Bajaj Finance (Rs 1741.60 crore), SBI (Rs 1616.34 crore), TCS (Rs 1527.76 crore), Axis Bank (Rs 1322.34 crore), Indiabulls Housing Finance (Rs 1284.90 crore) and Kotak Bank (Rs 1262.14 crore) were among the most active stocks on Dalal Street on Friday in value terms. Higher activity on a counter in value terms can help identify the counters with highest trading turnovers in the day.

Friday’s most active stocks in volume terms

Vodafone Idea (Shares traded: 38.68 crore), Indiabulls Housing Finance (Shares traded: 13.29 crore), ONGC (Shares traded: 12.87 crore), YES Bank (Shares traded: 11.81 crore), IDFC First Bank Ltd. (Shares traded: 10.00 crore), Ashok Leyland (Shares traded: 9.60 crore), ICICI Bank (Shares traded: 8.86 crore), Tata Motors (Shares traded: 8.60 crore), SBI (Shares traded: 7.74 crore) and PowerGrid (Shares traded: 7.40 crore) were among the most traded stocks in the session.

US stocks in bad shape
US stocks fell sharply and the price of oil sank Friday as federal and state governments moved to shut down bigger and bigger swaths of the nation's economy in the hope of limiting the spread of the outbreak. The Dow slid more than 900 points, ending the week with a 17.3% loss. The index has declined in four of the last five weeks. For the week gone by, Dow dropped more than 17% recording its worst weekly performance since the 2008 financial crisis, while the S&P500 marked the same milestone with a 15% drop. The Dow and S&P 500, which both traded at all-time highs in February, dropped from records to a bear market — a pullback of 20% from a recent peak — at the fastest pace on record, and have kept falling. With Friday’s close, the Dow is down 35.1% from its Feb. 12 record finish, while the S&P 500 is off 31.9% from its Feb. 19 record.

NYSE to close trading floor
The New York Stock Exchange will close its trading floor starting on Monday, March 23, while electronic trading continues. The decision comes after two people tested positive for the coronavirus during screenings set up by NYSE. Goldman Sachs’ economists predict an unprecedented 24% drop in US GDP in the second quarter. They also forecast weekly jobless claims to spike to 2.25 million, up from 281,000 in the previous week. This would be the largest one-week jump in history.