India has started its vaccination drive but that seems to be already factored in. For now, FII flows continue to be strong despite high valuations but the volatility gauge has been on a climb. India VIX now stands at 25-level.
“Coming days are likely to be volatile on budget expectations and, more importantly, on actual budget proposals. One major factor supporting the markets even at high valuations is the sustained FII inflows. When FII inflows start to taper, there will be renewed selling in the market,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“Meanwhile data on credit and imports growth show recovery in the economy. If growth recovery sustains, that will support the market. Very good numbers from HDFC Bank is another positive. But investors may remain cautious.”
Factors driving markets
- Vaccination begins, with hiccups: In India, the government kickstarted the vaccination drive over the weekend but many states said they could not complete daily targets as many raised suspicion over Covaxin that is prepared by Bharat Biotech.
- Retail sales fall: US retail sales fell for a third straight month in December, while US producer prices rose moderately, suggesting that an anticipated pick-up in inflation in the coming months will probably not be worrisome.
- US dollar gains: Dollar also strengthened as the day progressed signaling risk aversion from investors across the globe.
How are bluechips doing
After opening in the red, benchmark indices dropped further. At 9.57 am, BSE flagship Sensex was down 248 points or 0.51 per cent to 48,787. NSE benchmark Nifty followed and fell 86 points or 0.59 per cent to 14,348.
“If the markets trade below 14,370-14,380 and manage to close below that too, we would be in a correction zone which could take the Nifty down to 14,150 and then 14,000. Extreme caution should be exercised and stops must be in place for all trades, long or short. Volatility needs to be strategically utilised. For the markets to move up, we need the index to close around the 14,600 levels. Until that does not happen, the trend remains sideways with a bearish bias,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.
In the 50-share pack Nifty, UPL was the biggest gainer, up 3.11 per cent. HDFC Bank, Wipro, ICICI Bank and Reliance Industries were among other gainers.
Hindalco was the top loser in the pack, down 4.09 per cent. Coal India, Tata Steel, Bajaj Finserv, ONGC, Shree Cement, Power Grid, Tata Motors, IndusInd Bank and Hero Moto were other losers in the pack.
Broader market indices traded with cuts underperforming their headline peers in the morning trade. Nifty Smallcap slipped 0.76 per cent while Nifty Midcap fell 1.60 per cent. Broadest index on NSE, Nifty 500 was down 0.77 per cent.
Tata Elxsi, IEX, CSB Bank, YES Bank, CESC and Dr Lal Pathlabs were among major gainers from the space while L&T Financial Holdings, Indian Hotel, Tata Chemicals, Sobha, Rain Industries and Welspun Corp were under selling pressure.
MSCI’s broadest index of Asia-Pacific shares outside Japan trimmed losses and were off 0.2 per cent, having hit a string of record peaks in recent weeks. Japan’s Nikkei slipped 0.8 per cent and is away from a 30-year high.
E-Mini futures for the S&P 500 dipped 0.3 per cent, though Wall Street will be closed on Monday for a holiday. EUROSTOXX 50 futures eased 0.2 per cent and FTSE futures 0.1 per cent.
Chinese blue chips edged up 0.4 per cent after the economy was reported to have grown 6.5 per cent in the fourth quarter, on a year earlier, topping forecasts of 6.1 per cent.
What to expect:
Q3 earnings: Indiamart, IRB Infra, Majesco, Mindtree, Rallis India, Indiabulls Real Estate, Snowman Logistics.