Key points for the week (India Markets):
Coronavirus Outbreak in China has ripple effects on global markets, as cases are reported in OECD markets
Chinese growth rate is expected to take a hit if the epidemic is not contained in time
Indian market awaits budget over the weekend, and is concerned amid all negative fundamentals in recent weeks
Earning reports are expected for many of the Index listed stocks this week, and that can move the markets
NIFTY and BANKNIFTY, though both in big picture (weekly) uptrend, are showing weakness in daily timeframe. On daily chart, the newly evolving downtrend in BANKNIFTY is weighing on NIFTY, though the latter is barely holding the uptrend. The demand area in NIFTY near 11830 – 11910 will be pivotal in deciding whether the uptrend will resume or it is beginning of reversal.
DAILY PRICE CHART FOR NIFTY 50 INDEX
BANKNIFTY has posted a series of lower lows and lower highs, signifying weakness in banking - finance sector. Given that this sector leads broader market, its breakdown below 28600 would take NIFTY and other sectors further down, towards September lows.
DAILY PRICE CHART FOR BANKNIFTY INDEX
In the bigger picture though – the markets have been continuing in the parallel channel. We may expect the two indices test lower walls of the respective channels in this week or next. It may coincide with the annual budget presentation on 1st February 2020, which can have effect on the market move thereafter.
WEEKLY PRICE CHART FOR NIFTY 50 INDEX
WEEKLY PRICE CHART FOR BANKNIFTY INDEX
Among the major fundamentals – right now the Chinese outbreak of Coronavirus weighs heavily on the global market. As of now about 10 cities with a total population of 56 million is already locked down, and more could follow, China and in turn the whole world are preparing against one of the worst epidemic. While we expect China to contain the spread of the outbreak, it will certainly slow down its economic growth for considerable time. In many places such as Shanghai and nearby manufacturing hubs, companies have declared extended holidays beyond the Chinese New Year. The financial services sector is expected to feel the impact as the insurance claims from individuals and businesses will create unexpected burden.
As cases of confirmed infection are being reported from other countries including USA, France, Japan, Australia, Singapore and Korea many other countries including India are investigating a few cases, these fears weigh heavily on the global market and will impact Indian markets too.
Finally – as we expect the Finance Minister to present annual budget for FY 2020 – 21 on 1st February, the anxiety is building up. The Indian investors and industry are expecting critical steps from the Finance Minister to fuel demand (for goods and services), reduce or eliminate tax terrorism and simplify tax structure. Failure to deliver on these expectations would hurt investors’ confidence and will impact the markets.
OUTLOOK AHEAD FOR INDIA MARKETS
NIFTY is going through a pullback after a long rally, and is eyeing the demand area at 11830 – 11910. The timing coincides with many fundamental events including Indian Annual Budget. BANKNIFTY – representing banking/finance sector that usually leads the broader market, is showing greater weakness and is dragging NIFTY further.
Owing to the anxiety of the budget and earning reports of many companies, as well as the Coronavirus outbreak in China,we can expect the market to slide further during the week. As the events unfold, they will determine further course by end of the week – whether the respective demand areas highlighted in the above pictures would hold or not.