Business

GDP numbers, F&O expiry may trigger volatility in equities

Agency | February 24, 2019 12:08 PM

MUMBAI: Release of quarterly GDP numbers along with derivatives expiry might flare-up volatility in the equity market during the coming week.

Market observers said that other factors such as high crude oil price and the rupee's movement against the US dollar can also induce volatility.

"The current volatility in the market is expected to remain. Going forward, the global macro-economic data and trend in global markets will be closely monitored," D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, said.

According to Sahil Kapoor, Chief Market Strategist, Research, Edelweiss Wealth Management: "Going ahead, I expect February expiry to witness renewed bout of volatility.

"It's quite rare for indices to remain sideways for this long. The next five days could produce a large move. It could be likely lower if call option writing becomes aggressive in the beginning of the expiry week. One should aggressively track activity in Nifty options for February 28 expiry."

Besides, crucial data points on the country's fiscal deficit, Index of Eight Core Industries and the quarterly GDP growth rate will be keenly watched by the market participants.

"Investors will closely watch GDP, eight core industries and manufacturing PMI data for the week ahead, while consensus expects muted outcome," said Vinod Nair, Geojit Financial Services' Head of Research.

Also, investment by foreign and domestic investors will give direction to the market along with the movement of rupee against the US dollar and crude oil prices.

In terms of fund flows, Foreign Institutional Investors (FIIs) bought stocks worth Rs 5,026.41 crore in the week ended last Friday.

"FIIs have been cautious about the India market in the last one year on account of premium valuation and lack of earnings growth, due to this domestic market underperformed versus its global peers in recent times," Nair said.

"However, falling interest rates and reforms by the government are providing positive signs for the market."

Additionally, the rupee appreciated by 30 paise to 71.03 against the US dollar over the previous week.

"Rupee is expected to remain range-bound in the coming week due to weak dollar overseas, rising stock market but also rising oil prices and border tensions," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.

"Over the next week, a range of 70.70-71.30 can be expected."

On technical levels, Nifty remains in a short-term uptrend and the upside momentum is likely to accelerate once the Nifty can convincingly cross the 50-day SMA (simple moving average) at 10,823.

"Next upside targets in this scenario would then be at 10,931 points. The 10,743 points support will be a crucial level to watch in the coming week as a close below that would reverse the recent upmove," said Deepak Jasani, Head of Retail Research for HDFC Securities.

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