COVID numbers will dictate stock market direction this week

Bullish trend seen last week may seep into the next, as nationwide lockdowns bring down the virus case load

Last week, the benchmark indices closed with substantial gains, the biggest since the Budget week.

How the nation battles COVID — as viewed via parameters such as new daily cases, positivity rate and mortality numbers —will mostly decide how the stock markets fare this week. With many states expanding and intensifying lockdowns, the markets will keenly watch how the second wave of the pandemic pans out.

How well prepared the governments and healthcare infrastructure are — as perceived by the markets — for the potential dreaded third wave will also have an influence. Additionally, global cues, which boosted the markets last week, will have say in how they shape up this week, too.

Key parameters

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Last week, daily COVID cases in the country tempered to about 300,000, against over 400,000 earlier in the month. A continuation of this trend, along with a scaling up of the vaccination drive with fresh imports, is likely to give the markets a leg-up this week.

Related news: India records 2.40L COVID cases, stays below 3L-mark for 7th day

Corporate earnings results for the last quarter of 2020-21, which had held some sway on the markets a few weeks back, are now mostly done. The influence of political happenings has also ceased, with new governments sworn in in all the states where Assembly elections were held.

Similarly, most critical economic data — such as PMI manufacturing index, GST collections and auto sales numbers — are also done with for the recent quarter. So, little influence on the markets by economic indicators is seen.

Past performance

Last week, the benchmark indices closed with substantial gains, the biggest since the Budget week. The BSE Sensex closed 3.7% from the previous week, while the Nifty50 rose 3.4%. This growth was fed largely by the dip in COVID numbers nationwide; the plateauing seen in metros such as Mumbai and Delhi was particularly encouraging.

The banking stocks shone last week. SBI was among the large gainers, thanks to robust quarterly results. Among the other stocks that appreciated last week were TCI Express, India Cement, Adani Total Gas, Gland Pharma, and CSB Bank.

“The entry of new vaccines in the market which will ease the supply crunch, and a steady decline in new COVID cases are factors boosting investor confidence in the market,” a PTI report quoted Vinod Nair, Head of Research at Geojit Financial Services, as saying. “Hence, the market will continue to focus on COVID numbers to pump in more optimism… due to a relatively quiet week for economic data.”

Global cues

“We feel global cues will continue to dictate the trend in near future,” said Ajit Mishra, VP – Research, Religare Broking Ltd, in the PTI report. “The recent buoyancy in banking and financial stocks is certainly encouraging and participation of other sectors on rotational basis would further fuel the recovery.”

“Investors will continue to focus on the trajectory of daily caseload and vaccination ramp-up in the country in the near term,” PTI quoted Binod Modi, Head – Strategy at Reliance Securities, as saying.

While most corporate results are done with, some are scheduled to be announced this week, such as Sun Pharma, Central Bank, Grasim Industries and BPCL, which is set to be disinvested soon.

Other factors that will draw investor attention are the rupee’s strength against the dollar, crude oil prices and the behaviour of foreign institutional investors (FIIs) in Indian equity markets.

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