Indian markets to look out for crypto law, GDP data this week
19:15, 28 November 2021
Indian stock markets would take their cues for the week from the Parliament’s decision on cryptocurrency and the economic growth rate data for the latest quarter, as long as the new Covid 19 variant Omicron does not play more havoc globally, according to market analysts.
The Parliament’s winter session that would begin on Monday would discuss the much-awaited cryptocurrency bill that intends to prohibit private currencies but approves an official digital currency to be issued by the Reserve Bank of India (RBI), the nation’s central bank.
India’s official gross domestic product or GDP data that measures the value added through the production of goods and services in a country, for the quarter ended 30 September would be released on Tuesday.
Last week saw the Indian benchmarks Bombay Stock Exchange’s 30-share Sensex fall 4.25%, and the National Stock Exchange’s 50-share Nifty50 decline by 4.15%.
“Markets saw sharp correction this week amid renewed concerns pertaining to Covid. Correction in the market was broad-based with BSE Midcap and BSE Smallcap index also witnessing a decline, said Shrikant Chouhan, head of equity research, Kotak Securities.
Among sectors, the BSE Auto index was a major underperformer having declined more than 7% this week, according to Chouhan. BSE Realty, BSE Bankex, and BSE Capital goods indices were other underperformers, declining in excess of 4% during the week. Despite weakness in the equity markets, the BSE Pharma index saw positive returns, he said.
“Apart from Covid-related concerns, inflation remains a worry for countries across the globe. Foreign investors have been net sellers this week. Equity markets in the near term will closely follow the impact of the new Covid variant, inflation data and Central Bank policies,” added Mumbai-based Chouhan.
Bill for digital currencies
Prices of many cryptocurrencies fell last week led by bitcoin after the Indian government said it will present The Cryptocurrency and Regulation of Official Digital Currency Bill in the Parliament to “prohibit” all private currencies in the country and approve an official digital currency to be issued by the RBI.
The bill, to be introduced today in the lower house or Lok Sabha of the Parliament, would allow for certain exceptions to promote the underlying technology and its uses.
Reports of such a bill have already created concerns in the domestic cryptoverse. The law is said to affect cryptos such as Monero, whose transactions are completely untraceable.
The new variant and its market impact
Global equity markets including that of India are reeling under pressure which may persist this week after the World Health Organisation (WHO) on Friday said the emerging Covid-19 mutation — termed Omicron — out of South Africa and Botswana is an official variant of concern (VOC).
The global health watchdog added that cases are spreading in all provinces of South Africa and early research on the variant suggests it has “some worrying characteristics”. “This variant has a large number of mutations, some of which are concerning,” noted WHO wrote in a press release. “Preliminary evidence suggests an increased risk of reinfection with this variant, as compared to other VOCs,” the statement said.
According to Kotak’s Chouhan, the new variant could present challenges in the form of lockdowns and travel bans, which are already taking place.
Ajit Mishra, vice president for research at Religare Broking agrees to say, “Markets were already struggling amid inflation fear and the news of a new Covid variant helped bears to strengthen their grip. All sectors barring pharma are reeling under pressure so participants should maintain caution and align their positions accordingly.”
The week ahead for stocks
Most analysts expect banking and financial sector shares to extend their weaknesses given their weight in the indices. The NSE’s Bank Nifty fell 5.1% last week and is trading at its lowest level since.
“Bank Nifty had a bearish week and we expect this trend to continue over the coming week. The charts suggest moderate bearishness in the price action over the next week. This week Nifty has closed below its crucial level of 17200. We are expecting Nifty to test 16700 in the coming few trading sessions. Bank Nifty is trading near its support zone. Any close below 35700 may take Bank Nifty to 34800 levels,” said Gaurav Udani, chief executive officer of Thincredblu Securities.
“Oil and gas indices remained under pressure amid reports of the US releasing its emergency oil reserves to keep the rising crude oil prices under control. The telecom sector was also in focus as the sector majors initiated rate hikes which will enhance profitability,” said Vinod Nair, head of research at Geojit Financial Services.
Some analysts advise using the recent slide in the indices as an opportunity to buy shares. Banking shares have underperformed in the recent past and hence a positive bias for the sector could emerge, ICICI Securities said. “We expect ongoing corrective phase to get arrested around 16900 for Nifty50 in the coming week. Therefore one should not construe the current decline as a negative, rather accumulate quality large and midcap companies as a structural uptrend remains intact, said Dharmesh Shah, head-technical at ICICI Securities.
“On the upside, the key hurdle for the week is placed at 50-day EMA (exponential moving average) at 17600 levels. BFSI (banking, financial services and insurance) and IT (information technology) provide favourable risk-reward setup with oversold readings while capital goods and telecom remain resilient,” Shah added.
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