Indian Market Ends on Positive Note Following Banking Crises in the US

The Indian market ended on a positive note on Friday building on minor gains of the previous session. The week was washed out after a spate of banking crises in the US. The next few days are going to be crucial for the domestic equity market as a number of crucial domestic and global events are lined up this week.

Market Sentiments Turn Bearish

“In the last couple of weeks, markets practically saw a one-sided selling activity which completely changed the market sentiment to bearish. Nifty broke its past 7 weeks’ consolidation range and closed at 17,100 levels with a loss of 1.80% on the weekly closing basis,” Rohan Patil, Technical Analyst, SAMCO Securities said.

“The intense sell-off in the global markets dented our sentiments, mirroring which Nifty tumbled below the 200 SMA. However, the last trading session could be seen as a constructive development for our markets as the index revived from the crucial support of the 17,000-16,900 zone. On the technical front, we are not entirely out of the woods and the broader trajectory remains tentative, but we may expect some bounce in the near term,” Osho Krishan, Senior Analyst – Technical & Derivative Research at Angel One Ltd said.

US Markets

Frontline indices on Wall Street end in the red on Friday. While Dow 30 ended at 31,862, down by 384.57 points or 1.19%, S&P 500 3,916.64 finished at 43.64 points or 1.10%. Nasdaq Composite settled at 11,630.50, lower by 86.76 points or 0.74%. When Indian markets reopen on Monday, they will take cues from the Friday closing of the US markets along with the movement in Dow futures on Monday. They will also track movement in Singapore-listed SGX Nifty futures, which is an early indicator of movement in the Nifty50.

FOMC Meeting

The two-day Federal Open Market Committee Meeting (FOMC) of the Federal Reserve will begin on 21 March 2023, Tuesday. The street will be keeping a close eye on the event following a spate of banking crises that surfaced over the past one week. Considering the 50 bps rate hike by the ECB, all eyes will be on the US Fed and Bank of England, which are set to hold their policy meetings next week, Vinod Nair, Head of Research at Geojit Financial services.

“Easing US inflation provided confidence that the Fed would not opt for a harsh rate hike of 50 bps and might even consider taking a break during the March meeting. Consistently unfavourable signs in global markets are encouraging investors to turn to safe havens such as the dollar and gold, while FIIs are withdrawing funds from the domestic market in response to the Indian rupee’s depreciation,” Nair said.

Technical Factors

“Technically, Nifty has formed a downward-sloping channel by connecting the lower highs and lower lows formations. After five days of selling, it took support from the lower end of the channel and formed a doji candlestick formation, and it respected that level on Friday trading, closing above 17100 levels. If Nifty manages to hold these levels, then there is scope for a short-covering rally towards the 17250 and 17440 levels,” Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd said. On the downside, 17000 will be the first support level, while 16800 is a critical support level, he added.

“Banknifty also formed a kind of spinning bottom candlestick formation near the important support level of 38700 and managed to sustain above the 39400 level. Now we can expect a short-covering move towards the 40000 and 40500 levels. On the downside, 38700–38500 is a strong demand zone,” Gour said.

FII/DII Action

FIIs and DIIs will be watched, Gour said. On Friday, foreign institutional investors were net sellers and sold Indian equities worth Rs 1,766.53 crore. Meanwhile, domestic institutional investors (DIIs) were net buyers at Rs 1,817.14 crore.

“If we look at the derivative data, FII net short exposure in index futures is at its highest level ever at 90% (1.71 lakh contracts), while in March 2020 (Covid) it was around 1.60 lakh contracts. The put-call ratio is at a 0.88 level. Overall, derivative data is negative but extremely oversold,” Gour added.

Crude Oil

Oil prices settled lower Friday, reversing early gains of more than $1 a barrel as banking sector fears caused both benchmarks to reach their biggest weekly declines in months, Reuters reported. Brent crude futures settled down by $1.73, or 2.3%, to $72.97 a barrel. U.S. West Texas Intermediate crude fell $1.61, or 2.4%, at $66.74, the report said.

Crude oil and the rupee will also play an important role in market movement, Gour of Swastika Investmart said.

Rupee Vs Dollar

The rupee finished at 82.5525 per dollar, compared with its previous close of 82.73. For the week, it fell 0.62% as most Asian equity markets notched weekly declines, Reuters reported.

The rupee rose during the day but mostly hovered near the key resistance level of 82.50. Markets were upbeat after U.S. lender First Republic Bank was rescued by a $30-billion injection from 11 banks, the report further said.

The rupee is expected to gain next week on continued year-end funds flows though it will encounter the FOMC meeting on 22nd March in which FED is now expected to raise rates by 25 bps only, Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP said.

“It will be a volatile week with a range of 82-83,” he added.

Gold

The banking crisis in the US has brought back appeal in the yellow metal. MCX Gold futures hit lifetime highs on Friday on the intraday (Rs 59,461) and closing basis at Rs 59,420 per 10 gram. The April futures settled up by Rs 1,414 or 2.44% from the Thursday closing price. Meanwhile, May Silver futures rallied over 3% and gained Rs 2,118 per kg to close at Rs 68,649.

“We expect gold and silver prices to remain volatile this week and gold could hold its support level of $1922 and silver could also hold $21.50 per troy ounce levels. Gold has support at $1970-1945, while resistance at $2010-2034 per troy ounce. Silver has support at $22.20-21.84, while resistance is at $23.10-23.50 per troy ounce. At mcx, gold is having support at 58820-58500 and resistance at 59660-60000 while silver is having support at 67750-67200 and resistance at 69200-70000. We suggest buying gold on dips around 58800 and add more around 58400 with a stop loss of 57920 for the target of 59660-60000 and also suggest buying silver around 68000 and add more on dips around 67400 with a stop loss of 66660 for the targets of 69200-70000,” Manoj Kumar Jain of Prithvifinmart Commodity Research said.