The looming triggers can be largely attributed to the surge in the US 10-year treasury yield and India’s 10-year government bond yield, hitting their highest in two years at 1.90% and 6.68%, respectively. This hints at the market pricing in a rate hike by Fed sooner than expected. Moreover, the woes pertaining to inflation exacerbated as the benchmark oil prices shot up past $89 per barrel, their highest level since 2014.
As the budget approaches, these tremors in the domestic markets are expected to continue in the coming week as well. History suggests that in 7 out of the last 10 years, Indian indices have delivered negative returns or remained range-bound in the week preceding the budget.
As the countdown to the budget has begun, market participants will try to envisage the reforms and measures that could feature in this year’s budget.
According to market expectations, the government will likely maintain its thrust on capex spending with a significant focus on growth-supportive expenditure in public and private sectors. Looking at the current economic scenario, the budget could initiate more beneficial programmes for rural segments, SME and MSME. Sectors such as trade, hospitality & travel, auto & logistics, communication, have all been severely impacted by the pandemic and are still struggling. Expectations are that these sectors may receive preferential consideration.
Furthermore, if the government reveals a structured approach for expediting asset disinvestment and monetization, the stock market may become enthusiastic about it.
Event of the week
India’s telecom subscriber base enriched marginally to 1,197.05 million, according to Telecom Regulatory Authority of India (TRAI) data released for November 2021. The industry witnessed a growth in the country’s overall wireless subscriber pack at 1,167.50 million, a net customer gain of 1.2 million with a monthly growth rate of 0.10%. To support the ailing telecom sector, the government had in September already announced measures that can ensure the industry’s healthy growth and drive the proliferation of broadband and telecom connectivity.
Additionally, its recent actions cement the government’s stance of not letting the industry become a duopoly. Going forward, the industry eyes better days on the back of the recent prepaid tariff hikes of approximately 20-25%. These hikes aim to uplift the average revenue per user for companies.
Technical Outlook
Nifty50 index closed sharply negative for the week. However, the benchmark index seems to be finding a cushion around the 17,500 zone. On the daily time frame, it has formed a hammer kind of candlestick pattern around the previous resistance zone.
The BankNifty index as well has formed a similar pattern around the 20-day moving average. This pattern indicates a continuation of the ongoing major uptrend. Having said this, if Nifty fails to hold above the 17,500 support zone, then an extension of time and price correction is likely.
Therefore, traders should maintain a cautious to mild bullish outlook. The resistance for Nifty is placed at 18,300 levels.
Expectations for the week
Markets are expected to remain volatile as arrays of market-moving events are expected. Early next week, markets around the world will be dominated by the outcome of the Fed’s meeting. With three or four rate hikes expected in 2022, investors will be keen to understand the schedule for the first one along with Fed’s stance on balance sheet reduction and a tight labour market.
Furthermore, the GDP figures for the US are expected, which may impact market sentiment globally. In the second half, market players may encounter whipsaw movements due to monthly expiry, especially since it is the last expiry before the union budget.
Additionally, as Q3FY22 results unfold, investors may expect stock-specific action to continue.
The Nifty50 closed the week at 17,617.15, down by 3.50%.
