Geopolitical crisis, F&O expiration among key factors that could guide the market this week

NEW DELHI: National equity benchmarks remained volatile and fell more than 0.5% in a volatile week, following weak global signals. This week will also likely be volatile, analysts said.

Updates on Russia and Ukraine continue to weigh on sentiment, prompting a strong reaction from participants in early sessions last week. Things eased a little in the following sessions amid mixed hints, but the selling pressure continued across the board and most sectors finished lower.

“In the absence of any major events, the focus would remain on the Russian-Ukrainian tension and its impact on global markets. In addition, the expected monthly expiration of derivatives contracts in February would further add to the instability,” said Ajit Mishra, Vice President of Research, Religare Broking.

Here are the key factors that may guide the market this week:


Russian-Ukrainian crisis
The situation in Eastern Europe remains tense with bombardments in parts of Ukraine and a strong presence of armed forces along the border. The United States said a Russian invasion was only a matter of time. The United States and Russia will also meet this week to discuss the issue. Any news that eases tensions will be cheered by market participants.

Inflation and bond yields
Inflation continues to rise in major economies. The US and UK have already reported record numbers. India also said its retail inflation had exceeded the prescribed range. Crude oil prices are on an upward trajectory, making other things more expensive. This pushed benchmark bond yields higher, which is negative for emerging market equities. Analysts expect rapid monetary tightening in the coming months. Investors will keep an eye on any such action taken by central banks around the world.

F&O expiry
Another volatility-inducing event scheduled for this week is the expiry of futures and options contracts for the February series. As traders rush to adjust or roll over their positions, the market may react accordingly.

The release of the FII continues
A central theme of the ongoing consolidation in the market is the sell-off by foreign investors. So far in February, they have withdrawn Rs 15,342 crore from Indian stocks, according to NSDL data.

“FIIs can be expected to sell more, going forward, unless market corrections make valuations attractive. DIIs and HNIs are slowly accumulating high-quality financial stocks whose valuations have become attractive due to the sustained sale of FII,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Technical outlook
Nifty50 ended the week down slightly. The short-term trend is gradually turning bearish, although the strong 16,800 support level on the downside still holds quite strongly. The Bank Nifty index, on the other hand, has yet to confirm a bearish pattern.

“The market is currently stuck in an uncertain zone between 16,800 and 17,600. Any breakouts/breakouts on either side will most certainly trigger a new course of action. We recommend traders maintain a relatively bullish outlook and start buying only around the support zone, with a strict stop loss below 16,800,” said Yesha Shah, Head of Equity Research, Samco Securities. .

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