F&O expiry, FPI flow among key factors that will guide market next week

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NEW DELHI: After a truncated week during which markets were subdued thanks to inflationary pressure, next week is likely to be similar as more negative factors pour in.

To start with, the Indian markets will react to the news of the withdrawal of the Farm Laws bills. Heavyweight Reliance may also put some pressure on the market after news that its deal with Aramco has been canceled. Rising inflationary pressure will continue to haunt global markets as fears of rate hikes will pump out liquidity from emerging markets like India.

“In the coming week, volatility is likely to remain high due to the scheduled derivatives expiry of November month contracts on November 25. At the same time, the focus would largely remain on the global markets for cues, in the absence of any major event on the domestic front,” said Ajit Mishra, VP Research. Religare Broking.

Here are key factors that analysts say may steer markets next week:

F&O expiry
The futures and options contracts for November will expire on Thursday this week. Ahead of the expiry, there may be volatility in the market as traders rush to either roll over their positions or square them.

Farm bills to be repealed
Prime Minister Modi on Friday bowed to demand of repealing the three controversial bills, which some analysts said may have a negative bearing on the markets. The bills were regarded as business friendly. “This should not have much impact on the market because these bills have not been implemented yet. However, the texture of the market is weak where the market reads more negative cues than positive cues,” said Santosh Meena, Head of Research, Swastika Investmart.

Rising inflation
The issue of inflation will continue to haunt investors as it is not proving to be transitory as many central banks had predicted. That means they may be forced to raise interest rates earlier than expected. Any rise in interest rate drains liquidity from the market, which may be adverse for equities.

RIL-Aramco deal called off
In a setback for investors,

and Aramco called off its deal in which the latter was supposed to invest $75 billion for a 15 per cent stake in O2C business. Analysts though say it will not have much impact in long term, but may induce some volatility in Reliance Industries shares in the short term.

FPI flows
Depository data shows net FPI buying to the tune of Rs 14,000 cr in equity in November up to 21st. But this buy figure is inclusive of the large primary market investment exceeding Rs 23000 crore, meaning actual equity inflow is in the negative. “For the first half of November, FPIs have been sellers in banking and even in performing sectors like IT. The trend indicates that FPIs are likely to turn sellers at every rise since most foreign brokerages have a sell call on India on concerns of stretched valuations,” said VK Vijayakumar, Chief Investment Strategist at

.

Technical outlook
Nifty 50 closed this week by posting a strong bearish candle. During the week, the index made an attempt to break above 18,120, but failed as selling pressure rose. Given that the breadth of the market is weak, it is likely that higher levels may not sustain, said analysts.

“The benchmark index is now trading around its crucial support level of 17,700. Similarly, the Bank Nifty is also trading around the rising trend line support. We suggest traders maintain a mild bearish to neutral outlook to position their trades. A break below 17,700 may lead the benchmark to test 17,500 levels,” said Yesha Shah, Head of Equity Research, Samco Securities.