Will rising Covid cases turn market more skittish next week?

MUMBAI: Domestic equity market is likely to remain rangebound next week as investors are unwilling to take bullish positions at a time when the pandemic is raging and making them second-guess their rosy outlook for the economy and earnings growth.

The government’s repeated insistence on not imposing a national lockdown despite the country reporting over 200,000 new cases on Friday has kept investors from panicking and thereby, limited the downside in the stock market.

Yet the surge in cases and localized lockdowns across the country has fogged investors’ ability to forecast earnings growth and economic activity too far in the future. Brokerages have already started to downgrade India’s growth forecast for 2021-22, even though there is limited clarity on how long the second wave will drag on.

Similarly, analysts have also started to trim earnings expectations in sectors such as automobiles, banks, travel and tourism, and few others as the second wave is likely to hit the recovery in these sectors the hardest.

The nerves among market participants was evident today as the market gave up nearly 1 per cent gains by the end of the session to barely close in the green. Traders were unwilling to risk holding long positions given the possibility that more states could announce restrictions over the weekend.

For the week, the Nifty50 index and BSE Sensex index ended 2 per cent lower, respectively. In the futures and options segment, traders were indecisive over the direction of the market as they sold both the out-of-money Call and Put options.

The acceleration in earnings announcements from next week will also keep investors on the sidelines as they will await management commentary on the impact of the lockdowns to form expectations for the near term.

HDFC Bank,

, ICICI Bank, HCL Technologies, and Bajaj Consumer are among the prominent companies that will report their March quarter numbers next week.

Over the long-term, the recovery in the global economy and expectations of another year of normal monsoons will enthuse investors that the medium-term outlook for earnings growth remains sanguine.

“Only some marginal deterioration is happening (in the outlook) and one has to be a little careful. But at the same time, one has to stay invested and stay positive from a medium-term point of view,” Ravi Dharamshi, founder and managing director at ValueQuest Investment Advisors told ETNow.

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