Geopolitical crisis, F&O expiry among key factors that may steer market this week

News updates around Russia-Ukraine continue to weigh on the sentiment, which resulted in a sharp reaction from participants in the initial sessions last week. The situation eased a bit in the following sessions amid mixed cues, but selling pressure continued across the board and most sectors ended lower.

“In the absence of any major event, the focus would remain on the Russia-Ukraine tension and its impact on global markets. Besides, the scheduled monthly expiry of February month derivatives contracts would further add to the choppiness,” Ajit Mishra, VP Research, Religare Broking, said.

Here are key factors that may guide market this week:


Russia-Ukraine crisis
The situation in Eastern Europe remains tense with shelling in some areas of Ukraine and heavy presence of armed forces along the border. The US has said a Russian invasion is just a matter of time. The US and Russia will also meet this week to discuss the matter. Any news that de-escalate tensions will be cheered by market participants.

Inflation & bond yields
Inflation continues to rise across major economies. The US and UK have already reported record numbers. India also said its retail inflation shot past the mandated range. Crude oil prices are on an upward trajectory, making other things more expensive. This has lifted benchmark bond yields, which is negative for emerging market equities. Analysts are pegging a swift monetary tightening in coming months. Investors will keep an eye on any such step taken by central banks across the world.

F&O expiry
Another volatility inducing event that is scheduled for this week is expiry of futures and options contract for February series. As traders rush to either square or rollover their positions, the market may react to them accordingly.

FII outflow continues
A central theme of the ongoing consolidation in the market is massive selling by foreign investors. In February so far, they have withdrawn Rs 15,342 crore from Indian equities, data at NSDL shows.

“FIIs can be expected to sell more, going forward, unless market corrections make valuations attractive. DIIs and HNIs are slowly accumulating high-quality financials whose valuations have turned attractive due to sustained FII selling,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Technical outlook
Nifty50 ended the week slightly lower. The short-term trend is gradually turning bearish, although the solid support level of 16,800 on the downside is still holding quite strongly. Bank Nifty index, on the other hand, is yet to confirm any bearish structure.

“The market is presently stuck in an uncertain zone between 16,800 and 17,600. Any breakout/breakdown on either side will very certainly spark a new course of action. We recommend that traders retain a relatively bullish outlook and begin longs only around the support zone, with strict stop loss below 16,800,” said Yesha Shah, Head of Equity Research, Samco Securities.