Stealth Omicron, FII flow among key factors that may guide market this week

This week, in the absence of any major event, global cues like Russia-Ukraine war, Covid situation in China and movement of crude oil will remain in focus. Besides, participants will also be eyeing FII flows for cues.

“The recent rebound has certainly eased some pressure. However, sustainability would largely depend upon global cues. Any news of escalation in the Russia-Ukraine tussle and deterioration of the Covid situation in China could again dent the sentiment. Amid all, we suggest maintaining a positive yet cautious approach while maintaining focus on overnight risk management,” said Ajit Mishra, VP Research, Religare Broking.

“Among sectoral packs, metal, energy and pharma are likely to outshine others so plan your trades accordingly.”

Below are key factors that may steer market this week:

Ukraine war
In the last few days we have seen many signs of de-escalation but Russia and Ukraine continue to fight a war. Despite the toned down rhetoric, Russian forces have intensified their attack but are yet to gain any significant grounds. Any de-escalation on the ground will further support the market.

Covid-19 re-emerging
In many territories, including Hong Kong, South Korea and China, we have seen significant rise in the number of Covid cases. Beijing has already shut down many of its cities that may have an impact on global trade. The latest outbreak is due to a variant named Stealth Omicron, which many believe may lead to another wave in India. If such a thing happens, the market may not like it.

Crude oil prices
A big headwind for the market was the sharp rise in crude oil prices, which has softened to $108 per barrel. Though the level is still high, it is not as bad as how it was two weeks ago. This means the fuel prices may not jump as much as expected, likely keeping inflation under control.

FII flow
Despite positive news emerging from some quarters, foreign investors continue to withdraw money as the US dollar has remained strong. They have taken out Rs 42,079 crore from equities so far this month, though much of the impact has been cushioned by heavy buying by domestic investors. However, if FIIs make a come back, the market may zoom further.

Tech view
Nifty50 index closed on a bullish note for the second consecutive week, successfully sustaining above the crucial resistance of 16,800 as well as the 20-week EMA. Till Nifty does not close below 16,800, the bullish trend is likely to continue, said analysts.

“With this backdrop, we suggest traders to maintain a bullish bias and initiate fresh long positions on dips only. Immediate support and resistance are now placed at 16,600 and 17,500 levels,” said Yesha Shah, Head of Equity Research, Samco Securities.