Q3 results hold the key though coronavirus fears remain

Despite facing headwinds on both the domestic front and global front, markets were relatively stable during the week ended. The Sensex was up 115.89 points (0.28 per cent) to end at 41,257.74 and the Nifty was up 15.15 points (0.12 per cent) to end at 12,113.5.

The S&P BSE Mid-cap index shed 1.53 per cent, while the S&P BSE Small-cap index fell 1 per cent. Barring fresh triggers, the market is expected trade sideways with a negative bias on account of continued impact of China issue in near term. On the back of Q3 results, stocks are witnessing volatile swings.

Expect this trend to continue, at least in the near future. Q3 earnings season has clearly shown that economic slowdown impacted the revenue growth of the companies. However, improvement was seen in operating performance (largely due to cost-cutting measures) and bottom-line (corporate tax benefits).

Though the exact impact of the coronavirus on different sectors and stocks is difficult to assess, the decline in commodity prices could positively impact the profitability of sectors like auto, capital goods and other industries.

For the week ahead, chartists predict trading range of 40,555-42,000 and 11,850-12,350 for the Sensex and the Nifty respectively. Chartists suggest strong hurdle at 12,300-12,400 zone for the Nifty. However, on the back of fears of impact of Coronavirus, the upside also seems capped for present.

FUTURES & OPTIONS

Mirroring the sentiment in cash market, derivative segment witnessed lack luster trading. Action was limited to few stocks. Option data indicates an immediate trading range of 12,000 to 12,300. Maximum Put OI is at 12,000 followed by 11,800 strike while Maximum Call OI is at 12,500 followed by 12,400 strike.

Call writing was seen at 12,200 strike and Put unwinding was seen at all the immediate strikes. The Implied Volatility (IV) of calls closed at 12.04% while put options closed at 13.10%. The Nifty VIX for the week closed at 13.37% and is expected to remain volatile. PCR OI for the week closed at 1.25.

The underlying trend of Nifty seems to be at the verge of reversal. There is a possibility of further weakness down to 11950-900 levels by next week say punters. Last week's high (12246) could be a crucial pivot area for a new lower top reversal.

A decisive move below 11900 could lead to a retest of 11614 in the next few weeks. Expect continued volatility in banking stocks for some more time. The Supreme Court had on Friday dismissed the petitions of Bharti Airtel and Vodafone Idea seeking a staggered option to pay their AGR-related dues.

Bharti had announced its payment strategy to pay Rs 10,000 crore by February 20 and the remaining dues before the next hearing on March 17. Marketmen are awaiting reaction of Vodafone Idea. Buy on declines Bharti Airtel. Select sectors are experiencing turbulence as the coronavirus epidemic spreads.

Market would focus on export-oriented and automobile related stocks say observers. Market may now start focusing on Donald Trump's India visit later this month.

Charts indicate good tidings for Apollo Hospitals, Bharat Forge, Bharti Airtel, Glenmark, HCL Tech, ICICI Bank, Shriram Transport, Tata Chemicals, Torrent Pharma and TechMahindra.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)