With no light at the end of the Street, indices unlikely to hold on to gains

Mumbai: The 14% bounce in Indian stock indices in the last four sessions could face hurdles in the days ahead amid rising cases of coronavirus in India and elsewhere. Analysts expect the Nifty to fall back below 8,000 levels and even touch 7,500, as the global economy faces its worst phase since the global financial crisis of 2008-09. The Nifty ended up 0.2% at 8,660 on Friday and the Sensex ended down 0.4% at 29,815.Overseas investors have reduced their selling of stocks over the past two trading sessions, which have soothed nerves, but various indicators are still not giving market participants the comfort to assume that the worst is over. FPIs are still holding their short positions after the March series expiry which saw the Nifty logging its worst series decline since 2008. For the stock market to keep the positive momentum going, the Nifty has to cross 9,000."Unless we go above 9,000, it will go down again. 9,000 level is 38% retracement from the previous sell-off. Failure to cross 9,000 would mean it would head back to 7,500 or a lower range,” said Rohit Srivastava, founder, Indiacharts.Options data show highest open interest among Nifty call options at 9,000 strike in the April series; while among put options, the 7,500 strike holds the highest open interest.Rajesh Palviya, head-technical and derivatives research at Axis Securities, says it remains to be seen if FIIs continue to be net buyers after Friday. “Until we cross 9,200, we cannot say bottom is made. If things worsen on the coronavirus front, we can again go to 7,500."On Friday, the Reserve Bank of India joined global central banks in easing monetary policy, slashing interest rates by 75 basis points and pumping additional liquidity into the banking system to cushion the financial system from the downturn caused by the pandemic. The government earlier announced a relief package to help the poor on Thursday. Investors think rate cuts alone will not help and are rooting for a stimulus by the government for the industry, which has been devastated by the 21-day lockdown."Although the government’s Rs 1.7 trillion package (0.83% of GDP) addressess some of the most basic issues, it pales in comparison with both the scale of the problem and what is being done by other countries. Among the various measures announced, some do not bear much incremental cost to the government and also have little impact in terms of creating a stimulus," said Emkay Global in a note. Moreover, the moratorium will defer but not remove the asset quality risk for banks, said Emkay.Brokerage reports following the announcement of 21-day lockdown also indicate that the worst is not yet over. Many are expecting the lockdown to be extended further."Markets will remain volatile as the economic impact of the lockdown will be severe while stimulus packages will help to contain the damage. How long the closure of businesses are done needs to be seen," said Rajat Rajgarhia, CEO, Motilal Oswal Institutional Equities.“These are unprecedented events - every macro-economic parameter is all over the place for next 1-2 quarters... A clear downtrend in the Covid-19 cases are critical for markets to have an uptrend," said Rajgarhia.

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