NEW DELHI: Domestic benchmark stock indices bolstered the recovery, rising a further 4 percent last week, thanks to optimism about the de-escalation of the Russia-Ukraine war combined with a sharp dip in crude oil-supported sentiment. Plus, not a single negative surprise from the US Fed came as a relief to investors either.

This week, in the absence of a major event, global signals such as the war between Russia and Ukraine, the Covid situation in China and the movement of crude oil remain on the radar. In addition, participants will also monitor FII flows for clues.

“The recent rebound has definitely eased some pressure. However, sustainability would largely depend on global signals. Any news of escalation in the Russia-Ukraine battle and worsening of the Covid situation in China could dent sentiment again. Overall, we recommend maintaining a positive yet cautious approach while continuing to focus on nightly risk management,” said Ajit Mishra, VP Research, Religare Broking.

“Among the sector packages, metals, energy and pharma are likely to outperform others, so plan your trades accordingly.”

Below are the key factors that could drive the market this week:
Ukraine war
We have seen many signs of de-escalation in recent days, but Russia and Ukraine continue to wage war. Despite the toned-down rhetoric, Russian forces have intensified their attack, but have not yet gained significant ground. Any on-site de-escalation will further support the market.

Covid-19 resurfaces
In many areas, including Hong Kong, South Korea and China, we have seen a significant increase in the number of Covid cases. Beijing has already closed many of its cities that could impact global trade. The latest outbreak is due to a variant called Stealth Omicron, which many believe could lead to another wave in India. If something like that happens, the market might not like it.

Crude oil prices
A major headwind for the market has been the sharp rise in the price of crude oil, which has weakened to $108 a barrel. While the level is still high, it’s not as bad as it was two weeks ago. This means that fuel prices may not rise as much as expected, so inflation is likely to stay under control.

FII Stream
Despite positive news from some quarters, foreign investors continue to withdraw as the US dollar has remained strong. They have taken Rs 42,079 crore from equities so far this month, although much of the impact has been cushioned by heavy buying by domestic investors. However, if FIIs return, the market could zoom in further.

Technical view
The Nifty50 Index closed on a bullish note for the second week in a row, successfully holding above the crucial resistance of 16,800 as well as the 20-week EMA. Until Nifty does not close below 16,800, the bullish trend is likely to continue, analysts say.

“Against this background, we recommend that traders maintain a bullish bias and only take new long positions on dips. Immediate support and resistance are now placed at the 16,600 and 17,500 levels,” said Yesha Shah, Head of Equity Research, Samco Securities.

This post handy target: Stealth Omicron, FII current among the key factors that could lead the market this week

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