10 Key Stock Market Triggers for Week Starting: 20 March 2023

The week starting 20ths March 2023 is likely to be an action-packed week with a lot of action points to watch out for. Of course, the global banking crisis and the Fed minutes will be the key data items that will drive the direction of the market. Here are some of the key triggers that could set the tone for the week.

Ten key trends to watch out for in the week

While there are a mix of global and local factors at a macro and micro level; here are some of the key triggers to watch out for.

1. For the previous week, the markets were extremely weak despite the late bounce in the indices. For the week, the Nifty closed -1.80% while Sensex closes -1.94% lower. The weakness was a lot more pronounced in the mid-cap and small cap space too. For instance, the mid-cap index was lower for the week by -2.04% with the NSE small cap index was down -2.49% There was lack of willingness even to buy small stocks for alpha.
    

2. All eyes will be on the UBS and Credit Suisse merger deal. The deal finally happened, but the ratio was much lower than expected; at least 60% below the market price. That is likely to be an overhang for the deal and indicates that the pressure on the banking sector is much more than anticipated. The desperation of the situation is evident from the fact that the Swiss government has given a $108 billion credit support line.
    

3. Meanwhile the stock markets in India will also await the outcome of the stabilization of the US markets after the launch of the Fed BTFP. Now the Bank Term Funding Program (BTFP) is intended to address the twin issues of liquidity for banks and the forced fire sales. Apart from prevent the run on the deposits of banks. The BTFP will also offer loans on the face value rather than on depleted value. US banks hinge on this program.
    

4. The billion-dollar question is what will the Federal Reserve do at the forthcoming FOMC meeting on 22nd March 2023? It remains to be seen, how much the Fed hawkishness is impacted by the recent banking crisis in the US, but the impact is surely expected to be there. For instance, the CME Fedwatch has already scaled down chances of 25 bps hike to 62% and the chances of status quo to 38%. The 50-bps rate hike expectation is totally ruled out, since the SVB crisis was triggered by higher bond yields.
    

5. With the US bond yields falling by nearly 60 basis points, all eyes will be on the Indian 10-year bond yields to check if the impact of lower yields is felt in India too. Indian yields are likely to taper further. Meanwhile, the mounting banking crisis is also pulling down crude oil prices lower. Oil has fallen 17% in March 2023 with a lot of speculative positions unwinding due to the banking crisis. That will be positive for Indian markets.
    

6. The IPO action is also likely to be quite prominent in the coming week. For instance, there is likely to be one IPO listing and one IPO opening during the week. Udayshivakumar Infra IPO will open on 20th Mar while the IPO of Global Surfaces will list on 23rd March. Apart from these, the focus on SME IPOs is likely to continue unabated; both on the BSE and on the NSE during the week.
    

7. There is an interesting story building up on gold, which is normally considered an antithesis to any macroeconomic crisis. In other words, gold is a safe haven asset and that is evident in the last few days. For instance, Spot Gold rallied 10% in just eight days from $1808/oz to $1989/oz, even as oil was cracking sharply. It is the classic safe-haven buying in risk-off assets like gold that is expected to sustain this week. Most experts concur that the price of spot gold will be headed above $2,000/oz.
    

8. Even as indices suffered globally, it was the Bank Nifty that took it on the chin. The Bank Nifty is already down 5% in the previous week. Now, with the European banks under pressure amid rising bond yields and the UBS and Credit Suisse deal completed under duress, one can safely expect more pressure on the Bank Nifty to continue. While Indian banks may be largely immune to this risk, the impact is likely to be there.
    

9. Let us now turn to the Nifty technical and F&O cues for the week. Clearly, the trend is down or you can call it a sell-on-rises market for the Nifty index. During the last week, the Nifty broker the 17,000 support and 16,850 appears to be the next big support for the week. Both, technicals and F&O accumulation data hint at a Nifty range of 16,800 to 17,100 for the coming week, with a very strong downside bias for the week.
    

10. Finally, let us come to global data points to watch out for. First let us look at the key data points for the US markets in this week. These include the Fed statement, existing home sales, API crude stocks, building permits, current account PMI and durable goods orders. In rest of the world data the focus for the EU will be on the trade balance, ECB speak, and PMI. For Japan, the focus would be on core CPI and Services PMI. Finally, for the UK, the key data points to watch out would be CPI, PPI, BOE statement, retail sales and PMI.