Stock indices expected to bounce back next week

New Delhi (IANS) The key Indian stock indices -- S&P BSE Sensex and the NSE Nifty50 -- might get a reprieve from the massive bouts of volatility that have been witnessed lately, as market observers predict a temporary bounce back.

The two key indices had witnessed heavy sell-off last week due to the global outbreak of Coronavirus and its impact on the world economy.

"However for a sustained rise, we will need more confirmation of the scare reducing drastically and economies getting back on their feet," said Deepak Jasani, Head of Retail Research, HDFC Securities.

"In the coming week Central Bank meetings will be watched keenly for outcomes to deal with the present situation."

Nevertheless, investors should remain vigilant since the volatility, as measured by the volatility index has reached an all time high, said Vinod Nair, Head of Research at Geojit Financial Services.

The 'Fear Index' or India 'VIX' on last Friday logged one of the steepest single day jump to 59.48-mark, which is the highest level in the last 11 years.

"Accumulating quality stocks which are available at lower valuations would be a good strategy," Nair said adding, "Sentiments around the spread of the virus will continue to drive the markets and any signs of the rate of infections falling will be a positive."

According to Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services: "Policymakers globally are still trying to figure the right measures to fix the disruption caused by the Coronavirus pandemic. The concerns over the kind of economic damage this outbreak would lead to will most likely weigh on the market for a while."

"While volatility may continue in coming days, we could see intermittent relief rallies, however these are likely to be short-lived."

In terms of the Indian currency, experts predict that the rupee will range from 73 to 74.20 against a US dollar with a downward bias towards 73.

"The RBI swap on Monday is expected to provide 'Forex liquidity' which should improve sentiments in the Forex market," said Sajal Gupta, Head Forex and Rates, Edelweiss Securities.

Last week, the Indian rupee closed at 73.92 against the US dollar.

On the technical charts, the short term trend of Nifty50 remains bearish.

"Having broken the crucial supports of 10004-9951, the Nifty could now test the next major supports of 9119-8968 in the coming weeks," Jasani said.

"Any pullback rallies could find resistances at 10042-10294."

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