Markets week ahead: Sentiment to act as throttle for event risk, themes

Capital markets heaved this past week. Following 10 weeks of fairly consistent climb, there was finally a serious shutter in speculative benchmarks.
India’s benchmark indices Sensex and Nifty ended the week 1% lower.
In Friday’s session, headline indices witnessed an excellent upside bounce after opening lower and recorded the biggest intraday gain in more than 2 months with BSE Sensex surging 1,432 points and the broader Nifty50 index 429 points from day’s low.

During the week, bears made a comeback as US Fed chair Jerome Powell decided to keep the interest at nearly zero. The Federal Reserve projected a grim outlook for the US economy and said that the virus poses a great threat. It projected that the US economy will shrink 6.5% in 2020.

Markets gathered momentum driven by global cues and stock-specific action will be the norm in the near term.
In the weeks to come, markets are likely to remain under pressure and VIX is likely to rise which will determine the speed of the market movement. However, US VIX is currently at much higher levels of 40-41 which implies that fear factor is again rising for the US markets after a terrific come back.
Though the benchmarks ended the week off their lows, volatility was an uncomfortable marker to consider for the weekend.

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While risk appetite itself will be in focus for committed market movement, there is no denying that fundamental themes can both trigger the avalanche and be used as justification for keeping the pyroclastic flow rolling downhill.

Results from major PSU banks are awaited but they are also expected to somber the mood of the markets.
Nifty50 closed the week at 9972.9, down by 1.7%.
Top themes ahead include coronavirus second wave recession fears while data will center on rate decisions like an expected BOE stimulus upgrade.

Going ahead in comimg week we expect upside will be capped at the last week’s high of 10,300 mark and the index would extend its corrective phase with immediate support of 9,700 levels. A decisive close below 9,700 would further accelerate declines, else consolidation in the 9,700-10,300 band with stocks specific action.