The new week is likely to begin on a positive note for domestic markets. The SGX Nifty at 16,215 indicates a 145-point gain for Nifty, as Nifty futures on Friday closed at 16,068. Analysts said that the market will remain cautious but with a positive bias as most of the negatives are priced in.

Analysts said the focus will be on current result season, rupee movement and inflation. Shibani Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company, said: Going forward, market would keenly watch out for the trajectory of inflation, rate hikes from central banks and growth in the developed economies.

"The Q1FY23 corporate earnings season is just beginning and the key to watch out for would be the impact of higher input costs on margins. Monsoons in India are now panning out well across the geography and can boost rural income and demand in H2FY23,” she added.

Key concerns

However, key concerns for the domestic market is depreciating rupee, widening trade deficit, selling pressure from FIIs and volatility in global crude prices, said Mitul Shah- Head of Research at Reliance securities.

"We expect a strong economic rebound, normalised commodity prices, inflation within targeted range and better visibility in H2FY23, which would transform. We expect FII inflows to return by end of H1FY23, while the DII investments would continue in FY23," he added.

Rupee woes

The Indian rupee has weakened for six straight months culminating in depreciation of around 6 per cent in calendar 2022 so far.   The dollar is expected to continue deriving support from aggressive interest rate hikes and monetary tightening in the US along with geopolitical-led risk aversion.

“We revise our expectation of India’s FY23 current account deficit to $105 billion from $90 billion earlier,” said Acuite Ratings in its Market Pulse report. “We continue to expect the rupee to depreciate moderately, but extend our USD-INR call higher to 80.5-81.0 levels by Mar-23 vs. our earlier expectation of 79,” it added. 

According to domestic brokerage, Choice International, Nifty has formed a bearish candle in the weekly chart, however as it closed above 16,000 level, an important psychological level , a small relief rally is expected in the near term.

Open interest data indicates, on the call side, the highest OI witnessed at 16,600 followed by 16,500 strike prices while on the put side, the highest OI was at 15,900 followed by 15,800 strike prices. The trend may remain bullish for the shorter term but simultaneously profit booking from higher levels is expected as well, it added.