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After slipping into the red on the last day of trading in August, the markets swung back into the black from the beginning of September, and scaled highs never touched before. The record rally can be attributed to strong industrial output for July, fall in August inflation print, decline in core inflation in the US, and the European Central Bank hints at a halt in rate hikes. Such supportive macro fundamentals helped the Indian market outweigh the surge in crude oil prices to a 10-month high.
Overall, the market sentiment is likely to remain positive in the coming week, too, with sector rotation in broader indices, but some consolidation can’t be ruled out with focus majorly on FOMC meeting outcome, experts said.
The benchmark indices reached record closing highs in the week ended September 15, with the BSE Sensex climbing 1,240 points or 1.9 percent to 67,839 and the Nifty50 rising 372 points or 1.9 percent to 20,192. The surge in trading triggered a wave of profit-booking in the broader markets amid rising concerns over valuation, driving the Nifty Midcap 100 and Smallcap 100 indices down 0.4 percent and 0.14 percent.
Sectorally, there was good buying in auto, banking and financial services, technology, and pharma.
“The Nifty has been scaling new highs over the last few sessions on upbeat sentiment after the successful G-20 Summit which is likely to bolster India’s economy in the global arena. Further, lower CPI and wholesale inflation in India are comforting amid the global inflationary scenario,” Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, said.
He expects the overall positive momentum to continue especially in the large-cap space while sectoral rotation is likely to be seen in the broader market.
So, what would be the 10 major factors to determine the market dynamics in the week ahead? Let’s take a look.
FOMC Meet
The key factor to watch out by global investors would be the outcome of two-day FOMC meeting scheduled to be announced on September 20, followed by US economic projections. Most experts feel that the Federal Reserve may decide to pause interest rate hikes in the September meeting and may keep Fed funds rate in the range of 5.25-5.5 percent, but raise a chance of hike in November or December meeting.
Federal Reserve Chief Jerome Powell has consistently been saying the central bank is prepared to increase Fed funds rate further if needed and intends to keep borrowing cost on the higher side till the inflation reaches to the Fed’s 2 percent target.
In the latest data, the CPI inflation for August increased to 3.7 percent, from 3.2 percent in July, but core inflation (excluding energy & food prices) dropped to an annual rate of 4.3 percent, from 4.7 percent during the same period, while the retail sales growth of 0.6 percent came in ahead of expectations despite elevated prices, but experts feel the higher interest rates may be started hurting the jobs market with US unemployment rate in August rising to 3.8 percent, from 3.5 percent in July.
The US 10-year treasury yields remained higher at 4.33 percent, against 4.27 percent on week-on-week basis, while the US dollar index, which measures the value of US dollar against a basket of world’s leading six currencies, climbed above 105, the highest levels since March this year, post US retail sales and weekly jobless claims data.
Global Economic Data Points
Investors will also focus on the interest rate decisions by the Bank of England on September 21 and the Bank of Japan on September 22.
“The Bank of England (BOE) is likely to raise rates amid elevated inflation, while the Bank of Japan’s (BoJ) policy will be closely monitored after Governor Kazuo Ueda hinted at the possibility of ending negative interest rates earlier,” Ravindra Rao of Kotak Securities.
Here are key global economic data points to watch out for in coming week:
Oil Prices
Oil prices jumped to a 10-month high on further supply tightening by the OPEC+ nations and now experts are betting on $100-a-barrel rate in the coming quarter if the Chinese economy shows the recovery path in the December quarter 2023 after recent measures. Hence, market participants will keep an eye on the oil rates as India is a net oil importer and any major spike in prices from here on may impact the sentiment.
Brent crude futures, the international oil benchmark, increased for the third straight week and settled at $93.93 a barrel last Friday, the highest level since November 2022, up 3.62 percent for the week. The prices surged over 30 percent since June lows.
“We remain bullish on crude oil prices for medium to long term as stronger demand outlook from a robust Chinese industrial sector along with the OPEC+ production to keep market very tight in Q4-2023,” Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas said.
FII Flow
Foreign institutional investors remained net sellers in the passing week too, though the outflow at Rs 747 crore was much less compared to previous weeks. Overall for September, they sold Rs 9,580 crore worth shares in the cash segment, but that did not impact the market momentum as domestic institutional investors compensated the FII outflow by buying over Rs 10,000 crore worth shares during the month.
Going ahead, FIIs may prefer more profit taking given the valuation concerns as the market is at historic highs, and also with the US bond yields at 4.3 percent and US dollar index above 105 mark, experts said.
Domestic Economic Data Points
On the domestic front, the deposit and bank loan growth data for fortnight ended September 8, and foreign exchange reserves for the week ended September 15 will be released on September 22.
Technical View
The Nifty50 has formed strong bullish candlestick pattern on the weekly charts and also there seems to be Three White Soldiers kind of pattern formation given the index rising for third week in a row and closing nearly 20,200 levels. The consolidation is expected to be on cards after recent rally, with support at 20,000-19,900 levels. Until these support levels are getting hold, experts expect the index to face resistance at 20,300-20,400 amid the likely consolidation, and above the same, 20,600-20,700 is likely scenario, experts said.
“Since the Nifty has reached closer to its immediate hurdle of 20,300 and the banking index has also retested its record high, we may see some consolidation now,” Ajit Mishra, SVP – technical research at Religare Broking said.
On the downside, he feels the 19,700-19,950 zone would act as a support in case of any dip. And, a decisive break above 20,300 would help the index to gradually move towards 20,700, he said, while advising that traders should continue with the “buy on dips” approach and maintain their focus on stock selection.
F&O Cues
Option data also indicated that 20,200-20,500 is expected to be the resistance area for the Nifty50, with support at 20,000 mark.
On the weekly Options front, the maximum Call open interest was seen at 20,200 strike, followed by 20,300 & 20,500 strikes, with Call writing at 20,200 strike, then 20,500 strike, while the maximum Put open interest was at 20,100 strike, followed by 20,000 & 20,200 strikes, with meaningfull Put writing at 20,200 strike, then 20,100 strike.
“Option data suggests a shift in higher trading range in between 19,900 to 20,400 zones while an immediate trading range in between 20,000 to 20,300 zones,” Chandan Taparia, Senior Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
India VIX
The volatility spiked in first half to 12 levels, but cooled down below 11 mark in later half of the last week, providing more comfort for bulls that lifted benchmark indices to new highs. Hence, the market may remain stable and positive as long as the volatility stays low in coming weeks, experts said.
India VIX, which measures the expected volatility for next 30 days in the Nifty50, increased by 1.14 percent from 10.78 levels to 10.90 levels on week-on-week basis.
IPO
The primary market will remain busy in the coming week with 10 IPOs opening for subscription and five companies making debut on the bourses. Sai Silks Kalamandir, and Signatureglobal India will be opening in September 20, with a price band of Rs 210-222 per share and Rs 366-385 per share, respectively, both will close on September 22. Vaibhav Jewellers will be opened during September 22-26, with a price band of Rs 204-215 per share.
IPOs by Samhi Hotels, and Zaggle Prepaid Ocean Services will close on September 18, while the closing date for Yatra Online will be September 20.
In the SME segment, the initial public offerings by Hi-Green Carbon, Mangalam Alloys, and Marco Cables & Conductors will be opened on September 21 and closing on September 25, while the bidding for Organic Recycling Systems’ IPO will take place during September 21-26.
Madhusudan Masala, Techknowgreen Solutions, and Master Components’ public issues will be launched on September 18 and will close on September 21, while Holmarc Opto-Mechatronics, Cellecor Gadgets, and Kody Technolab IPOs will be closing on September 20.
On the listing front, Jiwanram Sheoduttrai Industries will make its debut on the NSE Emerge on September 18, while Unihealth Consultancy and Meson Valves India will list shares on the NSE Emerge and BSE SME on September 21, while Jupiter Life Line Hospitals will be listing on the BSE & NSE on September 18, and EMS on September 21.
Corporate Action
Here are key corporate actions taking place next week:
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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