Investors will eye a host of stock market triggers in the coming week including the foreign fund inflow, rupee movement, global stock markets, the Monetary Policy Committee (MPC) minutes by the Reserve Bank of India (RBI), as well as the much-awaited listing of Jio Financial Services shares.

Benchmark indices ended lower for the fourth week in a row, the longest stretch of weekly declines in over a year. Initially, the tone was sideways but pressure in the global indices, especially the US markets, pushed the index lower in the final sessions.

Frontline indices settled lower for the second straight session on Friday, August 18, on the backdrop of unfavourable global cues and additional foreign fund outflows. In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong ended in the negative territory.

Global markets largely extended their losses as concerns over higher interest rates and slowing China’s economy weighed on investors. The Evergrande Bankruptcy in China though was brushed away since real estate loans in India are by and large regulated well in India now, noted analysts.

Fears of a US Fed rate hike, coupled with a decline in global equities, exerted additional downward pressure, specifically on IT stocks in India, which fell 1.47 per cent. The 30-share BSE Sensex ended at 64,948.66 down 202.36 points or down 0.31 per cent while Nifty also closed at 19,310.15 level, down 55.10 points or 0.28 per cent.

Most sectors were in red this week led by metal, bank and IT, while only media, FMCG and auto sectors ended in green this week. The broader indices too traded in sync and lost nearly half a per cent each.

‘’Indian indices encountered a week of vulnerability due to adverse global and domestic cues, accompanied by a shift towards safer assets by investors like the USD. Discouraging domestic industrial production, negative wholesale inflation, and elevated CPI inflation contributed to market volatility,” said Vinod Nair, Head of Research at Geojit Financial Services.

‘’Additional strains emerged from stronger-than-expected US retail sales data; adding to Fed rate hike fears, concerns about US bank rating downgrades, and a sudden Chinese central bank rate cut hindered recovery and sustained selling pressure,” added Nair.

Going forward, a buzzing week awaits the primary market with two public issues to be rolled out for bidding. Markets will begin the week by reacting to the listing of Jio Financial Services shares on Monday, August 21. Jio Financial Services shares were credited to eligible Reliance shareholders as of the record date of July 20 in the ratio of 1:1. The week will also be crucial amid current global economic headwinds, due to which analysts expect investor sentiment to remain subdued in the next few days.

Here are the key triggers for stock markets next week:

Macro Data:

India’s wholesale price inflation remained in the negative zone for the fourth month in a row by contracting to 1.36 per cent in July after contracting by 4.12 per cent in June, which was the lowest in more than seven-and-a-half years.

India’s retail inflation in July surged to a 15-month high at 7.44 per cent primarily driven by a rise in food prices especially vegetables, breaching the RBI’s upper tolerance level of 6 per cent for the first time in five months.

RBI in its August bulletin mentioned the industrial production and trade weakening, the slowing of global recovery after a robust performance in the April-June quarter. The Indian economy is gathering momentum in Q2FY24 with headline inflation expected to average above 6 per cent, said the central bank.

In the coming week, the RBI will release its MPC minutes of the meeting, which will throw light on the current economic backdrop. Going forward, the indicators will likely provide further cues to market movement.

2 IPOs, 2 listings to hit D-Street

In the coming week, two initial public offerings (IPO) await the bourses in both main board segment. These are as follows:

Vishnu Prakash R Punglia IPO will open for subscription on Thursday, 24 August, and close on Monday, 28 August.

Aeroflex Industries IPO: The Ashish Kacholia backed Aeroflex Industries Limited IPO opens for subscription on Tuesday, 22 August and closes on Thursday, 24 August.

New listings: TVS Supply Chain Solutions shares are will be listed on BSE and NSE on Wednesday, 23 August.

Shelter Pharma shares will get listed on Wednesday, 23 August on BSE SME.

FII Inflow:

Foreign institutional investors (FIIs) continue their selling streak on D-Street as Indian markets closed by extended losses for the second straight session, amid volatility on global and domestic headwinds. The domestic institutional investors (DIIs) were net buyers and invested ₹339.18 crore during Friday’s session.

As per the NSE data, FIIs cumulatively bought ₹12,302.17 crore of Indian equities, while they sold ₹12,569.17 crore — resulting in an outflow of ₹266.98 crore.

Foreign portfolio investors (FPIs) performance remains muted on D-Street so far in August due to the rising US bond yields and stronger US dollar, after sustained buying in the last three months.

FPIs bought ₹8,394 crore worth of Indian equities and infused a total of ₹13,948 crore as of August 18, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data.

In the cash market FPIs sold stocks for ₹10,921 crore and were net sellers on 10 days and buyers in only three days in August, so far, according to analysts

For the first time in 15 months, the Indian equity market fell for the fourth week in a row as Sensex, Nifty, and Nifty Bank fell nearly 1 per cent each. 31 nifty stocks recorded losses, which can be attributed to profit booking in the Nifty metal sector and selling activity by FIIs, according to analysts.

‘’Insights gleaned from the derivative market highlight a reduction in FIIs long exposure in index futures, now at 42 per cent. This suggests a prevailing short-term bearish inclination. Furthermore, the put-call ratio currently rests at 0.98, approaching levels that indicate potentially oversold conditions,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.

Global Cues:

In global markets, investors will closely monitor the movement of crude oil prices, the dollar index, and US bond yields, as these are likely to dictate FIIs and FPI activity. On the macro front, the BRICS Summit will be held between August 22 and August 24. China will announce the loan prime rate for 1 year and 5 years on August 21. US Flash Manufacturing PMI, Flash Services PMI, and unemployment claims will be scheduled between August 23 and August 24.

‘’Escalating US bond yields are predicted to restrict foreign investments in India, further impacting market dynamics….The metal sector bore the brunt this week due to sluggish industrial data and concerns about Chinese demand. Investor sentiment remains subdued due to the high volatility of the global currency market, leading to a high depreciation of EM currencies, which affects the performance of equities,” said Geojit Financial’s Vinod Nair.

US Industrial production in July rose 1 per cent from a month earlier. Manufacturing output rose 0.5 per cent in July from the previous month. US initial jobless claims fell by 11,000 at 2.39 lakh for the week ended August 12 from the previous week. According to the Federal Open Market Committee (FOMC) meeting minutes, US Fed may not be done with rate hikes and may hike again.

‘’The buoyancy in select Indian heavyweights on a rotational basis is capping the pace of decline so far but the recent fall in the global indices may change the scenario ahead. Among the major world markets, the deterioration of the trend in the US market is the key challenge to tackle. The next major support is at 34,200 in Dow Jones Industrial Average (DJIA) and then 33,700 i.e. 200 EMA,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.

Oil Prices:

Oil prices rose about one per cent in the previous session on signs of slowing US output, but both crude benchmarks also snapped their longest 8-week rally of 2023 on mounting concerns about global demand growth.

West Texas Intermediate (WTI) crude futures gained 86 cents, or 1.1 per cent, to settle at $81.25 a barrel, and Brent crude futures rose 68 cents, or 0.8 per cent, to settle at $84.80 a barrel, according to news agency Reuters.

Both benchmarks pushed higher on Friday after industry data showed that the US oil and natural gas rig count, an early indicator of future output, fell for the sixth week in a row.

Concerns of tighter supply after output cuts from the Organization of the Petroleum Exporting Countries and allies (OPEC+), helped oil prices gain for seven straight weeks since June. Brent crude gained about 18 per cent and WTI gained 20 per cent over the seven weeks ended August 11.

China’s slowdown in economic recovery and its property crisis countered signs of tightening supply in the oil market due to which prices dropped 2 per cent from last week and reduced investors appetite for risk across markets.

Corporate Action:

Shares of several companies including Reliance Industries, Oil India, ICICI Securities, Hindustan Aeronautics Ltd, RailTel Corporation, among many others will trade ex-dividend in the coming week, starting from Monday, August 21.Check the full list here.

Additionally, shares of Veer Global Infraconstruction Ltd will trade ex-bonus on August 22. Focus Business Solution Ltd will trade ex-bonus on August 23. FDC Ltd, IndiaMART InterMESH Ltd, KRBL Ltd, and Piramal Enterprises will declare a buy back of shares on August 25.

Technical View:

Nifty is down 3 per cent from the July peak of 19,979. Due to some mounting global headwinds like China’s housing crisis, and expectations of further rate hikes in the US prices eased by around 0.60 per cent to settle the week at 19,310.

‘’Prices are currently forming a descending triangle pattern on the daily chart, a decisive fall below the lower range value will confirm the bearish scenario,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

Technically, the index is exhibiting signs of weakness, characterized by a lower top formation. It is respecting its 50-day moving average (50-DMA), positioned around the 19,270 mark, according to analysts.

‘’Since we are seeing a mixed trend across sectors, participation should focus on stock-specific approach and maintain positions on both sides. Also, keep trailing stop losses on the rise in the profitable positions, especially in the midcap and smallcap space,” said Religare Brokings’ Ajit Mishra.

Analysts observe that on the downside, immediate support rests at 19,250. A breach below this level could expose Nifty to further declines, possibly targeting the 19,191 and 18,888 levels.

‘’Above 19,460, we can expect some short covering towards the 19,600 level. The re-establishment of bullish momentum hinges on a rebound above the 20-DMA, which lies at 19,650,” said Swastika Investmarts’ Pravesh Gour.

In contrast, the Bank Nifty seems to be exhibiting greater weakness compared to the Nifty. It concluded the week below the previous week’s low. The index briefly trades below the neckline support of a Head & Shoulders Pattern on the daily chart, according to Master Capital Services’ Arvinder Singh Nanda.

Bank Nifty is persistently encountering resistance at the 44,000 level, where the call side holds the highest open interest. The lower end of the support is noticeable around 43,600, which aligns with the presence of the 100-DMA.

‘’If this support level is breached, it could trigger additional selling pressure in the market. A break on either side will lead to trending moves,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before taking any investment decisions.