Inflation data, global cues to guide markets as bulls eye 20,000 in this week

Despite the US 10-year bond yield surpassing 4.3 per cent, the dollar index reaching above 50, and Brent crude trading at over $90, the Indian market displayed remarkable resilience last week.

Frontline indices Sensex and Nifty settled higher for the sixth consecutive session on Friday, despite a cautious global market. The benchmarks recorded their second straight week of gains and posted their best week since two months, gaining nearly 2 per cent, each.

Sensex closed 333 points, or 0.50 per cent, higher at 66,598.91 while the Nifty closed the day at 19,819.95, up 93 points, or 0.47 per cent. In the last six sessions of gains, Sensex has risen 2.73 per cent while Nifty has risen 2.94 per cent.

The BSE Midcap index closed with a strong gain of 0.92 per cent at 32,672 after hitting its fresh record high of 32,692.74 during the session. The BSE Smallcap index also hit its fresh record high of 38,369.21 during the session but ended at 38,266.53, up 0.43 per cent.

Energy companies and public sector enterprises were top gainers, rising 1.4 per cent and 2.6 per cent, respectively. The indexes have risen 3.4 per cent and 4.5 per cent, so far this week, driven by a rally in power stocks on a sudden surge in power demand in the country. Analysts see that the overall bullish sentiment is strong, with hopes of the Nifty reaching the 20,000 mark this week.

Going forward, a buzzing week awaits the primary market with six new public issues to be rolled out for bidding, along with five listings across mainboard and small-and-medium enterprises (SME) segments. Bulls will keenly eye Nifty at the psychological 20,000-mark this week after domestic benchmarks last settled on a six-week high.
 

Here are the key triggers for stock markets in the coming week:

Macro data: CPI inflation, IIP, WPI inflation, Trade deficit

Last week’s data showed that India’s S&P global services purchasing manager’s index (PMI) fell to 60.1 in August from 13 13-year high of 62.3 in July but still recorded one of the best sales performances despite elevated inflationary pressures. However, exports hit a record high on robust foreign demand.

On the macro front this week, the market will react to some of the key macroeconomic data including India’s consumer price index (CPI) or retail inflation, index of industrial production (IIP), wholesale price index (WPI) inflation, manufacturing output, forex reserves, and trade deficit data. 
 

6 IPOs, 5 listings to hit D-Street:

In the coming week, six initial public offerings (IPO) await the bourses among main board and SME segment. From the mainboard segment, RR Kabel IPO will open for subscription on September 13. Samhi Hotels IPO and Zaggle Prepaid Ocean Services IPO will open on September 14.
From the SME segment, Chavda Infra IPO and Kundan Edifice IPO will open for subscription on September 12. Cellecor Gadgets IPO will open on September 15.

Among listings, shares of Rishabh Instruments and Ratnaveer Precision Engineering will get listed on stock exchanges BSE and NSE on September 11. On the other side, shares of Saroja Pharma Industries, Basilic Fly Studio, and Pramara Promotions will get listed on NSE SME on September 13.

FII Inflow:

Foreign institutional investors (FIIs) sold equities worth ₹9,321.41 crore, while domestic institutional investors (DIIs) bought equities worth ₹4,572.14 crore last week. High US bond yields and a stronger US dollar has been triggering FII selling since August.

In spite of the net institutional selling by foreign investors, Nifty is up by 434 points for the month so far. This, along with the hyper activity in the mid-and small-cap segments, point to the active participation of retail investors in the rally, noted analysts. This market sentiment will drive Nifty to record high levels of over 19,900-20,000, as per market observers.

‘’The ‘buy on dips’ strategy is working well for traders. This market construct has the potential to take the rally to near the Nifty record high of 19,991. Frontline banking and IT stocks assisted by L&T and RIL have the potential to sustain the rally in the near-term,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services also highlighted that the Nifty has been gaining strength and is inching closer towards its life high of 19,992. ‘’With monsoon gradually improving and India set to host G20 summit over the weekend, sentiments are buoyant and may lift market towards its life high and 20,000 mark over the next few days,” said Khemka.

Foreign portfolio investors (FPIs) emerged as net sellers so far in September, with a muted performance on D-Street. FPIs have sold ₹4,203 crore worth of Indian equities and infused a total of ₹3,636 crore as of September 8, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data.

‘’Turning to the derivative market, it’s noteworthy that FIIs hold a long exposure in index futures at 58 per cent, indicating a neutral to bullish bias,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
 

Global Cues:

On the global front, the US trade deficit in July grew to $65 billion in July on a rise in imports from $63.7 billion in June. US August S&P global services PMI rose to 54.5 compared to 52.7 in July due to new orders firming and businesses paying higher prices for inputs – showing potential signs of elevated inflation pressures.

Crude oil price traded at a 10-month high of $90 per barrel up 7 per cent, with supply cuts announced by Saudi Arabia and Russia. ‘’It is expected that in the coming days, a stronger dollar could exert upward pressure on crude prices, potentially offsetting gains made from supply cuts and increased demand,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

On the global front, close attention will be paid to movements in crude oil prices, the US dollar index, and US bond yields. Additionally factors such as the US inflation rate and the outcome of the European Central Bank (ECB) meeting will be of significance. Domestically, developments stemming from the G20 summit may lead to sector- or stock-specific movements.

‘’We are getting mixed signals from the global front. Among the key world indices, the Dow Jones Industrial Average (DJIA) has been hovering within the 34,000-35,000 levels and needs a decisive close above the upper band to extend the recovery. In case of a range breakdown, participants should brace themselves for volatility in our markets too,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
 

Oil Prices:

Last week, oil producers Saudi Arabia and Russia extended their voluntary oil output cuts of a combined 1.3 million barrels per day (bpd) to the end of the year which resulted in a sharp surge in international crude prices – reaching a 10-month high peak.

These are on top of the April cut agreed by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) running to the end of 2024. Ending the week, oil gained almost 1 per cent to a nine-month high on Friday on rising US diesel futures and worries about tighter supplies.

Brent futures rose 73 cents, or 0.8 per cent, to settle at $90.65 a barrel, while US West Texas Intermediate (WTI) crude rose 64 cents, or 0.7 per cent, to settle at $87.51. Both crude benchmarks remained in technically overbought territory for a sixth straight day, with Brent’s settlement its highest since November 16.

WTI’s settlement was its highest since September 6, which was its highest since November. For the week, both benchmarks were up about 2 per cent, following gains last week of about 5 per cent for Brent and about 7 per cent for WTI, according to news agency Reuters.
 

Corporation Action:

Shares of several companies including Indian Railway Finance Corporation (IRFC), Jindal Stainless, Apollo Pipes, Multi Commodity Exchange of India (MCX), among many others will trade ex-dividend in the coming week, starting from Monday, September 11. Check full list here.

Additionally, shares of Power Grid Corp will trade ex-bonus on September 12 and Larsen & Tuobro (L&T) will declare a buyback of shares on the same day.
 

Technical View:

From a technical perspective, the Nifty has recently broken out of a bullish flag formation, suggesting the potential for a significant upward move. However, it faces a critical psychological hurdle at the 20,000 mark, which currently acts as a key resistance level, according to analysts.

Religare Brokings’ Ajit Mishra noted that with a trend line breakout combined with a decisive close above 19,650, the Nifty index looks set to inch towards a newer high. ‘’It may take a breather around the milestone of “20,000″ and then progress to 20,300 level,” he said .

Swastika Investmarts’ Santosh Meena highlighted that if Nifty struggles to breach this level, there is a possibility of it forming a double top pattern around this point, which could trigger profit booking.

Religare’s Mishra agrees. ‘’On the downside, the 19,500-19,650 zone would offer the cushion, in case of any profit taking. Since all sectors are contributing to the up move, maintain focus on identifying stocks, that are showing relatively higher strength and avoid contrarian trades,” he said.

Master Capital Services’ Arvinder Singh Nanda also remains optimistic. ‘’Currently, prices are trading above the 21-day EMA on the daily chart, indicating positive momentum. There’s a strong likelihood that Nifty will break its all-time high in the upcoming weeks of September,” said Nanda.

On the other hand, Bank Nifty index witnessed a strong bullish momentum as the bulls took full control. The index has displayed a strong recovery from its 100-day moving average (DMA). Following the breakthrough of the resistance level at 44,650, there was a sharp rally of 600 points.

‘’The next significant hurdle on the upside is situated at 45,500, where the highest open interest is concentrated. The index maintains a “buy on dip” mode, with robust support seen at the 44,800 levels, underlining the bullish sentiment in the market,” said Kunal Shah, Senior Technical & Derivative analyst at LKP Securities.

‘’The immediate resistance zone for Bank Nifty is around 45,600–45,700, and surpassing this level may pave the way for an attempt to reach the all-time high of 46,350,” added Swastika’s Santosh Meena.

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

Updated: 10 Sep 2023, 06:04 AM IST