Inflation data, US Fed policy to guide markets as Nifty 50 eyes 21,500 this week
Domestic equity benchmarks reported their longest weekly winning streak in three years, as they rallied to record high levels on the back of strong macroeconomic data, a drop in oil prices and the hawkish rate pause by the Reserve Bank of India (RBI).
Frontline indices gained for sixth straight week as the NSE Nifty 50 and S&P BSE Sensex indexes rose about 3.5 per cent to log their best week since July 2022. Nifty 50 tested a new milestone at its lifetime high and Sensex also reached closer to the 70,000 level.
The small- and mid-caps underperformed the blue-chips this week, but gained 1.16 per cent and 2.35 per cent, respectively, to fresh record highs. Bank Nifty surged by more than 5 per cent, highlighting strong investor sentiment in the banking sector.
On Friday, the indices ended in positive territory over gains led by banking and IT stocks, including HDFC Bank, Infosys and ICICI Bank, after the RBI’s policy decision and the upside in GDP growth forecast for the financial year.
Following the policy announcement, Nifty 50 breached the 21,000 mark for the first time and hit its all-time high of 21,006.10 during the session. The Sensex also hit its fresh record high of 69,893.8 in the session. Nifty 50 closed at 20,969.40, up 68 points on December 8, or 0.33 per cent while the Sensex closed the day at 69,825.60, up 304 points, or 0.44 per cent.
Also Read: After RBI MPC verdict, US Fed to unveil policy decision next week: Here’s what experts predict
“Despite the RBI maintaining policy status quo, an upgraded GDP growth forecast for FY24 boosted investor confidence. Measures to address the liquidity deficit, including the reversal of Standing Deposit Facility (SDF) and Marginal Standing Facility (MDF) facilities, positively impacted financials, leading to a 5 per cent gain in Nifty Bank for the week,” said Vinod Nair, Head of Research at Geojit Financial Services.
‘’IT, consumer, auto, and realty sectors performed well due to valuation comfort, festive momentum, and a strong uptick in residential sales. Mid & small caps continued to outperform, driven by a healthy economic outlook, strong Q2 earnings, and corrections in oil prices,” added Nair.
Analysts also said that the recent election victory of Bharatiya Janata Party (BJP) in three out of four states during state assembly elections on December 13 boosted investors’ confidence about political stability and continuity of the government’s economic policies.
Going forward, a busy week awaits the primary market as a several new initial public offerings (IPO) and listings are slated so far across the mainboard and small-and-medium enterprises (SME) segments. The data-centric week will be crucial from the domestic and technical point of view as investors will closely eye the global cues along with key domestic economic data.
Overall, analysts expect markets to remain range bound this week over policy decisions by global banks but believe that the sentiment will strengthen further as the short-term technical outlook continues to be in favor of bulls -who eye Nifty 50 at the 21,500-mark, after the benchmark seized its lifetime-high level last week.
Here are the key triggers for stock markets in the coming week:
Domestic Macroeconomic Data:
On the macroeconomic front, India’s consumer price index (CPI)-based inflation or inflation rate for November and index of industrial production (IIP) data for October are scheduled for release on December 12, followed by the wholesale price index (WPI) -based inflation on December 13.
7 IPOs, 3 listings to hit D-Street:
In the mainboard segment, three new IPOs are opening for subscription in the coming week. India Shelter Finance IPO and DOMS IPO are opening on December 13, while Suraj Estate Developers IPO is opening on December 18.
In the SME segment, Presstonic Engineering IPO will open for subscription on December 11 and S J Logistics IPO will open on December 12. Siyaram Recycling IPO and Shree OSFM E-Mobility IPO will open for bidding on December 14.
Among new listings, shares of Graphisads will debut on NSE SME on December 13. Shares of Sheetal Universal will debut on NSE SME on December 11, and shares of Accent Microcell will get listed on NSE SME on December 15.
‘’After an active November, December is also going to witness some new IPOs. It is expected that 15 new issues are lined up for the upcoming 2 months. However, investors should remain cautious and invest in an IPO after considering its valuations and net proceeds usage,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
FII Activity:
Foreign institutional investors (FIIs) have made a comeback in Indian markets over the country’s strong macroeconomic fundamentals and robust uptrend shown by the domestic markets. Foreign investors have emerged as net buyers of Indian equities for three out of five sessions last week and pumped a total of ₹9285.11 crore, playing a pivotal role in driving market activity.
The domestic institutional investors (DIIs) also infused in Indian stocks – with a total of ₹4326.47 crore this week In November, FIIs finally snapped their three month -sustained selling streak which was over global headwinds.
Foreign portfolio investors (FPIs) also reversed their selling streak and have started buying in Indian markets starting from December. FPIs have bought ₹26,505 crore worth of Indian equities and the total inflow stands at ₹30,852 crore as of December 8, taking into account debt, hybrid, debt-VRR, and equities. The investment in cash market stands at ₹10,874 crore.
‘’It is expected that the reversal in trend in global market and FIIs started buying again with stronger participation of retail investors will keep the market spirits high,” said Master Capital Services’ Nanda.
Global Cues:
This week central bank policy decisions will dominate global markets. The US Federal Reserve (Fed) will announce its policy decision on December 13, followed by the Bank of England and the European Central Bank on December 14. The outcome of the awaited Fed policy meeting will be pivotal in shaping market sentiments, according to analysts.
Investors are optimistic about India’s strong economic growth and gives India an edge over China. Falling crude oil prices provided much-needed relief to the Indian economy, as lower oil import bills translate to lower inflation and a more favorable balance of payments. It also becomes a positive factor for oil marketing companies.
On the macroeconomic front, the US will announce key data releases, with inflation figures on December 12 and retail sales numbers on December 14. Beyond these events, institutional flows, US bond yields, the dollar index, and crude oil prices will be important factors influencing market movements.
‘’In the recent rally, we are largely trading in tandem with the US markets and the current positioning of the Dow Jones Industrial Average (DJIA) reaffirms our positive view. We are eyeing a gradual rise to its record high i.e. 36,952.65 levels and 35,300-35,700 zone to act as support in case of a dip,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
Oil Prices:
Oil prices rose more than 2 per cent in the previous session after US data supported expectations of a demand growth, however, both crude benchmarks fell for a seventh straight week, posting their longest streak of weekly declines in half a decade, on lingering oversupply concerns.
Brent crude futures settled at $75.84 a barrel, up$1.79, or 2.4 per cent, while US West Texas Intermediate (WTI) crude futures settled at $71.23, up $1.89, or 2.7 per cent. For the week, both benchmarks lost 3.8 per cent, after hitting their lowest since late June on Thursday, a sign that many traders believe the market is oversupplied, according to news agency Reuters.
Even though oil reported its longest weekly losing streak since 2018, Brent and US WTI posted their first gain in six sessions on Friday, which analysts said could be a sign that the market has found a floor for now after falling for six straight sessions.
Saudi Arabia and Russia, the world’s two biggest oil exporters called for all members of the Organisation of Petroleum Exporting Countries and its allies (OPEC+) last week to join an agreement on output cuts ‘for the good of the global economy’. Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman met to discuss oil price cooperation on Wednesday.
Corporate Action:
Shares of three major public-sector undertakings (PSUs)- including Bharat Pteroleum Corporation Limited (BPCL) will trade ex-dividend in the coming week, starting from Monday, December 11. Some other companies will also trade ex-split and ex-bonus, while some have announced a buy back of shares next week. Check full list here
Technical View:
Analysts said that Nifty 50 witnessed a spectacular rally last week following a swing high breakout on the daily chart. This suggests a rise in optimism among market participants. However, the Nifty consolidated in the later part of the week.
‘’In a bullish market scenario, the index appears poised to continue its upward trajectory, targeting 21,500 in the near term. Despite occasional consolidation, the momentum remains strong. Key obstacles are identified at the 21,000-21,100 level, with a crucial support base at 20,600,” said Master Capital Services’ Arvinder Singh Nanda.
Santosh Meena, Head of Research, Swastika Investmart Ltd said, ‘’A strong support level exists at 20850, with 20600 serving as a critical support at any pullback. The overall trend remains bullish, although some intraday consolidation or pullbacks are likely.”
‘’We maintain our positive view on markets despite the overbought conditions and suggest participants look for buying opportunities on dips. Nifty has the potential to test the 21,200-21,500 zone and expects the index to hold the 20,300-20,550 zone in case of profit taking,” said Religare’s Ajit Mishra.
‘’Among the key sectoral indices, we reiterate our preference for banking and IT majors and suggest staying selective in the others. Besides, we are seeing early signs of exhaustion in midcap and smallcap space so maintain extra caution in stock selection,” added Mishra.
Turning to Bank Nifty, a strategy of capitalizing on downward movements as buying opportunities is recommended, provided that the support level of 46,500 remains unbreached. The immediate resistance levels to watch for an upward move are 47,500-47,800,” said Master Capital Services’ Nanda.
Swastika Investmarts’ Santosh Meena said, ‘’Bank Nifty is comfortably trading above the key resistance of 46,300, with an immediate target zone of 47,700-48,000. Its potential lies in reaching the psychological level of 50,000.”
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 10 Dec 2023, 06:05 AM IST
