Macro data, FII activity, global cues to guide market direction this week

Domestic benchmark indices Sensex and Nifty settled lower for the fourth consecutive session on Friday, September 22, amid weak global cues as the US Treasury yields rose to their multi-year high levels, weighing on investors’ sentiment for riskier equities. 

The 30-share BSE Sensex logged its worst week in over 15 months on lingering worries over a higher global interest rate environment following the US Federal Reserve’s hawkish tone. Nifty 50 closed with a loss of 68 points, or 0.34 per cent, at 19,674.25 while the Sensex ended at 66,009.15, down 221 points, or 0.33 per cent. 

While domestic investors offloaded in healthcare, consumer durable and commodity stocks, foreign fund outflows and a steep decline in HDFC Bank shares also hit market sentiment. Mid and smallcaps outperformed the benchmarks as the BSE Midcap index ended lower by 0.14 per cent while the BSE Smallcap index ended with a nominal gain of 0.04 per cent.

For the week, Nifty 50 fell 2.6 per cent while the Sensex declined by 2.7 per cent –  recording its worst fall since June 2022. The BSE Midcap index lost 1.7 per cent and the Smallcap index fell 2 per cent for the week ended September 22. 

Except PSU Banks, all sectoral indices declined last week with Realty, Metal and Banks being the worst hit ones. The tone was negative from the beginning and that further deteriorated with sharp cuts in the select index majors, according to analysts.

 “Throughout the week, investor sentiment was plagued by concerns of impending rate hikes driven by inflationary pressures. Rising crude oil prices, attributed to expectations of increased demand in China coupled with supply cuts, contributed to these inflation concerns,” said Vinod Nair, Head of Research at Geojit Financial Services.

Last week, the US Federal Reserve opted to maintain existing interest rates, the suggestion of potential future rate hikes in response to inflationary pressures led to rising US bond yields and a stronger US dollar, prompting investors to seek refuge in safe-haven investments. This cast a shadow over the domestic market and displayed a bearish trend. 

‘’PSU bank stocks saw gains, partially due to India’s inclusion in JP Morgan’s Government Bond Index, which resulted in a decline in bond yields. However, overall, risk-averse sentiment prevailed, driven by the ongoing ascent of US bond yields and concerns regarding the possibility of higher rates persisting for an extended period,” added Nair.

Going forward, the last week of September awaits a buzzing primary market with as many as 16 new public issues to be rolled out for bidding, along with eight listings across mainboard and small-and-medium enterprises (SME) segments.

On the domestic front, a better monsoon and a cool off in crude oil prices are providing further support. However, analysts reckon that bears will maintain their dominance and markets could remain under pressure in the near term given the global concerns. This week also marks the September month Futures and Options (F&O) expiry, which is expected to bring about volatility in the market. 

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

Macro Data, Global Cues:

Global and domestic macroeconomic data, trend in global stock market, movement of rupee against dollar, and inflows by foreign and domestic investors will be in focus. 

The market will take further cues from some key events such as US building permits, new home sales, API weekly crude oil, crude oil inventories, jobless claims, US GDP data, UK GDP, Eurozone inflation, US & China Manufacturing PMI, India’s infrastructure output, foreign exchange reserves, and fiscal deficit data. Market participants and analysts will also keenly the movement of US bond yields and the US dollar index to gauge the activity of foreign investors.

Technically, major indices such as Dow Jones, Nasdaq, and S&P are showing signs of a breakdown in a bearish head and shoulder formation, potentially leading to a deeper correction in the US market.

‘’We were managing to outperformance global markets amid mixed cues but the recent fall in the US indices has started showing its impact now,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.

‘’The Dow Jones Industrial Average (DJIA) has slipped below the trendline support and now inching towards the long term moving average around 33,900 levels. A decisive break could trigger the next leg of down move to the 33,200 level,” added Mishra.

On the domestic front, the rupee has stabilized after the announcement of Indian government bonds being included in the JP Morgan global bond index. The inclusion will likely lead to significant inflows into economy, according to analysts. 

JP Morgan index is $240 billion and India weightage will be 10 per cent which will ease borrowing pressure. It is positive for the banks, NBFCs, and public sector companies, according to Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
 

16 IPOs, 8 listings to hit D-Street:

In the coming week, 16 new initial public offerings (IPO) await the bourses among main board and SME segment. From the mainboard segment, JSW Infrastructure IPO and Updater Services IPO will open for subscription on September 25, while Valiant Laboratories IPO wil open on September 27.

From the SME segment, Digikore Studios IPO, Saakshi Medtech and Panels IPO, Inspire Films IPO, Newjaisa Technologies IPO, and Arabian Petroleum IPO will open for subscription on September 25. Sunita Tools IPO, Goyal Salt IPO, and City Crops Agro IPO will open for subscription on September 26. 

Kontor Space IPO, E Factor Experiences IPO, Vinyas Innovative Technologies IPO, and Canarys Automations IPO will open for subscription on September 27. Vishnusurya Projects and Infra IPO will open for subscription on September 29.

Among listings, shares of Yatra Online stock exchanges BSE and NSE on September 29. Also, shares of Chavda Infra Ltd will get listed on NSE SME on September 25 and shares of Kundan Edifice will get listed on NSE SME on September 26. 

Shares of Kody Technolab Ltd, Holmarc Opto-Mechatronics Ltd, Cellecor Gadgets will get listed on NSE SME on September 28. Additionally, shares of Master Components Ltd and Techknowgreen Solutions will get listed on NSE SME on September 29.
 

FII Inflow:

Foreign institutional investors (FIIs) have sold ₹7,300 crore in the last three trading sessions and around ₹16,934 crore in Indian equities till September 21, according to analysts. On Friday, FIIs cumulatively bought ₹10,840.20 crore of Indian equities, while they sold ₹12,166.94 crore — resulting in an outflow of ₹12,166.94 crore on September 22.

‘’The aggressive selling by FIIs, especially in heavyweights like HDFC Bank, Reliance, and ICICI Bank, is a crucial factor affecting the direction of the headline indices. However, the broader and primary markets are relatively stable, largely due to domestic liquidity,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Foreign portfolio investors (FPIs) have sold ₹10,164 crore worth of Indian equities and offloaded a total of ₹10,100 crore as of September 22, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data.

Rising bond yields in the US and strong dollar index are negative for capital flows. Strength in the US dollar index and the US 10-year bond yield remaining high are short-term negatives for foreign flows to emerging markets like India, according to analysts.

‘’Since valuations remain high even after the recent pull back and US bond yields are attractive ( the US 10-year bond yield is around 4.49 per cent) FIIs are likely to press sales so long as this trend persists. It would be irrational to expect the FIIs to buy aggressively when the US 10-year bond yield is around 4.49 per cent and the dollar index is above 105,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
 

Oil Prices:

Oil prices held steady on Friday but closed the week lower on profit-taking and as markets weighed supply concerns stemming from Russia’s fuel export ban against demand woes from future rate hikes.

Brent futures settled 3 cents lower at $93.27 a barrel. It fell 0.3 per cent in the week, breaking a three week streak of gains. US West Texas Intermediate crude (WTI) futures rose 40 cents, or 0.5 per cent, to $90.03 a barrel, as US oil rig counts fell. The benchmark fell 0.03 per cent for the week, the first decline in four weeks, according to news agency Reuters.

Russia temporarily banned exports of gasoline and diesel to all countries outside a circle of four ex-Soviet states with immediate effect in order to stabilize the domestic fuel market, the Russian government said last week.
 

Corporation Action:

Shares of companies including Bajaj Holdings & Investments, Semac Consultants, among few others will trade ex-dividend in the coming week, starting from Monday, September 25. Additionally, Hindustan Aeronautics Ltd will declare a stock split from ₹10 to ₹5 on Friday, September 29.  Check Full List Here

Technical View:

Nifty mostly had time-wise corrections in recent months but it has retraced half of the up move i.e. 19,200-20,200+ this time. The frontline index experienced consistent selling pressure throughout the week, resulting in a decline of 2.80 per cent from its all-time high. 

Nifty also slipped below the short term moving average (20 EMA) and holding below the same. It may result in possible consolidation in the index with the bias on the negative side, according to analysts.

‘’The sentiment appears bearish at this point, with a key support level identified at 19,600. A breach below 19,600 could potentially initiate a more significant market correction. On the upside, 19,800 is expected to serve as a resistance level,” said Rupak De, Senior Technical Analyst at LKP Securities.

Most analysts suggest investors to have higher allocation towards defensive and large-caps. ‘’We expect Nifty to hold the 19,200-19,550 zone while the 19,900-20,100 zone would attract selling. Meanwhile, since we are still seeing select packs showing resilience, participants should maintain stock-specific approach and maintain positions on both sides,” said Religare Brokings’ Ajit Mishra.

NSE Nifty experienced a decline of 500 points, or -2.57 per cent, in closing values on weekly chart. ‘’Given the negative signals on the daily chart, it would be a prudent strategy to consider buy on dip if it comes close to 19,500 and sell on rise if it goes to 19,900,” said Master Capital Services’ Arvinder Singh Nanda.

Swastika Investmarts’ Santosh Meena observes that the range of 19,640–19,580 is a critical demand zone where a bounce back is anticipated. ‘’Below 19,580, the 19,300–19,250 range will be the next important demand zone,” he said.

Additionally, the Bank Nifty index witnessed a significant double top breakdown pattern, which often signals a reversal in trend, according to analysts. It experienced a sharp correction with a double top formation at the 46,300 level. 

The index closed with a loss of more than 3.50 per cent and broke the previous week’s low price. The bearish pattern was largely influenced by selling pressure in HDFC Bank. Swastika’s Santosh Meena said that Bank Nifty is currently trading near the critical support of the 100-day moving average (DMA) at 44,500, where a bounce back is anticipated.

‘’The index breached its 20-day moving average (20DMA) located at 45,000. A break above this level could trigger some short-covering, but the overall sentiment remains bearish. The prevailing sentiment in the Bank Nifty index remains bearish. As a result, it’s advisable to maintain a “sell on rise” approach. The next immediate support is seen in the 44,500-44,400 range,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

Master Capitals’ Nanda observes that the index appears to have established a robust demand zone within the 43,800-44,000 range, making it an opportune area to initiate buying positions price drop to that level. ‘’Looking ahead, it’s important to note that there is a resistance level expected at 45800-46000, which could pose a challenge for further upward movement in the index,” he said. 

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

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Updated: 24 Sep 2023, 06:20 AM IST