Macro data, IPO action, FII activity, global cues to guide market direction

Domestic markets extended their bullish tone for the third successive week and gained over a per cent. The beginning was downbeat but the bias changed in the following sessions with a surge in the US markets.

The NSE Nifty 50 index gained 1.58 per cent this week, its best in two months, while the Sensex rose 1.37 per cent. Stocks of IT companies, which earn a significant share of their revenue from the US, climbed 5.07 per cent, their best week in 16 months. The more domestically-focussed small- and mid-caps hit fresh record highs, and outperformed the benchmarks on the week, aided by retail inflows.

Shares of banks and NBFC firms fell sharply after the Reserve Bank of India (RBI) tightened norms for consumer credit as it asked them to assign a higher risk weight for unsecured personal loans, a move aimed at making the lenders more cautious about such advances.

On Friday, frontline indices indices ended in red over weak cues from the Asian markets and witnessed extremely volatile trading trends. However, the broader market outperformed the benchmark indices in the session.

Also Read: These 50 smallcap stocks rose 15-50% as Sensex logs third weekly gain led by IT; do you own?

The 30-share BSE Sensex ended lower by 187.75 points or 0.28 per cent at 65,794.73 level while the Nifty 50 closed at 19,731.80 level, down 33.40 points or 0.17 per cent. The broader market closed inched higher than the benchmark indices on Friday’s session, the Nifty Midcap 100 closed 0.20 per cent higher and Nifty Smallcap ended flat or 0.09 per cent higher.

“The domestic markets ended the week on a positive note, buoyed by global cues and favourable Indian macroeconomic indicators hinting at controlled inflation. Softer-than-expected inflation figures in the US, UK, and at home bolstered investor optimism, fueling hopes for an end to the interest rate cycle. This sentiment propelled gains across the broader market, particularly in small and mid-cap stocks.,” said Vinod Nair, Head of Research at Geojit Financial Services.

‘’Confidence in export-oriented sectors like IT and Pharma resurged, anticipating increased spending, while the auto and real estate sectors gained favour during the festival season. The market is anticipated to maintain its positive momentum in the short term, supported by declining oil prices and moderating US yields,” added Nair.

Going forward, a busy week awaits the primary market as some major initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segments. The week will be crucial from the domestic and technical point of view as investors will closely eye the global cues along with domestic economic data.

Overall, analysts believe that global trends are largely dictating the market direction and will continue to keep investors on their toes in the coming week as well. Nifty 50 is likely to take support net positive foreign capital inflow along with sharp decline in oil prices and moderation of US bond yields.
 

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

6 new IPOs, 1 listing to hit D-Street:

In the mainboard segment, five new IPOs are opening for subscription in the coming week. IREDA IPO will open for bidding on November 21.

Tata Technologies IPO, Gandhar Oil Refinery India IPO, Fedbank Financial Services IPO, and Flair Writing IPOs are opening for subscription on November 22.

In the SME segment, Rocking Deals Circular Economy IPO will open for subscription on November 22. Among new listings, shares of Sunrest Lifescience will get listed on NSE SME in the coming week.

FII Activity:

Foreign institutional investors (FIIs) snapped their selling streak on November 15 after US consumer price index (CPI)-based inflation eased in October, leading to a significant decline in US 10-year bond yields to 4.45 per cent.

However, the total foreign capital outflow stands at ₹7,630 crore in the first fortnight of November. The domestic institutional investors (DIIs) won the tug of war and remained net buyers in the first 15 days of the month.

Foreign portfolio investors (FPIs) have finally reversed their selling streak this month after being net buyers till November 15. During August, September October and till November 15, FPIs cumulatively sold stocks for ₹83,422 crore through the exchanges.

‘’FIIs observed some buying activity in recent days, and there is potential for an acceleration in their buying momentum amid the declining US bond yields and the dollar index,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Global Cues:

US inflation declined sharply in Oct to 4.6 per cent from 6.7 per cent encouraging markets and reducing the risk of further rate cuts by Federal Reserve in the near term. ‘’This might attract FII flows towards emerging markets amid the increase in festive demand and good quarterly earnings season,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

The domestic market will take cues from US existing home sales, initial jobless claims, US manufacturing and services PMI, Federal Open Market Committee (FOMC) minutes, UK manufacturing and services PMI. Investors will also focus on US bond yields, crude oil inventories, and the movement of rupee against the dollar.

‘’Global cues are largely dictating the trend and we expect this trend to continue in the coming week as well. Among all the major indices, the US markets are showing noticeable strength and have recovered considerably in the last three weeks,” said Ajit Mishra, SVP – Technical Research, Religare Broking

‘’The Dow Jones Industrial Average (DJIA) may take a breather after the recent upmove however we expect the tone to remain bullish. The next major hurdle would be at the previous swing high i.e. 35,679 and any dip in 34,300-34,600 zon would attract buying interest,” added Mishra.

Oil Prices:

Oil prices jumped more than 4 per cent on Friday, rebounding from a four-month low hit in the previous session, as investors who had taken short positions took profits and while US sanctions on some Russian oil shippers lent support.

Brent crude futures settled up $3.19, or about 4.1 per cent, at $80.61 a barrel, while West Texas Intermediate crude (WTI) rose $2.99, or 4.1 per cent, at $75.89, according to news agency Reuters.

Some of the losses were offset after the US imposed sanctions this week on maritime companies and vessels for shipping Russian oil sold above the Group of Seven’s (G7) price cap.

Still, both benchmarks ended the week more than 1 per cent lower, their fourth straight weekly decline, mostly weighed down by a rise in US crude inventories and sustained record high production. 

The OPEC+ group, comprising of the Organization of the Petroleum Exporting Countries and its allies, is set to consider whether to make additional oil supply cuts when the group meets on November 26.

Corporate Action:

Shares of several companies will trade ex-dividend in the coming week including Coal India, Oil and Natural Gas Corporation (ONGC), Oil India, Aurobindo Pharma among others will trade ex-dividend in the coming week, starting from Monday, November 20. Tata Consultancy Services (TCS) will declare a buyback of shares on November 24. Check full list here

Technical View:

On the domestic front, investors may see some consolidation in Nifty after testing 19,850 however the bias would remain positive, according to investors. ‘’A decisive breakout above that level would help the index to inch toward the record high i.e. 20,222 levels. On the downside, the 19,300-19,500 zone would offer a cushion in case of any dip,” said Religare’s Ajit Mishra.

Swastika Investmarts’ Santosh Meena said, ‘’From a technical standpoint, Nifty currently finds itself in a brief consolidation phase, encountering a significant obstacle around the 19,850 mark before a potential substantial upward surge.”

‘’Amid all, the underperformance of the banking pack may continue to weigh on the sentiment however buoyancy in other sectors would continue to offer buying opportunities. Besides, traders can selectively look for long trades from the midcap and smallcap pack too,” added Ajit Mishra.

Bank Nifty exhibits underperformance, yet a compelling demand zone emerges at 43,400–43,300, marked by the convergence of the 20-day Moving Average (20-DMA) and the 200-day Moving Average (200-DMA), suggesting a potential rebound.

“Following the RBI’s announcement of tightening provisions for consumer loans, Bank Nifty’s next support is situated at the 43,300-43,250 zone, serving as a crucial line of defense for the bulls,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities

‘’If this level holds, it could pave the way for a potential recovery towards the 44,000 mark. However, a breach of the mentioned support may intensify selling pressure, leading the index further down towards the 42,700 level on the downside,” added Shah.

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: 19 Nov 2023, 06:12 AM IST