RBI MPC, Q1 results, macro data & more: Key triggers for stock markets this week

Domestic equity benchmarks Sensex and Nifty closed with decent gains on Friday (August 4), snapping their three-day losing run, amid positive global cues. Sensex closed 481 points, or 0.74 per cent, higher at 65,721.25 while the Nifty closed at 19,517, up 135 points, or 0.70 per cent.

HDFC Bank, Reliance Industries, Infosys, TCS and Bharti Airtel were the top contributors to the gains in the Sensex index. Mid and smallcap indices slightly underperformed the benchmark index on Friday. The BSE Midcap index closed with a gain of 0.65 per cent while the Smallcap index ended 0.66 per cent higher.

For the week, Sensex and Nifty fell 0.66 per cent each while the BSE Midcap index ended flat. The BSE Smallcap index clocked a gain of 1.51 per cent. 

‘’After the upbeat start, pressure in the middle pushed the index lower as the week progressed, however a rebound in the final session trimmed some losses…The majority of sectors traded in sync and edged lower wherein realty, FMCG and auto were the top losers. Amid all, the broader indices managed to outperform for yet another week and gained nearly a per cent each,” said Ajit Mishra, SVP – Technical Research, Religare Broking.

Analysts at Geojit Financial Services highlighted that the domestic market recovered from the impact of weak global cues, gaining support from positive domestic earnings led by IT and pharma stocks.

Going forward, a buzzing week awaits the primary market with two public issues to be rolled out for bidding. The week will also be crucial from the domestic point of view as the central bank is set to announce its interest rate decision. Hence, analysts expect markets to move in a broader range with some volatility.
 

Here are the key triggers for stock markets next week:

Amid expectations that the central bank will keep the benchmark interest rates unchanged, the rate-setting monetary policy panel will begin deliberations in the coming week. Headed by RBI Governor Shaktikanta Das, the six-member MPC will meet for three days – from August 8 to August 10, and the decision will be announced on 10 August at 10 am by the RBI Governor. The RBI has kept the repo rate unchanged at 6.5 per cent since February this year. This will be the central bank’s third MPC meeting for fiscal 2023-24.

In the run-up to the MPC decision, rate-sensitive stocks will be in focus throughout the week. The market largely expects the central bank to continue its current stance as India’s retail inflation ticked higher last month on rise in vegetable prices.

“The RBI takes into account CPI data to assess the domestic inflation dynamics and CPI inflation is on the higher side and is showing a tendency to move out of the comfort zone of the RBI. Therefore, the central bank is likely to continue with the repo rate unchanged and continue with its current stance of ‘withdrawal of accommodation.’ Overall, MPC is expected to adopt a hawkish stance,’’ said Umesh Mohanan, Executive Director & CEO, Indel Money.
 

Q1 Earnings, Macro Data

Investors will be busy analyzing corporate earnings in the coming week as the last batch of Q1FY24 results are set to be released. However, markets will begin the week by reacting to the June quarter results of Britannia, Bank of Baroda, Punjab and Sind Bank, among few others as these companies declared their quarterly results during the weekend or during post-market hours on Friday.

Some of the prominent companies reporting their Q1FY24 results in the coming week are: Adani Ports, Apollo Hospitals, Coal India, Oil India, IRCTC, Grasim, Hero MotoCorp, LIC, Hindalco, ITC, ONGC, among others.

On the macro front, market participants will be closely observing key numbers including the industrial production, retail inflation, and manufacturing production data, which will be released on August 11, 2023.
 

2 IPOs to hit D-Street

In the coming week, two initial public offerings (IPO) await the bourses in both main board and small- and medium-sized enterprise (SME) segments. These are as follows:

-TVS Supply Chain Solutions IPO will open for subscription on Thursday, August 10 and conclude on August 14. Shares will be listed on stock exchanges on August 24.
-Srivari Foods and Spices IPO will open for subscription on Monday, August 7 and conclude on August 9. Shares will get listed on NSE Emerge on August 18.

Additionally, shares of Oriana Power will tentatively get listed on NSE Emerge on August 11.
 

FII Inflow

Foreign institutional investors (FII) continued their selling streak in Indian equities for straight sessions last week amid weak global cues. Sharp gains in US bond yields and the US dollar weighed on stock market sentiment. Analysts noted that the Nifty corrected more than 680 points after making its all-time high at 19991 caused by sudden selling by FIIs.

‘’The negative sentiment can be attributed to the downgrade of the US rating and profit booking by investors who were concerned about high stock valuations. These concerns were also flagged by analysts. Additionally, mixed global economic data may have contributed to the cautious market sentiment,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services.

Additionally, foreign portfolio investors (FPIs) started August on a subdued note, while the inflows by the end of July came in lower than June 2023. FPIs sold ₹2,034 crore in Indian equities so far in August and infused a total of ₹46,618 crore in July taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data. 

During the last seven trading sessions FPIs sold stocks worth ₹8,545 crore in the cash market, according to analysts. Between March and July, FPIs have been net buyers of Indian equities in each of the five months, purchasing shares worth ₹15,530,800 crore and triggering a 14.15 per cent rise in Nifty 50 index.
 

Global Cues

Last week, Morgan Stanley upgraded India’s status to an overweight rating as it believes that the country is poised for substantial and sustained economic growth, at a time when the rest of the world is slowing down and downgrades China to an equal weight rating.

‘’Fitch’s decision to downgrade the US rating to AA+ from AAA weighed on investors’ sentiments which led to across-the-board selling in the stock market,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

China’s manufacturing PMI fell to 49.2 in July 2023 from 50.5 in June, the lowest in six months. Eurozone CPI inflation slowed for a third consecutive month to 5.3 per cent in July 2023 from 5.5 per cent in June.

The Eurozone economy GDP grew by 0.3 per cent in Q2, the recovery in demand was likely boosted by a moderation in inflationary pressures. US Manufacturing PMI came at 49 in July 2023 vs 46.3 MoM, signaling the softest decline in operating conditions in the manufacturing sector in three months, noted Nanda.

‘’The week began on a positive note, with hopes of an end to the policy tightening era due to cooling inflation worldwide. However, negative news about the US rating downgrade, weak factory activity data from the Eurozone and China, and prolonged FII selling triggered by rising US bond yields caused widespread worries across the globe,” said Vinod Nair, Head of Research at Geojit Financial services.

‘’Increased concerns over the US economy forced investors to flee in search of safe haven investments, leading to a surge in the dollar index,” added Nair.

The market will react to movement of the dollar index, US inflation data, US Initial jobless claims, and UK GDP data will come in the upcoming week, according to analysts.

‘’We are largely mirroring global counterparts and indications are pointing towards a further slide, which may put further pressure on our markets. However, the downside seems capped, citing strong support around the 34600-34900 zone in the key US index, Dow Jones Industrial Average (DJIA),” said Religare Brokings’ Ajit Mishra.
 

Oil Prices

Oil prices rose more than a dollar a barrel on Friday to record a sixth consecutive week of gains, after top producers Saudi Arabia and Russia extended supply cuts through September, adding to undersupply concerns.

Brent crude futures rose $1.10, or 1.3 per cent, to settle at $86.24 a barrel, while the U.S. West Texas Intermediate crude gained $1.27, or 1.6 per cent, to close at $82.82 a barrel. Both benchmarks hit their highest levels since mid-April on Friday, according to news agency Reuters.

Saudi Arabia has extended a voluntary oil production cut of 1 million barrels per day (bpd) to the end of September, keeping the door open for another extension. Russia has also elected to reduce its oil exports by 300,000 bpd next month.

“With the production cut extended, we anticipate a market deficit of more than 1.5 million barrels per day (bpd) in September, following an estimated deficit of around 2 million bpd in July and August,” UBS analysts wrote in a note. UBS added that it expects Brent prices to trade in the $85 to $90 per barrel range over the coming months, according to the news news agency.
 

Corporate Action

Shares of several companies including ICICI Bank, Power Grid, RITES, Bharti Airtel, Bharat Petroleum Corporation Ltd (BPCL), Castrol India, among many others will trade ex-dividend in the coming week, starting from Monday, August 6. Check the full list here.

Additionally, shares of Raghav Productivity Enhancers Ltd will trade ex-bonus on August 8, 2023 in the ratio 1:1. Shares of Mena Mani Industries Ltd will declare a stock split from ₹10 to Re 1 on August 11, 2023.
 

Technical View

Nifty fell sharply following the downgrading of the US credit rating from AAA to AA+, leading to a breakdown from the recent consolidation on the daily timeframe. The recent fall has pulled the index below the 21-day exponential moving average (EMA) for the first time since March 29.

Nifty has slipped below the support of short term moving average i.e. 20 EMA after five months and also breached the trend line indicating the loss of momentum now, according to Religare Brokings’ Ajit Mishra.

‘’We expect Nifty to consolidate in a broader range ahead wherein 19,100-19,300 would offer support in case of further decline while a rebound towards the 19,650-19,850 zone would attract profit taking again,” he added.

Rupak De, Senior Technical Analyst at LKP Securities agreed that 19,300 has acted as support, on an immediate basis. ‘’However, on the higher end, 19,566 is likely to act as a crucial resistance level. The sentiment is likely to remain weak as long as Nifty remains below 19,566. However, a decisive move above 19,566 could take the index towards 19,700-19,750. On the other hand, a failure to move above 19,566 could trigger selling pressure,” said De.

Additionally, Arvinder Singh Nanda of Master Capital Services noted, ‘’The Relative Strength Index (RSI) had previously been in the overbought zone, but it has now come down to 67, indicating a potential easing of bullish momentum,” said Nanda.

The 20-DMA (Daily Moving Average) located around 19,600 is a crucial resistance level that Nifty needs to overcome. ‘’If Nifty manages to close above its 20-DMA, it may indicate a resumption of bullish momentum,” said Pravesh Gour of Swastika Investmart.

However, there is a risk of Nifty falling further to the 18,888 level if it slips below the 19,300 support. Traders should closely monitor the price action around these levels to assess the market’s direction, according to analysts.

Overall, the market remains uncertain, and investors should closely monitor the support and resistance levels, technical indicators, and global economic developments to make informed decisions. 

Since analysts are seeing a mixed trend across sectors, they recommend that the focus should be on stocks that are showing relatively higher strength and maintain strict risk management citing intermediate volatility.

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: 06 Aug 2023, 06:49 AM IST