Dalal Street – With a focus on US bond yields and oil prices, experts expect market optimism to continue in the coming week and recommend buying-on-dips.
in this week.
Despite banking and financial equities being hammered by the Reserve Bank of India’s announcement to enhance risk weights for unsecured loans, the markets rallied for the third straight week ending November 17 with a 1% gain. Dalling crude oil prices and prospects of an end to the global rate hiking cycle due to falling inflation bolstered the optimistic trend.
Experts expect market optimism to continue in the coming week, focusing on US bond yields and oil prices and recommending buy-on-dips.
The BSE Sensex rose 535 points to 65,795, the Nifty50 206 points to 19,732, and the Nifty Midcap 100 and Smallcap 100 indexes 2 percent and 2.7 percent.
The weekly run-up included most industries except banking and financial services equities.
Swastika Investmart research head Santosh Meena believes US bond yields, the dollar index, crude oil prices, and institutional flows will determine the trend. He warned the market’s stability may be affected until state elections, when a trend may emerge.
Here are the 10 biggest factors to watch next week.
FOMC Minutes
The November 1 FOMC minutes will be watched by global markets. Given declining inflation, global investors and analysts will seek for more signs of a rate hike cycle halt. In November, the Fed held rates steady at 5.25-5.50 percent and focused on bringing inflation to 2 percent, reporting maximum employment, avoiding recession, trying to soften the US economy, and avoiding excessive policy tightening that could hurt the banking sector. Some experts predict the Fed to lower rates in the first half of 2024, not the second.
October US inflation was below market estimates at 3.2 percent, compared to 3.7 percent in September, fueling equities market gains in the week.
Domestic Economic Data
Foreign exchange reserves data for the week ended November 17 will be issued on November 24, but domestic economic data will be scarce.
Global Cues
With earnings and the holiday season coming to a conclusion, investors will turn to overseas markets to gauge the direction of domestic markets.
In the previous week, benchmark indices in the United States climbed more than 1-2%, while key Asian markets gained 1-3%.
Macroeconomic Indicators
The weekly retail sales and existing home sales for October will be reported in the United States on Tuesday, among other macroeconomic data points to watch.
The minutes of the November meeting of the US Federal Reserve will also be revealed on Tuesday.
Then, on Wednesday, weekly unemployment claims in the United States will be revealed, followed by the flash manufacturing PMI for November in France, Germany, the Eurozone, the United Kingdom, and the United States later in the week.
The IPO Market/Primary market
Six businesses will launch Rs 7,400 crore IPOs on Dalal Street, focusing market players on the primary market. The state-owned Indian Renewable Energy Development Agency will be the first to launch its Rs 2,150-crore initial public offering on November 21 and close on November 23 at Rs 30-32 a share.
Next four mainboard IPOs are Tata Technologies, Gandhar Oil Refinery India, Fedbank Financial Services, and Flair Writing Industries. Bidding begins on November 22 and ends on November 24.
Tata Technologies, situated in Pune, will raise Rs 3,042.51 crore through a public issue at Rs 475-500 per share, while Gandhar Oil Refinery India, a white oil maker, would raise Rs 500 crore through an IPO at Rs 160-169 per share.
Flair Writing Industries plans to raise Rs 593 crore from the maiden issue at Rs 288-304 per share, while NBFC Fedbank Financial Services plans to raise Rs 1,092.26 crore at Rs 133-140 per share.
In the SME segment, B2B re-commerce player Rocking Deals Circular Economy will open its Rs 21-crore public offering for subscription on November 22-24 at Rs 136-140 per share, and dryer producer Arrowhead Seperation Engineering will close its IPO on November 20.
Healthcare and personal care goods supplier Sunrest Lifescience will debut on NSE Emerge on November 20.
Fii Flow
The slowing in FII selling, especially after US bond yields fell and hopes that the Fed is done raising rates, bolstered equities market confidence, but strong DII figures imply that FIIs are losing impact.
Last week, foreign institutional investors sold Rs 215 crore worth of shares due to two-day buying interest, but local institutional investors bought Rs 1,580 crore, offsetting that. Even this month, they acquired Rs 7,700 crore in cash shares against FIIs selling Rs 6,575 crore.
US 10-year treasury yields finished at 4.44 percent on Friday, down from 4.64 percent week-over-week, while the dollar index fell to 103.82 from 105.86.
The dramatic drop in US 10-year bond yields was a turning point for the mother market and global stock markets. Markets now think the Fed is done raising rates and will incrementally discount rate reduction in 2024 “VK Vijayakumar, chief investment strategist at Geojit Financial Services, said the Fed may cut rates by mid-2024 if US inflation continues to fall. This can boost FPI into EMs like India.
Oil Prices
Market players will also focus on oil prices, which supported equities benchmark rallies. Oil, the biggest import risk for emerging markets like India, is falling due to demand concerns, rising US oil stocks, and expanding non-OPEC supplies.
Last week, Brent crude futures fell to a four-month low. Prices declined 1% to $80.61 a barrel, the lowest closing level since the second week of July, down about 13% from the October peak ($92.38).
Read: Analyst hotlists: HCL Tech, TCS, Infosys, Nifty IT index ready for breakout
Mohammed Imran, research analyst at Sharekhan by BNP Paribas, is negative on crude oil due to declining Asian and US demand and rising US commercial stocks.
Technical View
The market appears good technically as the Nifty stays above the falling resistance trendline for a third week, forms bullish candlestick patterns, and has higher highs and higher lows for a second week. Its 20-week EMA can support the Nifty50.
Experts say Thursday’s swing high of 19,875 may be a new sequence high.
“Buy the dip is likely to remain in favor as prices traded above 19600,” said Master Capital Services Senior Vice President Arvinder Singh Nanda. 19,600-19,500 should support the Nifty50 immediately. “We can expect a new high if it closes above 19,900. A dramatic collapse below 19,500 will signal a short-term trend reversal that might push Nifty to 19,300-19,100.”
Corporate Action
Axita Cotton is one of the companies with board meetings scheduled for next week, with a meeting on November 23 to evaluate and approve a bonus share issue.
Religare Enterprises shares will be in the spotlight when the Burman Group launches an open offer to purchase an additional 26% stake in the company from public shareholders on November 21. The offer price per share is Rs 235. The open offer will be available till December 5.
Mazagon Dock Shipbuilders shares will trade ex-date on November 20 for the company’s interim dividend of Rs 15.34 per share.
Coal India shares will trade ex-date on November 21 for the company’s interim dividend of Rs 15.25 per share.
Esab India’s interim dividend of Rs 32 per share will trade ex-date on November 24.
F&O Cues
Options data also showed that the Nifty50 may confront resistance at 19,900, which might decide its rise to 20,000-20,200, and support at 19,500.
Weekly options data showed the most Call open interest at 19,900 strike, followed by 19,800 and 20,500 strikes, with Call writing at 19,800 and 20,400 and 20,500 strikes.
On the Put side, 19,700 strike had the most open interest, followed by 19,500 and 19,000 strikes, with writing at 19,100 and 19,500.
Despite the Nifty’s 1,000-point surge, FIIs are 79% short index futures. Santosh Meena said this elevated level signals short-covering possibility.
Indian VIX
The volatility rose again this week, but it has been between 8-13 for several weeks. However, bulls maintained market leadership.
India VIX, which forecasts Nifty50 volatility for the next 30 days, rose 8.7% in two weeks to 11.83 on November 17.
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