Dalal Street
Given the optimism on Dalal Street, the market may rise further in the coming week to 22,000-22,100 levels on the Nifty 50, but intermittent consolidation cannot be ruled out, with the focus mostly on corporate earnings.
In the second week of the year, investors will be looking for many stock market triggers, including the ongoing October-December quarter results for fiscal 2023-24 (Q3FY24), domestic signals, macroeconomic indicators, primary market action, foreign capital inflow, crude oil prices, and stock-specific action.
Domestic equity indexes Sensex and Nifty 50 finished a two-week consolidation phase near the week’s high. The BSE benchmark rose 542.3 points, or 0.75 percent, throughout the week, while the Nifty 50 rose 183.75 points, or 0.84 percent. The Nifty 50 is currently only 100 points away from reaching another milestone of 22,000 points.
The US market:
US equities finished little changed on Friday, bouncing back and forth between tiny gains and losses, as mixed bank earnings offset lower-than-expected inflation data, which boosted optimism for Federal Reserve interest-rate reduction.
The Dow gained 0.34% last week, the S&P 500 gained 1.84%, and the Nasdaq gained 3.09%. The S&P 500 gained the most weekly percentage points since mid-December, while the Nasdaq gained the most since early November.
European stocks:
European markets finished higher on Friday as bond yields fell following dismal U.S. data that fueled expectations of early interest rate cuts from the Federal Reserve and other major central banks, while Airbus shares sparkled after reporting record annual aircraft orders.
The pan-European STOXX 600 index finished 0.8% higher, stopping a three-day losing skid and registering its highest single-day performance so far this year, albeit it ended the week flat.
Earnings of Corporations
The domestic corporate earnings season will be the main focus next week, especially after the strong start by technology companies last week. During the following week, around 200 firms will release their December quarter results, with a particular focus on Reliance Industries, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Hindustan Unilever, Asian Paints, LTIMindtree, IndusInd Bank, UltraTech Cement, and Jio Financial Services.
Angel One, Federal Bank, ICICI Lombard General Insurance, Jindal Saw, L&T Technology, Union Bank of India, Credo Brands Marketing, Network18 Media & Investments, TV18 Broadcast, ICICI Prudential Life Insurance, Innova Captab, Jindal Stainless, Polycab India, Poonawalla Fincorp, Hindustan Zinc, One 97 Communications (Paytm), RBL Bank, and IREDA, among others, will also report earnings.
Data on the Domestic Economy
On the economic front, India’s monthly wholesale inflation for December, as assessed by the Wholesale Price Index, will be revealed on January 15. Experts anticipate more increases in WPI inflation, which was 0.26 percent in November, the highest print in eight months.
On the same day, passenger vehicle sales and balance of trade figures for December will be revealed, while foreign currency reserves will be released on January 19.
Data on the Global Economy
On the global front, market participants will be watching China’s quarterly GDP and industrial capacity utilization statistics for Q4-CY23, which will be released on January 17. In the July-September 2023 period, China’s economy increased 4.9 percent year on year, compared to 6.3 percent in the preceding quarter. The International Monetary Fund forecasted 5.4 percent growth for the Chinese economy in 2023 in November, while the Organization for Economic Cooperation and Development (OECD) forecasted 5.2 percent growth.
Aside from that, the attention will be on US jobs data, Europe’s December inflation numbers, and retail sales for December in the US and China, with participants taking cues from ECB President Lagarde’s address.
The Red Sea
Global investors will also be watching the geopolitical issues with the Red Sea closely. On January 11, the United States and the United Kingdom launched numerous air strikes on Iran-allied Houthi militants in Yemen in response to Houthi rebel attacks on Red Sea shipping, intensifying Middle Eastern tensions that began with the Israel-Hamas war in October last year.
Following the US and UK airstrikes, several of the world’s major tanker companies, including Hafnia, Torm, and Stena Bulk, halted traffic toward the Red Sea, a critical trade gateway, on January 12 in response to an advisory from the Combined Maritime Forces, a multinational coalition led by the US. CNBC reported on the situation.
Oil Costs
With the increase of tensions in the Red Sea region following US and UK airstrikes in Houthi-controlled portions of Yemen, all eyes will be on oil prices. Brent crude futures traded above $80 per barrel intraday on Friday, eventually settling at $78.29, up from the week’s low of $75.26. Experts believe geopolitical conflicts will continue to bolster oil prices.
“Concerns about a broader Middle East conflict and potential direct involvement by Iran posed threats to output and flows in a region responsible for a third of the world’s crude production,” said Ravindra Rao, VP-Head Commodity Research at Kotak Securities.
He believes crude oil prices will remain sustained due to disruptions and the necessity for boats to divert, especially because Saudi Arabia has cautioned that recent measures by the US and its allies may inflame tensions.
Flow of FII
Following a major purchasing spree in December, foreign institutional investors’ flow into Indian shares has turned negative, possibly due to a rebound in US 10-year treasury yields (maybe due to higher-than-expected US inflation in December) and profit booking. Furthermore, as the market approaches the Union Budget 2024, the institutional flow will be vital to monitor.
FIIs net sold Rs 3,900 crore worth of shares in the week ended January 12, and their net selling in the cash segment was little more than Rs 600 crore for the month. The 10-year treasury yield in the United States rose above 4% during the week before closing at 3.94 percent on Friday.
Domestic institutional investors were net sellers for the month to the tune of Rs 438 crore, but they made a significant purchasing of Rs 6,858 crore in the cash segment this week, assisting the market to reach a new high.
5 new IPOs and 5 new listings on D-Street:
On the mainboard, the Medi Assist Healthcare IPO will go on sale on January 15, and the EPACK Durable IPO will go on sale on January 19. Shares of Jyoti CNC Automation will be listed on the stock exchanges BSE and NSE on January 16.
Maxposure IPO will be on sale on January 15, while Konstelec Engineers IPO and Addictive Learning Technology Limited IPO (Lawsikho IPO) will go on sale on January 19. Shares of IBL Finance will be listed on the NSE SME on January 16.
Shares of New Swan Multitech and Australian Premium Solar (India) will be launched on the BSE SME and NSE SME exchanges on January 18. Shree Marutinandan Tubes will also make its BSE SME debut on January 19.
Corporate Activity:
Some companies’ shares, notably Tata Consultancy Services (TCS), HCL Technologies, and a few others, will trade ex-dividend in the following week, beginning Monday, January 15. Other businesses will also trade ex-bonus, ex-split, and several have planned share buybacks for next week.
A Technical Perspective
The Nifty 50 eventually broke over a downward sloping resistance trendline around 21,750, triggering a new high of 21,928, with higher highs and lower lows continuing for the second straight session. For the seventh week in a row, the index has experienced bullish candlestick formation with long lower shadows and maintained higher highs.
As a result, technical analysts see the Nifty 50 moving towards the 22,000-22,100 range before entering a consolidation phase.
“Nifty successfully broke through the 21,800 resistance level, with 22,000 serving as a psychological barrier and 22,220 designated as the next target level.” On the downside, the 21,750-21,650 area represents the immediate demand zone, with 21,500 functioning as a critical support level, according to Swastika Investmart’s Santosh Meena.
Cues from F&O
On the weekly options front, the largest Call open interest was found at the 22,500 strike, followed by the 22,300 and 21,900 strikes, while considerable Call writing was noted at the 22,600 strike, followed by the 22,500 and 22,700 strikes.
On the Put side, the 21,700 strike had the most open interest, followed by the 21,000 and 21,800 strikes, with writing at the 21,700 strike, followed by the 21,800 and 21,000 strikes.
According to the aforesaid options data, the Nifty 50 is projected to find immediate support near 21,800-21,700, with an immediate resistance on the higher side at 22,000.
“On Monday, option activity at the 22,000 strike will provide clues about the Nifty’s intraday direction.” “After Friday’s close, the resistance for the Nifty shifts to 22,500 from 21,800,” said Ashwin Ramani, derivatives and technical analyst at SAMCO Securities.
Volatility climbed last week following a dramatic decrease the previous week, but it is still well below December’s peak of 16.47. The India VIX fear index rose 3.72 percent to 13.10 for the week ended January 12, after falling 12.91 percent the previous week.
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