Dalal Street
Dalal Street -The following week is going to be interesting, as a slew of economic data is due to be released throughout the world.
After ranking among the top-performing stock indexes internationally in 2023, investors will be looking for a variety of triggers as stock markets begin 2024 at record high levels. According to various experts and industry watchers, the bull run in Indian financial markets is anticipated to continue in 2024 as foreign interest remains strong, with substantial purchasing forecast in both equities and debt markets.
Domestic cues, macroeconomic data, car sales numbers, October-December quarter (Q3FY24) updates, foreign capital inflows, and global signals are among the important stock market triggers in the first week of 2024.
Auto Sales, FOMC Meeting Minutes and 10 other factors that will sway D-Street this week
Here are ten crucial indicators to keep an eye on:
Automobile Sales
The new year will begin with the release of monthly vehicle sales statistics for December 2023 by original equipment manufacturers. As a result, car stocks will be scrutinized.
On a year-to-year basis, most analysts predict double-digit increase in two-wheeler sales, but flat-to-moderate growth in passenger, commercial vehicle, and tractor categories.
Data on the Domestic Economy
Furthermore, the S&P Global Manufacturing and Services PMI data for December will be revealed next week on January 3 and 5, with most analysts expecting slightly lower readings of 56 and 56.9, respectively, than in November.
Furthermore, foreign exchange reserves for the week ending December 29 will be released on January 5.
Also read: In the last ten years, January has been generally frigid for investors. Will there be a change in 2024?
FOMC Meeting Minutes
Globally, all eyes will be on the FOMC minutes from the December 2023 Federal Reserve meeting. Market players will be looking for clues about potential rate reduction in 2024.
The US Federal Reserve left the fed funds rate constant at 5.25-5.50 percent for the third meeting in a row in December, while hinting at three rate decreases (total 75 basis points) in 2024, owing to declining inflation. Economic growth is expected to reach 2.6 percent in 2023, up from 2.1 percent before, but 1.4 percent in 2024, down from 1.5 percent previously projected.
Data on the Global Economy
Aside from the FOMC minutes, global investors will be looking to manufacturing and services PMI statistics from developed countries. Furthermore, the US unemployment rate (which is likely to rise slightly in December, from 3.7 percent recorded in the previous month), non-farm payrolls, and JOLTs job openings and quits will be closely monitored.
Oil Costs
Oil prices, which fell dramatically in November and stayed rangebound in December, will also be watched by market players. The weekly charts showed that oil prices appeared to have made a temporary bottom in December, as prices returned from about $72 per barrel levels and hovered just below the 200-week EMA (exponential moving average). Furthermore, during the course of the year, prices frequently tested $70-72 per barrel but did not break through.
The fact that oil prices have stabilized below $80 per barrel is a huge benefit for oil-importing nations like India, and has thus worked as a strong supporting factor for equities markets since it relieves budgetary pressure.
Brent crude futures, the international oil benchmark, fell 2.2 percent last week to $77.04 a barrel. After a strong surge in the previous two years, prices fell 10.3 percent this year.
“We expect oil prices to fall as non-OPEC supply has increased in recent months and US production is near an all-time high of 13.3 million barrels per day.” OPEC+ production cutbacks have been inadequate to support prices, with benchmarks falling roughly 20% from their peak this year, according to Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas.
Flow of FII
Foreign institutional investors upped their purchasing interest in December to about Rs 32,000 crore, the highest monthly buying since February 2021, while domestic institutional investors purchased shares worth Rs 12,900 crore during the same month. They both contributed to the market setting a new high and gaining 8% over the month. The drop in US 10-year bond rates to 3.8 percent from 4.9 percent in the previous two months, along with rising expectations for a Fed funds rate decrease in 2024, has resulted in a rise in FII inflows.
However, in 2023, FIIs were net sellers to the tune of Rs 13,200 crore, vastly outperforming DIIs, who purchased Rs 1,68,988 crore in cash shares. Most analysts anticipate a considerable rise in flow from both the desk (FIIs and DIIs) in 2024.
“Because 2024 is expected to see further declines in US interest rates, FPIs are likely to increase their purchases in 2024 as well,” said Dr V K Vijayakumar, chief investment strategist at Geojit Financial Services.
IPO
The following week will be a quiet one for the mainboard category in the primary market. There will be no new IPOs in the SME sector, but seven businesses will make their market debut.
On January 1, Sameera Agro and Infra will list its equity shares, followed by AIK Pipes & Polymers on January 2, and Akanksha Power & Infrastructure, HRH Next Services, Manoj Ceramic, and Shri Balaji Valve Components on January 3.
In addition, Kay Cee Energy & Infra’s IPO will close on January 2 and its equity shares will be listed on January 5, while Kaushalya Logistics’ IPO will close on January 3.
A Technical Perspective
After a week of pullback, the Nifty 50 recovered and formed a powerful bullish candlestick pattern on a weekly basis. Furthermore, the index reached a new high of 21,800 during the week, but there was some profit-taking on Friday. Higher highs and lower lows were formed for the fifth week in a row, and higher lows were formed for the ninth week in a row, while momentum indicators RSI (relative strength index) and MACD (moving average convergence divergence) remained positive.
Technically, given the sharp gain in the previous week, the market may prefer to consolidate for a few more days, but after that, the index is predicted to break through the 21,800-22,000 zone in the next weeks, with the critical 21,600-21,300 region acting as a support, according to analysts.
“Immediate support is seen around 21,600, followed by 21,500, and strong support is seen around the week’s low around 21,300,” Angel One technical analyst Rajesh Bhosale said.
Despite the fact that prices are in unknown territory with no evident resistance, he believes that 21,850 followed by 22,000 represents an imminent barrier, given the overbought conditions. Traders should keep an eye on these levels and alter their tactics as needed, he said.
The F&O Cues and India VIX
Given the market’s high level of optimism, options data suggest that the Nifty 50 will face resistance at 21,800-22,000 levels in the near term and may also aim for the 22,500-23,000 zone in the short-to-medium term, with a support zone of 21,700-21,500 in the near term and 21,000 as critical support.
According to the first weekly options data for the January series, 22,000 strikes had the most Call open interest, followed by 22,500, 21,800, and 23,000 strikes, with notable Call writing at 23,000 strikes, followed by 22,000, 22,500, and 21,800 strikes.
The 21,500 strike had the most open interest on the Put side, followed by the 21,000 and 21,700 strikes. The writing was first noticed during the 21,500 strike, then at the 21,700 strike, and finally at the 21,200 strike.
Except for one week, volatility has progressively increased week after week since the market began to rise in November. This indicates that market players are too optimistic about the Nifty 50. As a result, some caution is advised at present levels, and profit booking cannot be ruled out in the near to medium term, according to analysts.
It is worth mentioning that the India VIX fear index rose 5.8 percent in the past week to 14.50 levels. It has increased by 33% since November.
Corporate Action
Some firms’ shares, notably Nestle India and a few others, will trade ex-split in the following week, beginning Monday, January 1, 2024. Other businesses will also trade ex-dividend and ex-bonus, and others have scheduled share buybacks for the following week. Next week, only one stock, Akshar Spintex Ltd, will trade ex-dividend.
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