FOMC Meet, FII Flow, IPO action are among the top 10 factors dictating Dalal Street’s mood this week.
After falling into the red on the last day of trading in August, the markets swung back into the black from the beginning of September, and achieved highs never touched before. The record rise can be ascribed to robust industrial output for July, fall in August inflation print, decline in core inflation in the US, and the European Central Bank hints at a halt in rate hikes. Such favorable macro fundamentals helped the Indian market outweigh the spike in crude oil prices to a 10-month high.
Overall, the market sentiment is likely to stay upbeat in the coming week, too, with sector rotation in broader indexes, but some consolidation can’t be ruled out with attention largely on FOMC meeting outcome, experts said.
The main indices set record closing highs in the week ending September 15, with the BSE Sensex soaring 1,240 points or 1.9 percent to 67,839 and the Nifty50 rising 372 points or 1.9 percent to 20,192. The rise in trade spurred a wave of profit-booking in the broader markets amid mounting concerns over valuation, sending the Nifty Midcap 100 and Smallcap 100 indices down 0.4 percent and 0.14 percent.
Sectorally, there was good purchasing in auto, banking and financial services, technology, and pharma.
“The Nifty has been setting new highs over the previous few days on buoyant sentiment after the successful G-20 Summit which is likely to support India’s economy in the global arena. Further, lower CPI and wholesale inflation in India are soothing against the global inflationary backdrop,” Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, said.
He anticipates the general positive momentum to continue especially in the large-cap space while sectoral rotation is expected to be witnessed in the broader market.
Next week’s top 10 factors
FOMC Meet
The important element to watch out by global investors would be the outcome of two-day FOMC meeting expected to be released on September 20, followed by US economic projections. Most analysts assume that the Federal Reserve may decide to suspend interest rate hikes in the September meeting and may hold Fed funds rate in the range of 5.25-5.5 percent, but raise a likelihood of hike in November or December meeting.
Federal Reserve Chief Jerome Powell has constantly been stressing the central bank is prepared to hike Fed funds rate further if needed and plans to keep borrowing cost on the higher side till the inflation rises to the Fed’s 2 percent target.
In the latest data, the CPI inflation for August increased to 3.7 percent, from 3.2 percent in July, but core inflation (excluding energy & food prices) dropped to an annual rate of 4.3 percent, from 4.7 percent during the same period, while the retail sales growth of 0.6 percent came in ahead of expectations despite elevated prices, but experts feel the higher interest rates may be started hurting the jobs market with US unemployment rate in August rising to 3.8 percent, from 3.5 percent in July.
The US 10-year treasury yields remained higher at 4.33 percent, against 4.27 percent on week-on-week basis, while the US dollar index, which measures the value of US dollar against a basket of world’s leading six currencies, climbed above 105, the highest levels since March this year, post US retail sales and weekly jobless claims data.
Global Economic Data Points
Investors will also watch on the interest rate decisions by the Bank of England on September 21 and the Bank of Japan on September 22.
“The Bank of England (BOE) is likely to raise rates amid elevated inflation, while the Bank of Japan’s (BoJ) policy will be closely monitored after Governor Kazuo Ueda hinted at the possibility of ending negative interest rates earlier,” Ravindra Rao of Kotak Securities.
Oil Prices
Oil prices surged to a 10-month high on additional supply tightening by the OPEC+ nations and now experts are counting on $100-a-barrel rate in the approaching quarter if the Chinese economy demonstrates the recovery route in the December quarter 2023 after recent measures. Hence, market participants will keep a watch on the oil rates as India is a net oil importer and any substantial jump in prices from here on may damage the attitude.
Brent crude futures, the international oil benchmark, surged for the third straight week and closed at $93.93 a barrel last Friday, the highest level since November 2022, up 3.62 percent for the week. The prices climbed nearly 30 percent since June lows.
“We remain bullish on crude oil prices for medium to long term as stronger demand outlook from a robust Chinese industrial sector along with the OPEC+ production to keep market very tight in Q4-2023,” Mohammed Imran, Research Analyst at Sharekhan by BNP Paribas said.
FII Flow
Foreign institutional investors remained net sellers in the passing week also, though the outflow at Rs 747 crore was substantially less compared to prior weeks. Overall for September, they sold Rs 9,580 crore worth shares in the cash segment, but it did not impair the market momentum as domestic institutional investors compensated the FII outflow by buying over Rs 10,000 crore worth shares throughout the month.
Going ahead, FIIs may favor further profit taking given the valuation worries as the market is at historic highs, and also with the US bond yields at 4.3 percent and US dollar index above 105 mark, experts added.
Domestic Economic Data Points
Deposit and bank loan growth figures for week ending September 8, and
Foreign exchange reserves for the week ended September 15 will be issued on September 22.
Corporation Action
Shares of various businesses like Steel Authority of India (SAIL), Mazagon Dock Shipbuilders, Rail Vikas Nigam Limited (RVNL), Mastek Ltd, among several others will trade ex-dividend in the coming week, commencing from Monday, September 18. Check entire list here
Additionally, shares of J.B Chemicals & Pharmaceuticals will declare a stock split from ₹2 to ₹1 on September 18 and Power Finance Corp (PFC) will declare a bonus issue in the ratio 1:4 on September 21.
Technical View
The Nifty50 has established strong bullish candlestick pattern on the weekly charts and also there seems to be Three White Soldiers kind of pattern formation given the index rising for third week in a row and closing almost 20,200 levels. The consolidation is projected to be on cards after recent rise, with support at 20,000-19,900 levels. Until these support levels are acquiring hold, experts predict the index to confront resistance near 20,300-20,400 amid the likely consolidation, and above the same, 20,600-20,700 is plausible scenario, experts added.
“Since the Nifty has reached closer to its immediate hurdle of 20,300 and the banking index has also retested its record high, we may see some consolidation now,” Ajit Mishra, SVP – technical research at Religare Broking said.
On the downside, he says the 19,700-19,950 zone will operate as a support in case of any dip. And, a decisive break above 20,300 would assist the index to gradually advance towards 20,700, he said, while advising that traders should continue with the “buy on dips” approach and retain their attention on company selection.
F&O Cues
Option data also revealed that 20,200-20,500 is projected to be the resistance range for the Nifty50, with support at 20,000 mark.
On the weekly Options front, the maximum Call open interest was seen at 20,200 strike, followed by 20,300 & 20,500 strikes, with Call writing at 20,200 strike, then 20,500 strike, while the maximum Put open interest was at 20,100 strike, followed by 20,000 & 20,200 strikes, with meaningfull Put writing at 20,200 strike, then 20,100 strike.
“Option data suggests a shift in higher trading range in between 19,900 to 20,400 zones while an immediate trading range in between 20,000 to 20,300 zones,” Chandan Taparia, Senior Vice President | Analyst-Derivatives at Motilal Oswal Financial Services said.
India VIX
The volatility soared in first half to 12 levels, but calmed down below 11 mark in later half of the last week, providing extra reassurance for bulls that raised benchmark indices to new highs. Hence, the market may remain stable and favorable as long as the volatility stays low in coming weeks, experts suggested.
India VIX, which measures the projected volatility for next 30 days in the Nifty50, jumped by 1.14 percent from 10.78 levels to 10.90 levels on week-on-week basis.
IPO
The primary market will continue busy in the coming week with 10 IPOs opening for subscription and five companies making debut on the bourses. Sai Silks Kalamandir, and Signatureglobal India will be starting in September 20, with a price band of Rs 210-222 per share and Rs 366-385 per share, respectively, both will shut on September 22. Vaibhav Jewellers will be opened on September 22-26, with a price band of Rs 204-215 per share.
IPOs by Samhi Hotels, and Zaggle Prepaid Ocean Services will end on September 18, while the closing date for Yatra Online will be September 20.
In the SME segment, the initial public offerings of Hi-Green Carbon, Mangalam Alloys, and Marco Cables & Conductors will be opened on September 21 and closing on September 25, while the bidding for Organic Recycling Systems’ IPO will take place on September 21-26.
Madhusudan Masala, Techknowgreen Solutions, and Master Components’ public offerings will be announced on September 18 and will end on September 21, while Holmarc Opto-Mechatronics, Cellecor Gadgets, and Kody Technolab IPOs will be closing on September 20.
On the listing front, Jiwanram Sheoduttrai Industries will make its debut on the NSE Emerge on September 18, while Unihealth Consultancy and Meson Valves India will list shares on the NSE Emerge and BSE SME on September 21, while Jupiter Life Line Hospitals will be listing on the BSE & NSE on September 18, and EMS on September 21.
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