Dalal Street
The RBI MPC, FII action, and Q1 results are among the top 10 reasons driving Dalal Street sentiment this week.
For the second week in a row, equities markets fell due to the US credit rating downgrade, FII selling, rising US bond yields, and weak Chinese and Eurozone industrial data.
Experts still think these reasons just gave an opportunity to book profits after the recent rally and expect the broad range bound action to continue in the markets with a focus next week entirely on RBI interest rate decision, while stock-specific action will continue given we are in the last leg of quarterly earnings season.
Selling in auto, banking & financial services, FMCG, and oil & gas stocks drove the BSE Sensex down 439 points to 65,721, but buying in technology companies reduced losses.
Nifty Midcap 100 and Smallcap 100 indexes gained 0.7 and 0.8 percent, respectively, outperforming benchmarks.
The RBI’s interest rate decision next week will be critical domestically. Thus, markets are expected to move in a broader range with some volatility,” said Motilal Oswal Financial Services head of retail research Siddhartha Khemka.
Next week’s top 10 factors
RBI Interest Rate Decision
Market investors will focus on the August 10 Monetary Policy Committee (MPC) interest rate decision more than earnings. Experts expect the RBI to maintain its monetary stance and repo rate at 6.5 percent. Vegetable price inflation worries necessitate this careful approach.
Inflationary pressures have intensified since the RBI decision. “Hence, the RBI should turn extra cautious at the upcoming MPC meeting,” said Pankaj Pathak, Fund Manager-Fixed Income at Quantum AMC, who expects the RBI to remain on hold and retain its policy stance as a removal of accommodation.
On August 11, industrial and manufacturing production for June, bank loan and deposit growth for the fortnight ended July 28, and foreign exchange reserves for August 4 will be announced.
US Inflation
Participants will follow August 10 US inflation statistics globally. Most worldwide experts forecast July inflation and core inflation to continue near June levels, which were 3 percent (the lowest since March 2021) and 4.8 percent compared to the year-ago period, respectively. Experts don’t expect inflation to drop below the Fed’s 2 percent long-term objective anytime soon.
Growth in the lower end of the range suggests inflation is unlikely to spike or dip below 2 percent. “We’re in a no-man’s land with stable macro indicators,” said Tata Mutual investment senior investment manager Chandraprakash Padiyar.
US Markets
Wall Street benchmarks fell again on Friday after the Fitch credit rating downgrade. Dow 30 closed at 35,065.60, down 150.27 points (0.43%), S&P 500 closed at 4,478.03, down 23.86 points (0.53%), and Nasdaq Composite closed at 13,909.20, down 50.48 points (0.36%).
Indian markets may follow US markets’ Friday closing on Monday. They will watch Dow Futures and GIFT Nifty futures on Monday. The latter predicts Nifty50 and Monday action.
Global Macros
This week, the US will provide trade balance, CPI, first unemployment claims, wholesale inventories, and consumer sentiment data. UK industrial, manufacturing, and GDP data will be released. China will report FDI, CPI, PPI, and trade balance. India will report industrial production.
Corporate Earnings
Adani Ports and Special Economic Zone, Coal India, Hindalco Industries, Grasim Industries, Hero MotoCorp, Apollo Hospitals, ONGC, and LIC will report June quarter earnings this week.
Bank of Baroda and Mrs. Bector’s Food Specialties’ Q1 earnings published Friday and during the weekend will also be watched by Wall Street.
This week, Bayer, Softbank, Foxconn, Sony, Disney, and Siemens will report earnings.
FII Flow
After buying since March, foreign institutional investors have turned net sellers in the Indian markets for August, especially after the US 10-year treasury yield rose above 4%, sending equities markets south.
FIIs net sold Rs 3,546 crore worth of shares in the first week of August, but DIIs compensated by buying more than Rs 5,600 crore worth of shares in the cash category last week.
The sharp rise in the US 10-year bond rate will hurt emerging market capital flows. “FPIs are likely to continue selling or at least refrain from buying if US bond yields remain high,” Geojit Financial Services Chief Investment Strategist V K Vijayakumar said.
Technical View
The Nifty50 bounced off 19,300 and closed the week over 19,500. The index has developed a bearish candlestick pattern with lower highs and lows for another week, thus a large upward is improbable until this formation is severely contradicted. Experts said range bound trade may continue till then, adding that 19,500 durability may be crucial for further up move.
“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,” said Religare Broking SVP-Technical Research Ajit Mishra.
F&O Cue
Weekly Option data showed that the Nifty50’s resistance level is 19,600–19,700, while its support is 19,400.
The maximum Call open interest was 19,600, followed by 20,000, with meaningful Call writing at 19,600 & 19,900 strikes, while the greatest Put open interest was 19,400, followed by 19,500, with meaningful Put writing at 19,500 & 19,400 strikes.
The India VIX, the fear index, spiked to 12 intra-week but finished at historic lows at 10.57, up 4.3 percent week-over-week, indicating stable markets.
IPO
TVS Supply Chain Solutions IPO will commence on August 10 and end on August 14, while NBFC SBFC Finance and biotechnology firm Concord Biotech will close their public issues on August 7 and 8, respectively.
Srivari Spices and Foods will begin its IPO on August 7–9 at Rs 40–42 per share, while Yudiz Solutions and Sangani Hospitals will end their public issues on August 8.On August 7, Noida-based super-speciality hospital chain Yatharth Hospital will become public. Khazanchi Jewellers will launch on the BSE SME on August 7, Zeal Global Services and Oriana Power on the NSE SME on August 9 and 11, respectively.
Oil Prices
Oil prices rose for a sixth week on restricted supply and rising demand. After Saudi Arabia extended its unilateral 1 million barrels a day oil output cut into September and Russia extended its cut into next month, Brent crude futures rose 2.2 percent to $86.24 a barrel on Friday.
“Due to supportive fundamentals, we believe the bullish momentum in crude oil will continue,” said HDFC Securities senior commodities analyst Saumil Gandhi. He recommended crude oil dealers to buy-on-dip.
Gold
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, said that Fitch’s downgrading of the US credit rating increased safe-haven demand for gold, while Morgan Stanley’s downgrade of China put pressure back on the metals. He said gold futures rose 0.17% to 59,527 and silver futures fell 2.13% to 72,478.
He suggested buying October gold futures at Rs 59,000 with a stop loss of Rs 58,500 to target Rs 59,800 and finally Rs 60,000. September Silver futures have support around Rs 71,000 and Rs 68,000 and resistance at Rs 74,000 and Rs 76,000. He expects silver to rise to Rs 74,000 soon.
ECONOMIC CALENDAR FOR WEEK AHEAD
F- FORECAST P- PREVIOUS
Wednesday, August 9, 2023
07:30 M3 Money Supply P- 10.7%
Thursday, August 10, 2023
00:30 Cash Reserve Ratio F- 4.50% P- 4.50%
00:30 Interest Rate Decision F- 6.50% P- 6.50%
00:30 Reverse REPO Rate F- 3.35%
22:00 Thomson Reuters IPSOS PCSI
(MoM) (Aug) F- 56.82
Friday, August 11, 2023
07:30 Bank Loan Growth F- 20.2%
07:30 Deposit Growth F- 13.2%
07:30 FX Reserves, USD F-607.04 B
08:00 CPI (YoY) (Jul) F- 4.81%
08:00 Cumulative Industrial Production
(Jun) F- 5.00% P- 4.80%
08:00 Industrial Production (YoY) (Jun) F- 1.0% P- 5.2%
08:00 Manufacturing Output (MoM) (Jun) F- 1.7% P- 5.7%
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