Dalal Stree
CPI statistics and FII attitude, FOMC minutes are among the top 10 reasons driving Dalal Street sentiment this week.
The short-term trajectory of domestic equities is perceived as poor after losses in the previous week, and investors may wait for new clues as the earnings season comes to an end.
As a result, range bound trading may be observed in indexes in the shortened week to come.
Due to Independence Day, the stock markets are closed on Tuesday.
As the trading week gets shorter, a number of things will affect market dynamics. In the coming days, market patterns will be significantly shaped by macroeconomic indicators, currency volatility, and FII activity, according to Santosh Meena, head of research at Swastika Investmart.
Next week’s top 10 factors
Domastic Data
With the market closing on August 15, several macroeconomic variables will affect market dynamics in the holiday-shortened week. In the next days, India’s WPI, July retail inflation statistics, exports, imports, and forex reserves will be watched.
RBI’s rate-setting council anticipates headline inflation to rise in the coming months, raising the FY24 CPI inflation goal to 5.4 percent from 5.1 percent.
Pharma and IT sectors led moderate weekly advances. However, economic data and RBI policy announcement uncertainty hampered significant changes. “Inflation worries resurfaced as the RBI raised their CPI forecast by 30 bps to 5.4 percent, increasing the potential for a prolonged rate-cut trajectory,” said Geojit Financial Services Head of Research Vinod Nair.
Monday, August 14, will see the final April-June quarter numbers. The June quarter results of ONGC, Nykaa, Aurobindo Pharma, Muthoot Finance, Glenmark Pharma, and others will start the week.
CPI Inflation
Market players will keenly scrutinise the July CPI data due on August 14, which is projected to exceed the RBI’s 6 percent threshold due to high vegetable costs. The RBI boosted its current financial year inflation projection to 5.4 percent from 5.1 percent on August 10 and revised Q2 and Q3FY24 statistics higher.
Perishable vegetable costs, driven by tomatoes, increased CPI inflation to 6.3 percent YoY in July. “Underlying core inflation remains broadly contained, but we expect the RBI to remain cautious and keep policy rates on hold,” said Barclays MD & Head of EM Asia (ex-China) Economics Rahul Bajoria.
WPI inflation for July and Balance of Trade figures for July will be issued on August 15. The week-ended August 11 foreign exchange reserves will be revealed on August 18.
FOMC Minutes
Global investors will closely scrutinise the August 16 FOMC meeting minutes, which may explain the July policy decision. The Federal Reserve hiked the fed funds rate by 25 bps in July and hinted at another rate hike this year.
“The markets remain cautious due to conflicting statements from Fed policymakers, which have clouded the outlook on monetary policy,” Ravindra Rao of Kotak Securities said.
Global Economic Data
After a tiny 0.2 percent increase in June, traders will also closely examine US retail sales data next week, China’s July retail sales and industrial output figures, and Europe, UK, and Japan’s monthly inflation reports.
FII Flow
Since the last week of July, FII net sellers helped fix Indian equity markets. Experts predicted equity markets could tumble more in future weeks if selling persists.
After buying for five months, FIIs net sold Rs 4,700 crore last week and over Rs 7,500 crore in August. Domestic institutional investors bought Rs 2,224 crore of shares this week to compensate.
Oil Prices
Supply tightening and unprecedented demand have sent oil prices up for seven weeks. Brent crude prices increased 0.66 percent to $86.81 a barrel this week. Rising oil prices are a worry for oil importers like India, but experts expect a technical correction in the coming days due to the constant rise in recent months before a further gain.
Technical View
The Nifty50 has established a bearish candlestick pattern with a tiny upper shadow on the weekly scale, making lower highs for a third week but trading inside last week’s range. Next week, watch the Nifty50’s closing support at an upward-sloping support trendline. Experts predict the index to find support at 19,300-19,000, 18,850-18,900, and 19,650-19,700 after breaking the same.
“Definitely there is a sign of weakness in the index for the short term and index could extend its correction but we believe that the downside in the market would be limited,” said HDFC Securities senior technical and derivative analyst Vinay Rajani, CMT.
F&O Cue
On the Option front, maximum Call open interest was at 19,600 strike, followed by 19,500 strike, then 19,800 strike. On the Put side, open interest peaked at 19,400 strike, followed by 19,500 strike, with writing at 19,400 and 19,300 strikes.
According to the analysis, the Nifty will trade between 19,300 and 19,600 in the next days.
“Both the Nifty and Bank Nifty index continues to face sell off and this trend will continue for the coming week,” said Rahul Ghose, Founder & CEO of algorithm-powered advising platform Hedged.
He expects Nifty to struggle past 19,650. He suggested a short straddle for the coming week at 19,500, where the Nifty index is experiencing the most suffering. Short straddle combines one short Call and one short Put of the same strike and expiry date.
After hitting a historic closing low in July, the India VIX rallied 14% in the following two weeks. Thus, whether the fear index continues to rise will be crucial.
Q1 Earnings
The earnings season is already in its final phase. ITC, Divi’s Laboratories, and Vodafone Idea are three of the major companies scheduled to announce their quarterly profits on Monday.
Career Points, Easy Trip Planners, Fiem Industries, Future Consumer, Globus Spirits, GMR Airports, Hindustan Copper, Jagran Prakashan, Meghmani Organics, PC Jeweller, and Wockhardt are just a few of the smallcap firms that will be publishing their profits.
IPO On Watch
Pyramid Technoplast’s Rs 153-crore public offering on August 18 and TVS Supply Chain Solutions’ Rs 880-crore IPO on August 14 will keep the primary market active. According to their IPO schedules, SBFC Finance and Concord Biotech will debut on August 16 and 18, respectively.
Shoora Designs will debut its Rs 2-crore SME issuance on August 17, while Bondada Engineering and Crop Life Science will launch on August 18. Shelter Pharma will end its offer on August 14, while Yudiz Solutions, Sangani Hospitals, and Srivari Spices and Foods will debut on the NSE SME on August 17 and 18.
Dollar Index
The movement of the dollar index will be widely monitored since it will influence how international institutional investors trade.
The dollar index net increased by 0.8% over the previous week. The index has risen 1.2% thus far in August, which has in some ways led to withdrawals from international investors.
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