Fiscal deficit, infrastructure production, and foreign exchange reserves are among the top 10 factors dictating Dalal Street’s mood this week.
After three weeks of gains, the benchmark indices fell more than 2.5 percent last week. This market downturn was caused by most industries underperforming, save PSU banks.
The Federal Reserve’s hawkish tone hinting at higher rates next year, aggressive sell-off by foreign institutions, correction in index heavyweights like HDFC Bank, and weak global cues dented market sentiment, but JPMorgan’s decision to include Indian government bonds in its bond index on the last day of the week helped PSU banks rise.
After a severe correction, the market is likely to consolidate with a negative bias in the coming week, with focus mostly on global cues (US GDP numbers, bond yields) due to the lack of major domestic data points. The scheduled monthly expiration of September derivative contracts may also cause
The BSE Sensex fell 1,830 points or 2.70 percent to 66,009, while the Nifty50 fell 518 points or 2.57 percent, its largest weekly loss since February, to 19,674.
Broader markets corrected as the Nifty Midcap 100 and Smallcap 100 lost 1.7 percent and 2.5 percent, respectively.
Next week’s top 10 factors
US economic growth
Globally, investors will watch the second-quarter economic growth statistics on September 28 and Fed Chair Jerome Powell’s address on September 29.
The second estimates for Q2CY23 showed 2.1 percent annual growth for the US economy, compared to 2.4 percent for advance estimates and 2 percent for the first quarter. Thus, whether the economy maintains its annualized 2% growth rate will be crucial.
Participants will also closely listen to the Fed chair’s speech for a strong signal about the interest rate hiking cycle’s peak. Last week, Powell predicted increasing interest rates through 2024.
Global Economic Data Points
Benchmark indices in the United States lost 2-4% in a week, dampening global mood.
“Global markets are facing challenges, particularly following the FOMC’s ultra-hawkish policy.” Technically, major indices such as the Dow Jones, Nasdaq, and S&P 500 are showing signals of a breakdown, potentially leading to a deeper drop in the US market,” said Swastika Investmart’s head of research, Santosh Meena.
In the absence of strong domestic events, foreign markets will provide investors with trade indications.
Oil Prices
The week saw the first weekly decline in four weeks, mainly due to fears of another US Fed funds rate hike, but also supported by possible supply tightening after Russia’s temporary ban on gasoline and diesel exports. Oil prices are expected to stay rangebound with a positive tendency in coming weeks, say experts.
After a three-week surge of over 11%, Brent crude futures finished at $93.3 a barrel, down 0.7 percent on profit taking.
FII Flow
After last week’s heavy selling due to the Fed’s hawkish tone and rising US 10-year treasury yields and dollar index, foreign institutional investor (FII) funds flow will be monitored. Even after the 2.7 percent market fall from record high, FII selling was sparked by high valuation worries. Given US bond yields and dollar index growth, experts predict FIIs to sell.
For the week ended September 22, FIIs net sold Rs 8,681 crore worth of cash segment shares, bringing the monthly outflow to Rs 18,261 crore. Domestic institutional investors (DIIs) bought Rs 1,940 crore worth of shares in the week and Rs 12,169 crore for the month.
US 10-year treasury yields rose 4.49 percent, the highest level since 2007, before settling at 4.44 percent, while the US dollar index, which tracks the US dollar against the basket of the world’s six currencies, rose to 105.58, the highest closing since November 2022, continuing its tenth consecutive week of gains.
Domestic Economic Data Points
On September 29, the August fiscal deficit, infrastructure production, and foreign exchange reserves for the week ended September 22 will be disclosed.
Current account and external debt figures for the June 2023 quarter will also be disclosed on the same date.
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
Last week, the Nifty50 breached its important 19,850-19,900 support level and finished at 19,674. Experts said the index may face resistance at 19,800-20,000 levels in the coming week if it recovers, but bearish sentiment may sell into any rally. The next critical support is 19,500-19,400, followed by 19,200 (the 20-week EMA).
Nifty50 has fallen below the short-term moving average (20 EMA, 19,770) and is holding below it. It may cause index consolidation with a negative skew “Religare Broking SVP-technical Research Ajit Mishra remarked.
He predicts Nifty holding at 19,200-19,550 and selling at 19,900-20,100.
F&O Cues
Based on weekly options data, 19,500 is projected to be important support, followed by 19,000 due to bearish mood, and 19,800-20,000 may be resistance.
Maximum Call open interest was at 19,800 strike, followed by 20,000 and 19,900 strikes, with meaningful Call writing at 19,800 and 19,700 strikes. Maximum Put open interest was at 19,000 strike, followed by 19,700 and 19,500 strikes, with Put writing at 19,000 and 19,600 and 19,700 strikes.
India VIX
Over the past few months, volatility has been modest but rangebound. India VIX, which forecasts Nifty50 volatility for the next 30 days, fell 2.22 percent to 10.66 levels and stayed within last week’s range.
IPO
Next week, 16 maiden public issues worth nearly Rs 4,000 crore will open for subscription, including JSW Infrastructure’s Rs 2,800-crore offer and Updater Services’ Rs 640-crore mainboard IPO on September 25-27. Valiant Laboratories’ Rs 152-crore IPO opens on September 27, while Vaibhav Jewellers’ Rs 270-crore closes on September 26.
Arabian Petroleum, Newjaisa Technologies, Inspire Films, Saakshi Medtech and Panels, and Digikore Studios will raise around Rs 400 crore in SME public issues from September 25–27.
Sunita Tools’ public offer opens September 26-28, Goyal Salt and City Crops Agro’s September 26-29, and Kontor Space’s September 27-29.
On September 27, E Factor Experiences, Vinyas Innovative Technologies, and Canarys Automations will launch its first public issues, followed by Vishnusurya Projects and Infra on September 29.
Organic Recycling Systems, Marco Cables & Conductors, Mangalam Alloys, and Hi-Green Carbon will close their public offerings on September 26 and 25, respectively.
Yatra Online will list on the bourses on September 29, while Chavda Infra and Holmarc Opto-Mechatronics will float on the NSE SME on September 25.
On September 26, Kundan Edifice will list on the NSE Emerge, Kody Technolab and Cellecor Gadgets on September 28, Master Components on September 29, and Techknowgreen Solutions on the BSE SME.
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