Week Ahead:- Markets are likely to stabilize this week owing to the Lok Sabha elections and comments on US and Indian inflation.
The Nifty 50 and Sensex lost 3% each last week due to heavy foreign institutional investor selling. The markets are expected to consolidate due to Lok Sabha elections and inflation commentary. Volatility remains high, with the India VIX at 18.5. Markets will take cues from Q4 results, global factors, and general elections news.
Key factors for upcoming week
Corporate Earnings
Next week, almost 200 firms will report. Zomato, Inox India, Varun Beverages, Bharti Airtel, PVR Inox, Radico Khaitan, Edelweiss Financial Services, Andhra Cement, Mankind Pharma, Power Finance Corporation, RVNL, Titagrah Rail Vikas Nigam, and Koukyo Camlin are significant ones.
Primary market activity
On May 15, Go Digit General Insurance will begin its mainboard IPO and end on May 17. Aadhar Housing Finance Limited and TBO Tek Limited will list May 15 on the bourses. Indegene Limited will list on the markets on May 13.
Rulka Electricals Limited, a SME, will accept subscriptions from May 16 to 21. Quest Laboratories Limited subscriptions begin May 15 and end May 17. Indian Emulsifier Limited will accept subscriptions from May 13 to 16.
Crude oil
Brent crude jumped to $82.79 per barrel as US crude stocks fell, indicating tighter oil supplies. “Additionally, expectations that the US Federal Reserve might cut interest rates later in the year also cheered energy demand, supporting oil prices,” said Pantomath Capital Advisors Private Limited Managing Director Mahavir Lunawat.
FII/DI data
FIIs sold Rs 82,800 crore in cash stocks and DIIs Rs 52,152 crore in equities last week. On the other side, FIIs acquired roughly Rs 61,264 crore worth of stocks, and DIIs purchased around Rs 69,354 crore worth. Heavy FII selling, and fears about the result of the impending general elections has added to the overall pressure in the markets, said Khemka.
Indian Inflation
The street will pay attention to the consumer price index (CPI) data announced by the National Statistical Office on May 13. In March, India’s CPI jumped 4.9 percent year-on-year. “We believe the Reserve Bank of India (RBI) will be in a wait-and-watch mode until the inflation is in the targeted range of 4 percent, before considering any rate cuts,” said Vikram Kasat, Head of Advisory, Prabhudas Lilladher.
US inflation
Traders will also shift their focus to the US CPI statistics for April, which are coming on Wednesday. During last week’s meeting, the Fed revealed a less-hawkish-than-expected posture, with Chair Jerome Powell ruling out rate rises and signaling that they are still leaning towards cuts.
Global cues
The European Central Bank (ECB) will hold its financial stability review on Thursday, which is when Japan will also disclose the preliminary estimates for its Q1 24 GDP.
The technical view
The Nifty 50 may continue last Friday’s rebound in the coming session given the persistent sell-off in the previous several days and creation of the Inside Bar candlestick pattern on the daily charts. But considering the strong bearish candlestick pattern with lower high formation on the weekly timescale, the general trend is predicted to be in favour of bears in the following week, unless the index sees a decisive close above 22,300 and persists above the same for a few days, analysts added. The immediate support may be at 21,900 and key support at 21,700.
“Thursday’s low coinciding with the 89 EMA at 21,900 serves as immediate support, followed by previous swing lows in the 21,800 – 21,700 range,” stated Rajesh Bhosale, Technical Analyst at Angel One.
On the upside, he considers the zone between the 20 and 50 EMA, around 22,200 – 22,300, poses a tough challenge. Traders are asked to observe these levels attentively and alter their trading tactics accordingly, he suggested.
F&O cues
Options data revealed that 22,500 is projected to be the major resistance point for the Nifty 50 in the coming week, with critical support at 21,500 levels.
On the weekly options front, the greatest Call open interest was found at 23,000 strike, followed by 22,500 and 22,800 strikes, with maximum Call writing at 22,800 strike, then 22,500 and 22,900 strikes. On the Put side, the 21,000 strike witnessed the most open interest, followed by 22,000 and 21,500 strikes, with maximum writing at 21,000 strike, then 22,000 and 21,600 strikes.
The bulls are in a tough situation presently as the volatility extended its northward excursion for 12 days in a row. India VIX, the fear index, increased 26 percent during the last week, and has climbed over 81 percent in the preceding 12 days.
Corporate action
Godrej Consumer Products has fixed the record date for its interim dividend of Rs 10 on May 14. Hindustan Zinc has fixed the record date for its interim dividend of Rs 10 on May 15. The record date for Tata Consultancy Services’ final dividend of Rs 28 is slated for May 16. Solara Active Pharma will undertake a rights offering of equity shares on May 15.
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