Week Ahead Preview
The market may consolidate following a recent gain and remain cautious ahead of RBI policy in the next week, although experts say good global indications favor bulls.
In the first week of the month, investors will watch the current October-December quarter results for fiscal 2023-24 (Q3FY24), the RBI’s Monetary Policy Committee (MPC) meeting, foreign capital inflow, and other domestic and global cues.
The government’s budgetary discipline in Interim Budget 2024 lifted spirits, sending BSE Sensex and Nifty 50 to their best week of 2024. Friday saw the benchmark Nifty 50 index reach an all-time high for the fifth time this year, driven by Reliance Industries and IT firms.
Main Factors to watch
RBI Policy
Experts predict the Monetary Policy Committee to retain the repo rate at 6.5 percent with a less hawkish tone, but the comments will be closely scrutinized for signals about the rate cut cycle and growth-inflation trajectory.
“We expect the committee to maintain the monetary policy stance of a “removal of accommodation” despite deficit liquidity conditions, but the communication is likely to become less hawkish,” said Barclays MD & Head of EM Asia (ex-China) Economics Rahul Bajoria. He anticipates rate reduction in Q1 FY24-25.
Corporations Earnings
The October-December quarter results season, which has been inconsistent, is ending. In the next week, 1,200 firms will disclose their quarterly results scorecards, including Bharti Airtel, Britannia, Nestle India, Power Grid Corporation, Tata Consumer Products, Grasim Industries, Hero MotoCorp, Divis Laboratories, and ONGC.
Life Insurance Corporation, Lupin, FSN E-Commerce Ventures (Nykaa), Zomato, Honasa Consumer, Tata Power, Alembic Pharma, Ashok Leyland, Varun Beverages, Godrej Properties, Apollo Tyres, Manappuram Finance, Apollo Hospitals Enterprise, Biocon, Escorts Kubota, Patanjali Foods, PFC, Alkem Labs, Zydus Lifesciences, Aurobindo Pharma, and MCX India will also report quarterly
Domestic Economic Data
In addition to monetary policy and quarterly results, the street will watch the January services PMI data on February 5. India’s services PMI rose to 59 in December 2023 from 56.9 in November, and experts expect it to rise further in January.
Next week, January 9, bank loan and deposit growth for the fortnight ending January 26 and foreign exchange reserves for the week ended February 2 will be revealed.
Oil prices
The stock market was supported by low crude oil prices, which benefited oil importers like India. With greater volumes, Brent crude futures fell 6.8% after two weeks of increases. Prices fell due to expectations of increasing interest rates, sluggish Chinese growth, and unverified media reports of Israel-Hamas peace talks.
Price has been below $85 a barrel since November 2023, hovering below 200-day EMA, while $75 is a support. Oil prices will likely be rangebound, say experts.
Fii Flow
The week saw foreign institutional investors sell, possibly due to rising US bond yields to above 4% and costly equities market values. They sold roughly Rs 2,000 crore in cash shares last week, but domestic institutional investors acquired more than Rs 10,000 crore to offset the outflow.
The future “FPI inflows into the equity market will depend on the trends in the US bond yields and the equity market trends globally as well as in India,” said Geojit Financial Services Chief Investment Strategist V K Vijayakumar.
Since US bond yields have fallen strongly again, he expects FPI sales to be low in February. “They may generate sales. Inflows into the debt market will likely continue.”
IPO
Four IPOs will hit Dalal Street next week, starting with Apeejay Surrendra Park Hotels’ Rs 920 crore IPO on February 5 and Rashi Peripherals, Jana Small Finance Bank, and Capital Small Finance Bank on February 7. The segment will raise Rs 2,613 crore.
SME-related Alpex Solar IPO opens on February 8 and Italian Edibles closes on February 7.
Northern Arc Capital refiles IPO papers, raises issue amount to Rs 500 crore
On February 6, BLS E-Services will list on the bourses, while Mayank Cattle Food, Harshdeep Hortico, and Megatherm Induction will list on February 5. On February 6 and 7, Baweja Studios and Gabriel Pet Straps will launch.
Technical View
After failing to hold the new record high on Friday, the Nifty 50 reached 21,850. On the daily charts, the index has produced Shooting Star and Double Top trend reversal patterns at the top. Without a firm closing above the record high of 22,134, the index may resume consolidation with immediate support at 21,700 and key at 21,500, experts warned.
Technically, Nifty’s new high is a double top, and a close above 22,126 in February might spark a rally. Therefore, investors and traders can only gamble aggressively above the same level. The downside could see staggered purchasing next week at 21,500 “Jigar S Patel, Anand Rathi senior manager-equity research.
F&O Signals
Options data suggests that 22,100-22,100 will be a critical barrier for the Nifty 50, while 21,600-21,500 may be a support.
According to weekly options data, the greatest Call open interest was at 23,000 strike, followed by 22,700 and 22,200 strikes, with notable Call writing at 22,100, 22,800, and 22,200 strikes.
The 21,000 strike had the most open interest on the Put front, followed by 21,600 and 21,500 strikes, with writing at 21,600 and 21,900 strikes.
Bulls appeared strong and energetic. Nifty put writers were at 21,500 and 21,600 strikes, while call writers (bears) left at 21,700 and 21,800. This suggests index support has strengthened “SAMCO Securities derivatives & technical analyst Ashwin Ramani remarked.
He thinks option activity at 22,000 strike will indicate Nifty’s path next week.
Corporate Action
From Monday, February 5, ITC, Hindustan Petroleum Corporation Ltd (HPCL), Gillette India, NTPC, Sun Pharmaceutical Industries, GAIL, RITES Ltd, Mahanagar Gas Ltd, and others will trade ex-dividend. Other firms will trade ex-bonus and ex-split next week.
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