Week Ahead Preview
Bulls supported the market for the fourth consecutive week ending March 7, with buying interest at lower levels. The benchmark indices reached a new high due to positive economic conditions, increased FII flow amid a fall in US bond yields, and rising hopes for a fed funds rate cut by June.
The positive momentum is likely to sustain in the coming week, with a buy on dip advisable despite possible consolidation and minor profit booking. The benchmark indices ended at a record closing high, with the BSE Sensex rising 313 points and the Nifty 50 climbing 115 points.
However, broader markets were under pressure due to profit booking and valuation concerns. Experts believe the money may be moving towards large caps due to the upcoming inflation data from the US and India.
Main Factors to watch
US Inflation
Globally, asset class market players will watch the February US inflation statistics on March 12. The Federal Reserve’s most crucial statistics before its March 19-20 policy meeting is CPI inflation, which most analysts expect to be around 3.1 percent and core inflation, which may drop from 3.9 percent.
Experts say recent weak US economic data, including downward revisions in jobs growth for December and January, rising unemployment, and falling US bond yields, may indicate a rate cut before June rather than later this year.
Global Economic Data
The February US PPI, retail sales, Japan’s GDP for the October-December quarter of 2023, and China’s car sales will also be discussed next week.
CPI Inflation
Returning to India, the February CPI inflation expected for March 12 is the main concern. Due to rising food and core prices, February inflation is predicted to be slightly above 5.1 percent, while core inflation is forecast to be slightly above 3.5 percent, the January figure, analysts said.
This data is crucial before the April 3-5, 2024 RBI policy meeting.
With food and core prices rising somewhat sequentially, we expect February CPI inflation to climb to 5.3 percent. Food costs are progressively falling as pricing pressures stay low. Since growth is strong, the RBI should stay put and not lower rates “Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics at Barclays.
Domestic Economic Data
Industrial and manufacturing production for January will also be reported on the same date, while WPI inflation for February (versus 0.27 percent in January) will be announced on March 14.
On March 11, passenger car sales statistics for February will be provided, and on March 15, the balance of trade and foreign exchange reserves for the week ending March 8.
Fii Flow
Apart from these data points, foreign institutional investors’ increased purchasing interest in stock markets will be important to follow, however Indian equities look to be less dependent on FII input given the growing and regular DII inflow.
After falling US bond yields and better-than-expected growth in the Indian economy in Q3FY24 (and better than other larger economies), FIIs net bought Rs 10,081 crore in cash in the truncated week ended March 7. Domestic institutional investors bought more shares, at Rs 10,129 crore.
US 10-year treasury rates decreased to 4.08 percent from 4.18 percent week-over-week, while the dollar index declined to 102.74 from 103.86.
Petroleum Prices
For a month, Brent crude futures, the international oil benchmark, have hovered between $80-84 a barrel. It tried to hold over $84 a barrel multiple times since February but failed to close, which supported India, the net oil importer. In the following week, experts predict consolidation to continue due to US economic slowdown and Chinese demand concerns.
Brent oil futures fell 1.76 percent to $82.08 a barrel on heavier volumes.
IPO
Seven IPOs and eight company listings will keep the primary market robust this week. RK Swamy, JG Chemicals, and Gopal Snacks will list their equity shares on the bourses on March 12, 13, and 14, respectively.
SME IPOs include Pratham EPC Projects on March 11, Signoria Creation and Royal Sense on March 12, AVP Infracon on March 13, and KP Green Engineering on March 15. On March 12, V R Infraspace will list, Sona Machinery on March 13, Shree Karni Fabcom and Koura Fine Diamond Jewelry on March 14, and Pune E-Stock Broking on March 15.
Next week, Gopal Snacks, Shree Karni Fabcom, and Koura Fine Diamond Jewelry will conclude IPOs in the mainboard and SME segments, respectively. The Pune E-Stock Broking IPO closes March 12.
Technical View
Technically, the Nifty 50 is solid with higher highs, good momentum indicators, and above all important moving averages. Experts expect the index to rise to 22,600-22,700 levels in the following days, with support at 22,200.
After a breakthrough, Nifty firmly soared over the upward-sloping resistance trendline and defended the 10-day EMA. The approaching sessions may see resistance at 22,600-22,700 and support at 22,200-22,100 “Master Capital Services senior vice president Arvinder Singh Nanda said.
India VIX, F&O Cues
Options data showed that 22,500 will be critical to market direction, with a barrier at 22,700 and support between 22,400 and 22,000 zones.
The Call side had the most open interest at 22,500 strikes, followed by 23,000 and 22,700 strikes, with writing at 22,500, 22,900, and 22,700 strikes. The Put side had 22,500, 22,400, and 22,000 strikes, with writing at 22,500, then 22,400.
The volatility drop increased bulls’ confidence. Experts claimed falling volatility may reassure bulls, but increasing again toward 16 may cause market consolidation and correction. The fear measure India VIX plunged 9.2% to 13.61 this week.
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