Week Ahead: RBI Policy, Q3 Results, macro data, global cues among key market triggers this week

Domestic equity benchmarks BSE Sensex and Nifty 50 logged their best week in 2024 so far, as the government’s fiscal prudence in Interim Budget 2024 boosted sentiments. The benchmark Nifty 50 index hit an all-time high for the fifth time this year on Friday, driven by gains in heavyweights such as Reliance Industries and information technology (IT) stocks.

Also Read: Nifty February series outlook: 4 stocks where investors can park their money; do you own?

Markets rebounded after spending two weeks in a corrective phase and gained around two per cent, led by favorable cues. The tone was positive for most of the week citing favorable global cues and buying in select heavyweights however underperformance of banking majors continues to weigh on the sentiment.

The frontline indices hit new highs led by large-cap stocks like Reliance Industries, which logged its best week since June 2022. On the weekly basis, the BSE benchmark jumped 1,384.96 points or 1.95 per cent, and the Nifty climbed 501.2 points or 2.34 per cent.

The BSE benchmark declined 106.81 points or 0.15 per cent to settle at 71,645.30 on Thursday when the finance minister presented Interim Budget 2024 in the Parliament. The Nifty 50 dipped 28.25 points or 0.13 per cent to 21,697.45 on February 1. PSU bank surged over two per cent on account of the 10-year G-Sec yield falling to an eight-month low at 7.04 per cent after the finance minister announced a lower borrowing plan.

‘’With US Fed and Interim Budget now behind, all eyes will be on RBI’s policy meeting next week. We expect the central bank to maintain its status quo. Overall we expect the market to remain in positive territory as sentiments remain high amid commendable delivery on budget,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

Also Read: Bulls tighten grip over OMCs after ₹15,000 crore capex infusion; IOC, BPCL, HPCL hit 6-9% upper circuit

Going forward, a busy week awaits the primary market as some new initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segments. The upcoming week will be crucial from the domestic and technical point of view as investors will closely eye the corporate results along with the central bank’s policy and global cues.

Overall, analysts expect volatility to remain high due to the prevailing earnings season and the RBI’s policy verdict, but expect that Nifty 50 can mark the next leg of the up move towards 22,500 if it sustains above 22,150 upon stability in the banking index. Experts also noted that stock-specific approach may continue despite market consolidation.
 

Here are the key triggers for stock markets in the coming week:
 

RBI MPC Meeting:

Amid expectations that the central bank will keep the benchmark interest rates unchanged, the rate-setting monetary policy panel will begin deliberations in the coming week. Headed by RBI Governor Shaktikanta Das, the six-member MPC will meet for three days – from February 6 to February 8, and the decision will be announced on February 8 at 10 am by the RBI Governor.

The RBI has kept the repo rate unchanged at 6.5 per cent since February 2023. This will be the central bank’s last MPC meeting for fiscal 2023-24. In the run-up to the MPC decision, rate-sensitive stocks will be in focus throughout the week.

The market largely expects the central bank to continue its current stance after the US Federal Reserve retained its key interest rates unchanged for the fourth straight meeting on January 31 and also knocked down prospects of rate cuts in March.

Q3 Results:

The ongoing Q3FY24 earnings season will be a major factor in driving the market movement. Some major companies will announce their quarterly numbers such as Apollo Hospital, Bharati Airtel, Britannia, Power Grid, Nestle, Lupin, Grasim, Ashok Leyland, LIC, Apollo Tyres, IRFC, Tata Power among others.

‘’Earnings growth and demand is sustained this quarter, with optimism continued for Indian corporates business performance. IT sector companies reported mediocre performance while banks reported better performance than expected. Real estate sector continues to boom while consumer sector struggled for growth for another quarter due to weak rural demand,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

5 new IPOs, 6 listings to hit D-Street:

In the mainboard segment, Apeejay Surrendra Park IPO will open for subscription on February 5. Rashi Peripherals IPO, Jana Small Finance Bank IPO, and Capital Small Finance Bank IPO will open for bidding on February 7. In the SME segment, Alpex Solar IPO will open for subscription on February 8.

Among listings, shares of BLS E-Services will debut on stock exchanges BSE, NSE on February 6. On February 5, shares of Megatherm Induction will get listed on NSE SME and shares of Harshdeep Hortico, Mayank Cattle Food will debut on BSE SME. On February 6, shares of Baweja Studios will get listed on BSE SME. On February 7, shares of Gabriel Pet Straps will debut on BSE SME.

FII Activity:

Foreign institutional investors (FIIs) were buyers for three out of five sessions last week with a total divestment of ₹2,008.68 crore, while domestic institutional investors bought for all sessions with a total investment of ₹10,102.62 crore, according to stock exchange data.

Foreign portfolio investors (FPIs) started February on a positive note, snapping January’s selling streak, driven by global cues. FPIs have sold ₹2,053 crore worth of Indian equities and the total outflow stands at ₹7,099 crore as of February 2, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data.

‘’Going forward, 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. ‘’Since the US bond yields have again corrected sharply, FPIs are unlikely to sell in large volume in February. They may even turn buyers. The inflows into the debt market are likely to continue,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Global Cues:

Global markets are currently showing positive signs, with the Nasdaq up two per cent and the Dow Jones up 1.22 per cent in January 2024. US 10-year bond yields and the dollar index are also cooling off, which gives strength to the market. These factors will be closely monitored, as they have the potential to influence market sentiment, according to analysts.

The crude oil prices fell as part of negotiations between Israel and Hamas, which could be an important step towards ending the conflict. On the other hand, despite a production cut by the Organisation of Petroleum Exporting Countries (OPEC), prices of crude oil are under pressure due to China’s fear of demand.

‘’Data like US non-farm payroll data and the unemployment rate for January will also be eyed by investors. The US ISM services PMI for January will be declared on February 5, 2024. These factors will be closely monitored, as they have the potential to influence market sentiment,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.

The market will react to major global economic data such as US trade balance, initial jobless claims, China’s inflation numbers, S&P global Services PMI of UK along with the movement of rupee against dollar.

‘’On the global front, the steady uptrend in the US markets will continue to favor the bulls and we maintain our target of the 39,000 mark for the Dow Jones Industrial Average (DJIA),” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.

Oil Prices:

Oil prices fell by about two per cent on Friday and posted weekly losses after US jobs data shrank the odds of imminent interest rate cuts in the world’s largest economy, which could dampen crude demand. Faltering growth in China and the possibility of some easing of tensions in the Middle East also reduced prices.

Brent crude futures settled at $77.33 a barrel, shedding $1.37, or 1.7 per cent. U.S. West Texas Intermediate crude futures settled at $72.28 a barrel, falling $1.54, or two per cent. Both benchmarks lost roughly seven per cent on the week, according to news agency Reuters.

High interest rates, which tend to dampen economic growth and oil demand, in major economies like the US and the euro zone appear to be here to stay in the near term. The weekly loss for oil prices was already in motion after unsubstantiated reports of a ceasefire between Israel and Hamas caused prices to settle more than two per cent lower on Thursday.

Corporate Action:

Shares of several companies, including ITC, Hindustan Petroleum Corporation Ltd (HPCL), Gillette India, NTPC, Sun Pharmaceutical Industries, GAIL, RITES Ltd, Mahanagar Gas Ltd, and many others will others will trade ex-dividend in the coming week, starting from Monday, February 5. Some other companies will also trade ex-bonus and ex-split in the coming week. Check full list here

Technical View:

Nifty 50 has been maintaining a positive tone amid the consolidation phase and needs a decisive close above 22,150 to mark the next leg of the up move towards 22,500+ else range bound bias would continue, according to analysts.

‘’While all the key sectors are playing their part, consistency in the banking majors would be critical for a steady uptrend. Meanwhile, traders should continue their focus on sectors/themes like energy, auto, IT, metal & pharma which are playing out well and stay selective in midcap and smallcap space,” said Religare’s Ajit Mishra.

Swastika Investmarts’ Pravesh Gour agreed that Nifty 50 has recently reached a new all-time high, reaching 22,126. However, for sustained upward momentum, it’s crucial for the index to maintain this level; otherwise, it might revert to a sideways trend. 

‘’Above the 22,126 mark, the next targets will be 22,350 and 22,500.Conversely, on the downside, the range between 21,640 and 21,500 presents an immediate demand zone,” added Gour.

The Bank Nifty bears regained control as the index failed to surpass the crucial level of 46,500 on a closing basis. The immediate support for the index is situated at 47,700, and a breach below this level is anticipated to intensify selling pressure, potentially pushing the index towards the 45,000 mark. 

‘’Given the heightened volatility in the near term, traders are advised to approach the market with caution and implement strict risk management measures to navigate potential fluctuations,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 04 Feb 2024, 06:02 AM IST