Markets week ahead: Wall Street likely to dictate trends in Indian equities; indexes rejig, F&O expiry among key factors

On Friday, Sensex and Nifty 50 halted their 3-day winning spree. The 30-scrip benchmark barely breathed above the 61,000 mark and closed at 61,002.57 lower by 316.94 points or 0.52%. Meanwhile, Nifty 50 pulled back from its psychological level of 18,000, to end at 17,944.20 below 91.65 points or 0.51%.

Overall, the weekly upside in Sensex is around 0.53%, and in Nifty 50 is about 0.49%.

Also, foreign institutional investors snapped their five consecutive days of buying to emerge as net sellers with an outflow of ₹624.61 crore on Friday. Similarly, domestic institutional investors (DIIs) took a U-turn from their four days straight buying spree to sell about ₹85.29 crore in the day.

However, broadly, both FIIs and DIIs are buyers in the week from February 13th to 17th, with an inflow of ₹6,088.48 crore and ₹2,820.39 crore respectively in Indian equities.

Meanwhile, the rupee continued to drop for the fourth day in a row against the US dollar on worries over surging U.S. yields. However, the downside was limited in the rupee due to likely intervention by RBI in the non-deliverable forward (NDF) market. The local unit closed at 82.83 against the greenback compared to the previous session’s print of 82.7175 per dollar.

What to expect in the week ahead?

According to Ajit Mishra, VP – of Technical Research, Religare Broking, markets continue to trade volatile amid mixed cues and ended with a gain of nearly half a percent. After the initial downtick, Nifty regained some strength in the middle, tracking favorable global cues and buying in select heavyweights. However, the profit-taking in the final sessions trimmed the gains and it finally settled at 17,944.20 levels. On the sectoral front, buoyancy in the IT and energy heavyweights kept the tone positive while banking and financials were under pressure. Meanwhile, the broader indices underperformed the benchmark and lost over a percent each.

Mishra pointed out that with all the major events behind us, the performance of the global markets, especially the US, will be in focus for cues. Besides, crude and rupee movements will continue to offer indications in between.

He added, “We do not expect any surprises from the global front however intermediate consolidation/profit-taking in the US markets may continue to trigger volatility in between. The recent underperformance of the banking and financial pack may continue so the participation of other sectors like IT, energy, FMCG, and auto could play a critical role ahead. On the index front, Nifty should hold 17,700 to extend the recovery and inch towards the 18,200 -18,350 zone. Meanwhile, we recommend participants to stay selective and prefer sectors that are showing strength and choose index majors over others.”

Further, Vinod Nair, Head of Research at Geojit Financial Services said, “dominated by the release of key macroeconomic numbers and persistent FII buying, domestic markets witnessed a positive trend during the week.”

However, Nair added, “the unfavourable combination of higher-than-expected inflation and a stronger job market in the US market dragged markets lower towards the end of the week, raising concerns about tighter monetary policy. The whammy over India’s retail inflation breaching the RBI’s tolerance level was cooled by WPI inflation easing to 4.73% in January. The US inflation rate, though it slowed its pace compared to the previous month, came in higher than expected at 6.4% YoY. Oil prices fell during the week as the US announced the release of more crude from its Strategic Petroleum Reserve (SPR), lifting supply concerns.”

“A lack of major triggers in the domestic market will attract global cues to dictate the market’s trend going forward,” Nair said on similar lines.

Apart from global cues, other key factors that could add fuel to Indian markets sentiment are — scheduled expiry of February monthly derivatives contracts; RBI’s minutes for February 2023 monetary policy where it hiked repo rate by 25 bps to 6.5%; NSE, MSCI, and FTSE Russel indexes rejig and their impact on Adani Group’s stocks; and Q3 earnings.

Among indexes rejig, NSE has added two Adani stocks namely Adani Wilmar and Adani Power to its Nifty Next 50 Index and Nifty Next 500 Index, respectively from March 31, 2023. While reports have stated that three Adani Group companies – Adani Power, Adani Total Gas, and Adani Transmission – are expected to be removed from the MSCI India index during the rebalancing exercise in May following a sharp correction in their stock prices.

On the other hand, the London stock exchange, Footsie confirmed that it intends to proceed with the scheduled index review changes for Adani Group (India) and its associated securities. Earlier, FTSE added 10 Indian stocks to its Global Large-cap index as part of its semi-annual index review, but no action was taken on Adani stocks.

In regards to Q3 earnings, some of the major companies to announce their financial results for the third quarter are — SpiceJet, Sanofi, and Mahindra CIE Automotive.

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