Nifty week ahead: How the index may perform and what factors will drive it

On Friday, Nifty 50 jumped by 98.40 points or 0.55% to end at 17,956.60, while Bank Nifty soared by 289 points or 0.69% to close at 42,371.25.

The 50-scrip benchmark managed to stay between 17,800 to 18,100 last week, however, its overall weekly upside was merely 0.5%. Foreign institutional investors (FIIs) were net sellers throughout the week with an outflow of ₹9,605.64 crore in Indian equities. On the other hand, domestic investors continued to be the biggest buyer in the market with an inflow of around ₹10,042.08 crore.

On January 9-13 weekly performance, Santosh Meena, Head of Research, Swastika Investmart said, “a tumultuous week comes to a flat end. The FII selling, where they sold approximately ₹10,000 crore in Indian equity markets, was the week’s highlight. Beginning in 2023, we are already observing some correction to the Indian equity market’s notable outperformance in the prior year. Indian markets are trading lower month-to-date with a significant FII outflow, whereas the majority of emerging markets rebounded in the first few days of 2023 with net FII inflows. The flow of FIIs is therefore a crucial variable in determining the market’s future course. We are not witnessing any abrupt drops, though, as DIIs are working to maintain the market.”

Going ahead, Meena believes along with Q3 results, the flow of FIIs is crucial to the market’s direction.

The Q3 season has begun with big IT names, and next week we will react on the earnings of some major names, including HDFC Bank, Indusind Bank, HDFC Life, Asian Paints, JSW Steel, and HUL. On the global front, the US market will remain shut on Monday on account of Martin Luther King, Jr. Day.

However, Meen added, “we will have lots of macro numbers from the USA, Europe, and China. In the USA, many major corporations will come out with quarterly earnings that may lead to volatility in the US markets. Apart from this, the movement in crude oil prices, US bond yields, and the dollar index will be other important factors. We may see stock and sector-specific moves in pre-budget expectations.”

Technically, Swastika expert explained that Nifty is respecting a key support level of 17800, but the 20-DMA around 18100 is an immediate and critical hurdle that needs to be crossed for any strength in the market, and the 50-DMA around 18300 will be the next hurdle. However, if Nifty slips below the 17800 level decisively, then we can expect a move towards the 17625 and 17425 levels.

Bank Nifty is respecting its support at 41725, but the cluster of the 20 and 50-DMA around 42700 is a critical hurdle; above this, we can expect a move towards 43400. On the downside, the 100-DMA around 41300 is the next important support level, Meena added.

“If you look at the derivative data, then FIIs’ short exposure in index futures stands at 57% while the put/call ratio is 1.03; therefore, there is scope for a short covering move. Option data, on the other hand, continues to point to a range-bound market movement,” he said.

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