Week Ahead: Macro data, FII mood, global cues among key market triggers as Nifty 50 eyes 22,150+ this week

Markets traded volatile in the continuation to the prevailing consolidation phase but managed to edge higher. The beginning was subdued however gradual recovery in the following sessions not only pared losses but also helped the index to close around the week’s high.

On the benchmark front, both Nifty and Sensex gained over a per cent each to settle at 22,040.70 and 72,426.64 levels respectively as investors shift their focus to fundamentals and macroeconomic indicators. The frontline indices remained resilient in the face of fading expectations of early rate cuts by the US Federal Reserve.

Most sectors traded in sync with the move wherein auto, IT, energy and banking were among the top performers. The BSE Midcap index closed almost a per cent higher. The BSE Smallcap index underperformed and closed flat for this week.

The broader indices oscillated sharply on both sides and eventually settled mixed. Overall, the broader, more domestically-focused small-caps of benchmarks fell 0.5 per cent and mid-caps added 0.5 per cent, underperforming the benchmarks, amid valuation concerns.

Also Read: FPIs offload ₹29,520 crore in Indian equities as sell-off continues in February: What’s behind this trend?

‘’The Indian auto sector had a strong week, lifted by anticipated high demand and a favourable earnings outlook. PSU Banks, benefiting from improved asset quality and the government’s focus on fiscal prudence, are attracting investors. Large caps gained traction, with mid and small caps seeing profit booking, driven by valuation gaps,” said Vinod Nair, Head of Research, Geojit Financial Services.

‘’Looking ahead, a correction in PSU banks seems likely due to higher valuation risks. Meanwhile, sectors such as metals, FMCG, and capital goods are anticipated to gain momentum driven by robust construction demand, an order backlog, rural revival prospects, and India’s narrowing trade deficit. This is boosted by softer commodity prices and government-led manufacturing initiatives,” added Nair.

Q3 earning season came to an end with most of the companies posting numbers in line with estimates. Some companies witnessed margin pressure due to rising input costs and expenses, said market analysts.

‘’The overall earnings grew 34 per cent year-on-year (YoY) as compared to the estimate of 28 per cent YoY. The stars sectors of the Q3 earning season were Energy, Metal, BFSI, cement with the highest YoY surge in net profit, driven by an upswing in capex cycle, robust demand and healthy margins. The major laggards were IT and FMCG,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

Going forward, a busy week awaits the primary market as several 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 stock action along with domestic and global cues.

Also Read: General Elections 2024 Stock Picks: IRCTC, SBI among top 10 picks for this season; to offer 10-20% potential upside

Overall, analysts maintain a positive yet cautious stance as Nifty 50 is set to retest its record high level, but there could be bouts of intra-day volatility. The recovery in banking heavyweights combined with rotational buying in other index majors has raised hope of a possible breakout attempt for Nifty 50 above 22,150. 

This may lead to the end of the consolidation phase and mark the resumption of the uptrend to inch towards the 22,500+ levels. Experts also advice participants to keep a close watch on the banking index continue with a “buy on dips” approach and focus on stock selection.

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

5 new IPOs, 7 listings to hit D-Street:

In the mainboard segment, Juniper Hotels IPO opens for subscription on February 21 and GPT Healthcare IPO opens on February 22, 2024.

In the SME segment, Zenith Drugs IPO will open for bidding on February 19, Deem Roll Tech IPO opens on February 20, and Sadhav Shipping IPO opens on February 23. Among the ongoing SME IPOs, Kalahridhaan Trendz IPO, Thaai Casting IPO, Atmastco IPO, Interiors and More IPO, and Esconet Technologies IPO are closing for subscription on February 20.

Among listings, shares of Vibhor Steel Tubes will get listed on stock exchanges BSE, NSE on February 20. Also, shares of WTI Cabs will debut on NSE SME on February 19. On February 23, shares of Kalahridhaan Trendz, Thaai Casting, Atmastco, Interiors and More, and Esconet Technologies will get listed on NSE SME.

FII Activity:

Foreign institutional investors (FIIs) were buyers for three out of five sessions last week, yet the total divestment stood at ₹6,240.55 crore, while domestic institutional investors (DIIs) were buyers for all five sessions, with a total investment of ₹8,731.6 crore, according to stock exchange data. On a monthly basis, FIIs have sold shares in Indian markets to the tune of Rs. 14,171 crore between February 1-16, 2024.

‘’The trend of FII selling is likely to continue since the 10-year US bond yield is high at 4.24 per cent. The trend of DII buying too is likely to continue since the flows into the DIIs continue to be robust,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Foreign portfolio investors (FPIs) started February on a positive note but took a U-turn on weak global cues and continued January’s selling streak in Indian markets. FPIs continued buying in primary markets and debt, counterbalanced the total net sell-off amount so far in February. However, the capital outflow by FPIs stands at ₹29,520 crore so far in 2024.

FPIs have sold ₹3,776 crore worth of Indian equities and the total inflow stands at ₹19,608 crore as of February 16, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data.

“The spike in US bond yields triggered by the higher-than-expected consumer price inflation led to sustained selling by FPIs in the cash market. In February through 16th, FPIs had sold equity worth ₹6,112 crore through the exchange. But, buying through ‘the primary market and others’ reduces the net sell figure for February through 16th to ₹3,775 crore,” said Dr. V K Vijayakumar.

The trend of FPI selling is likely to continue so long as the US bond yields remain elevated. The sustained FPI buying in debt which started early this year also continues. FPIs bought debt for ₹16,559 crore in February through 16th taking the total buy figure for debt for 2024 to ₹36,395 crore. This trend is also likely to continue, according to the analyst.

Global Cues:

Investor expectations of a rate cut from the Fed were bolstered as US retail sales data declined. Moreover, a disinflation trend in the eurozone and expectations of increased consumption demand in China after the New Year holidays provided further support, according to analysts.

The US Federal Reserve will release its Federal Open Market Committee (FOMC) minutes-of-the-meeting this week, which will lend further cues towards interest rates trajectory for global markets and investors would be closely watching the US Fed’s move on interest rates going ahead.

‘’With few definitive signals this week, market focus remains on the trajectory of the dollar index and US bond yields. Heightened crude oil prices pose a potential risk, although prevailing bullish sentiment largely overshadows negative developments. Additionally, attention is directed towards the US FOMC meeting minutes,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Going ahead, markets will react to major global economic events, global news, Asian market performance, movement of rupee against dollar, inflationary pressures, interest rates, and steps taken by different governments domestic and globally to tackle their economy.

‘’Global cues would largely dictate the trend in the coming week. Among the key markets, the US benchmark index, the Dow Jones Industrial Average (DJIA) has been seeing volatile swings and a decisive breakdown of 38,300 could prompt some profit taking to the 37,500-37,800 zone,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.

Oil Prices:

Oil prices settled higher in the previous session as geopolitical tensions in the Middle East more than offset a forecast from the International Energy Agency (IEA) for slowing demand. The growing risk of a wider conflict in the Middle East supported crude prices.

Brent crude futures settled up 61 cents, or 0.74 per cent at $83.47 a barrel. US West Texas Intermediate crude settled $1.16, or 1.49 per cent, higher at $79.19 with the nearby March contract expiring on Tuesday. The April contract rose 87 cents to $78.46. For the week, Brent gained more than one per cent and the US benchmark rose about three per cent.

The IEA said global oil demand growth was losing momentum and trimmed its 2024 growth forecast. The agency expects global oil demand growth to decelerate to 1.22 million barrels per day (bpd) in 2024, about half of the growth seen last year. 

Corporate Action:

Shares of several companies, including Coal India, Life Insurance Corporation (LIC) of India, Hero MotoCorp, Steel Authority of India (SAIL), Aurobindo Pharma, Hindustan Aeronautics Ltd (HAL), and many others will others will trade ex-dividend in the coming week, starting from Monday, February 19. Some other companies will also trade ex-bonus and ex-split in the coming week. Check full list here

Technical View:

The recovery in banking heavyweights combined with rotational buying in other index majors has raised hope of a possible breakout attempt from the prevailing range. However, mixed global cues may continue to weigh on the sentiment and prompt kick-jerk reactions in between, said experts

‘’We are eyeing sustainability above 22,150 to mark the resumption of the uptrend and inch towards the 22,500+ levels. On the flip side, the support has shifted to the 21,450-21,700 zone. Since the majority of sectors are aligned with the benchmark now, participants should continue with a “buy on dips” approach and focus on stock selection,” said Religare Brokings’ Ajit Mishra.

According to Swastika Investmarts’ Santosh Meena, Nifty displays signs of a bullish breakout from a cup and handle formation, with 22,125 as a crucial resistance level. Further upward movement towards 22,350/22,500 levels is anticipated upon surpassing this barrier. Conversely, robust support lies within the 21,800–21,600 range.

‘’Q3 earning season has ended on a buoyant note with Nifty delivering a strong beat with a 17 per cent YoY PAT growth vs. est. of +11 per cent. We expect market sentiment to strengthen further as the prospect of a pre-election rally is quite strong,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

In Bank Nifty, the weekly chart has formed double bottom pattern near its strong demand zone near the level of 44,500-44,800. ‘’The short-term texture is on bullish side as 45,200 will act as an immediate support level, while 46,800 is the hurdle for upside. Once it sustained above 46,800, a move of more than 1000 pts. can be expected till the levels of 48,000,” said Master Capital Services’ Arvinder Singh Nanda.

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: 18 Feb 2024, 05:49 AM IST