Week Ahead: Q4FY24 Results, FII activity, macro data, global cues among key market triggers this week

The stock market experienced volatility throughout last week, ultimately ending nearly unchanged amid conflicting signals. While the overall sentiment was positive initially, fluctuations in global markets coupled with declines in certain major stocks offset much of the gains. 

Also Read: US Fed to hold rates at 23-year high-mark until inflation cools, slows pace of balance sheet runoff: 5 key highlights

Despite this, the Nifty 50 managed to reach a new record high of 22,794.70 before settling at 22,475.80. Sector-wise, financials, auto, and energy saw gains, but broader indices closed with slight losses, taking a pause after recent gains.

The key benchmark indices maintained a flat trajectory on all days, marking the fourth consecutive week of little movement. At the close of trading, the Sensex recorded a marginal uptick of 147.99 points or 0.20 per cent, reaching 73,878.15, while the Nifty 50 edged up by 55 points or 0.25 per cent to settle at 22,475.80.

On the weekly front, the BSE benchmark climbed 147.99 points or 0.20 per cent. The NSE Nifty advanced 55.9 points or 0.24 per cent. The benchmarks added about 0.25 per cent each this week, their second consecutive weekly rise.

The Nifty volatility index rose to a two-month high at close. The high weightage financials gained more than two per cent, led by non-bank lender Bajaj Finance, which jumped three per cent after the Reserve Bank of India (RBI) lifted a five-month ban on some of its lending products.

IT stocks dropped 2.25 per cent, dragged by an 8.5 per cent decline in HCL Technologies after the software services company missed March quarter revenue estimates, making it this week’s top loser on the Nifty 50 index.

The expectations of higher-for-longer US interest rates after the latest US Federal Reserve policy decision have been weighing on India’s IT sector, as elevated rates have resulted in lower client spending the US, a key market.

“A marginally better than anticipated Q4 earnings and a correction in oil prices led to a positive start to the domestic market during the week. However, a mixed trend in the global market after the release of a status quo Fed policy with caution about sustaining a high inflation trend led to a broad-based correction in the domestic market,” said Vinod Nair, Head of Research, Geojit Financial Services.

The positive commentary from the auto companies on recent volume numbers led the sector to outperform. Stock-specific action was visible in banks and the power sector on account of positive Q4 results and increased power demand, according to the analyst.

Also Read: ‘Harshad Mehta-era is back’: RPG’s Harsh Goenka warns retail investors of ‘severe losses’ amid bull run on D-Street

‘’Moving forward, the ongoing results season will be a key detrimental factor for investors to align their portfolios…We expect a degree of consolidation in the market due to expensive valuations and any election-led jitters,” said Nair.

In the coming week, the buzz will return in primary markets as several initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segment. The week will be critical from the domestic and technical point of view as investors will global indicators and the latest corporate results.

Overall, analysts expect volatility to continue over quarterly results despite the ongoing uptrend in markets. Nifty 50’s resistance is expected in the 22,750-22,900 zone in case of further upward movement. Experts advise traders to consider hedged positions and await clearer signals before making big moves.
 

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

Q4 Results

Domestically, the next batch of Q4 earnings reports will drive stock-specific movements, Dr Reddy’s Laboratories, Hero MotoCorp, Larsen & Toubro (L&T), Bharat Petroleum Corp Ltd (BPCL), Hindustan Petroleum, State Bank of India (SBI), Eicher Motors, and Tata Motors are some of the big names in the list.

9 new IPOs, 4 listings to hit D-Street

In the mainboard segment, Indegene IPO will open for subscription on May 6, while, TBO Tek IPO and Aadhar Housing Finance IPO will open for bidding on May 8. In the SME segment, Winsol Engineers IPO and Refractory Shapes IPO will open for bidding on May 6. 

Finelistings Technologies IPO and Silkflex Polymers IPO will open for bidding on May 7. TGIF Agribusiness IPO will open on May 8 and Energy Mission Machineries IPO will open on May 9. Among the ongoing IPOs, Slone Infosystems IPO will close for subscription on May 7.

Among listings, shares of Storage Technologies Racks and Rollers, Sai Swami Metals and Alloys, and Amkay Products will debut on BSE SME on May 8. Shares of Slone Infosystems will get listed on NSE SME on May 10. 

FII Activity

Foreign institutional investors (FIIs) last week, offloading stocks worth ₹2,115 crore and domestic institutional investors (DIIs) were net buyers, with the net investment worth ₹2,121 crore.  According to analysts, since the FIIs have continued to remain net sellers in the market, the sentiment has impacted the performance of large cap stocks, prompting retail investors to book profits.

‘’DIIs made up for the foreign investor sales this week. Looking ahead, it’s crucial to monitor the activity of FIIs, especially given their limited holdings in the Indian market,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.

Foreign portfolio investors (FPIs) snapped their April’s selling streak and turned net buyers in Indian equities over low US bond yields, however, the sell-off was seen continued in debt market. FPIs invested ₹1,156 crore worth of Indian equities and the total outflow stands at ₹771 crore as of May 3, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. 

The total debt outflows stand at ₹1,727 crore so far this month. ‘’The market is at record highs. There has been a pre-election rally. It is not as strong as in the past. ⁠More than anything else, FPIs will respond to changes in the US bond yields. If the US bond yields fall and the Indian economy and markets do well they will turn aggressive buyers, ‘’ said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Global Cues

Global market indices mainly US and UK ended the week on a bullish note with Dow Jones and FTSE rising (+1.14 per cent) and (+0.90 per cent). US 10-year bond yields and the dollar index are also cooling off, which gives strength to the market. The US Federal Reserve held interest rates steady on May 1 citing limited progress on the inflation objective (to attain the two per cent target).

In the coming week, the market will remain vigilant over the Bank of England policy and economic data from the euro zone. Economic data releases from China and the US, along with movements in the global currency market, will also be factors to consider.

‘’Attention will be on earnings reports and global market performance, particularly in the US. The Dow Jones Industrial Average has seen significant volatility over the past month, recently surpassing the previous swing high of 38,700, though sustainability remains uncertain,” said Ajit Mishra, SVP – Research, Religare Broking Ltd.

Oil Prices

International crude oil prices settled lower in the previous session, and posted their steepest weekly loss in three months as investors weighed weak US jobs data and possible timing of interest rate cuts by the US Federal Reserve. The crude oil inventory rose by 7.26 million barrels as compared to an expected a fall by 2.30 million barrels.

Brent crude futures for July settled 71 cents lower, or 0.85 per cent, to $82.96 per barrel. US West Texas Intermediate (WTI) crude for June fell 84 cents, or 1.06 per cent, to $78.11 per barrel. For the week, Brent declined more than seven per cent, while WTI fell 6.8 per cent. 

The US Fed held rates steady and said that high inflation could delay rate cuts. Higher interest rates typically weigh on the economy and can reduce crude oil demand. Investors were also concerned that higher-for-longer borrowing costs would curb economic growth in the US, the world’s leading oil consumer.

Corporate Action

In the second week of May, several major companies and banks are trading ex-dividend, while others may announce rights issue and other corporate actions, according to BSE. Shares of major banks such as HDFC Bank, DCB Bank, Bank of Maharashtra, and UCO Bank while other companies including HCL Technologies, Ramakrishna Forgings will trade ex-dividend in the coming week. Check full list here

Technical View

Pressure persists around record high levels for the Nifty, with a close below 22,400 potentially leading to further declines toward the 22,200-21,850 range. The sharp increase in the India VIX volatility index suggests caution despite the ongoing uptrend, according to market analysts.

‘’Resistance is expected in the 22,750-22,900 zone in case of further upward movement. While most sectors are contributing positively except for IT, banking performance is likely to heavily influence market sentiment. It’s advisable to consider hedged positions and await clearer signals before making significant moves,” said Religare Brokings’ Ajit Mishra.

The Nifty has formed a potential double-top pattern near 22,800. As long as the index holds above 22,200, the bulls are likely to remain in control. A breakout above 22,800 could trigger a fresh rally towards 23,000 and even 23,300. A drop below 22,200 could lead to selling pressure, according to Swastika Investmarts’ Pravesh Gour.

Profit-taking emerged near the psychological level of 50000 in Bank Nifty. However, the zone between 48600 and 48400 is a strong support area where buyers might return. If the index climbs above 50000, key resistance levels lie at 50500 and 51000. Conversely, a breach below 48400 could see weakness extend towards 47400.

The Bank Nifty has recently slipped beneath the crucial 49,000 level and breached an upward sloping resistance trendline, which previously provided support over the last two sessions. According to Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd, this decline amounted to 308 points, bringing the index to 48,924. It managed to hold above the 10-day EMA at 48,683, serving as immediate support. 

‘’Subsequently, the 21-day EMA at 48,270 is another level to watch, potentially offering support if tested. On the upside, immediate resistance is expected within the range of 49,200 to 49,300. Key support levels are positioned at 48,400 to 48,300, crucial areas to monitor for potential shifts in market sentiment,” added Nanda.

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

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Published: 05 May 2024, 06:50 AM IST