Week Ahead: Inflation data, Q2 Results, FII outflow, global cues among key market triggers for Nifty, Sensex

The Indian stock market continued to consolidate for another week, losing over half a per cent, signalling the continuation of a corrective phase. The week began cautiously due to concerns ahead of the US Presidential elections, followed by a brief mid-week recovery after the poll results. The gains could not hold, reflecting volatility driven by the slew of global events.

In the second week of November, investors will closely monitor key market triggers, including the last set of July-September quarter results for fiscal 2024-25 (Q2FY25), Middle-East geopolitical tensions, foreign fund outflows, crude oil prices, global cues, domestic and global macroeconomic data.

Also Read: Wall Street on track to log best week in one year after Trump’s poll win; S&P 500, Dow in green after US Fed rate cut

Domestic equity benchmarks Sensex and Nifty 50 logged their fifth weekly loss in six dragged by dull corporate earnings, relentless foreign fund outflows and losses in major blue-chip stocks. The Nifty is now down about eight per cent from the record high it hit on September 27. Broader indices were mixed as small-cap stocks fell two per cent, while mid-caps were stable.

"Nifty dropped to levels not seen since June 27, and the Sensex hit a 19-week low. The India VIX, or India volatility index, which measures expected stock market volatility, fell by 14.47 (-9.01 per cent). The share of foreign investors in NSE-listed companies dropped to 15.98 per cent in October, the lowest in 12 years," said Palka Arora Chopra, Director of Master Capital Services Ltd.

On the weekly front, the BSE benchmark declined 237.8 points or 0.29 per cent and the Nifty went lower by 156.15 points or 0.64 per cent. The standout was the IT sector, which earns a significant share of its revenue from the US, as it gained four per cent in its best week in over two months.

The IT sector's gains were helped by the US Fed's quarter-point rate cut on Thursday and positive commentary on economic growth and inflation. It also got a boost from Donald Trump's victory in the US presidential election.

Analysts say Trump is positive for the IT sector. His proposed US corporate tax cuts could boost corporate spending, potentially benefiting IT firms. US rate cuts would have the same effect. Most sectors saw declines during this period, with realty, energy, and FMCG leading the losses. 

Also Read: Stock market holiday: NSE, BSE to remain closed on November 20 on account of Assembly Elections in Maharashtra

The Indian rupee weakened to a record low on Friday and logged its worst weekly fall in five months, pressured by sustained outflows from local stocks and expectations of a stronger dollar after Donald Trump's poll victory.

“The broad-based correction is particularly evident in sectors with excessive valuations. The anticipated slowdown in domestic Q2 GDP growth has further dampened market sentiment. Conversely, the appealing valuations of other Asian peers and ongoing stimulus measures by China also contribute to the underperformance," said Vinod Nair, Head of Research at Geojit Financial Services. According to Nair, the market will continue to be influenced by Q2 earnings, Trumponomic policies, and actions by FIIs.

Also Read: US Election Results: FPI outflows to China trade war—how will Trump’s victory impact global markets? Experts weigh in

This week, the primary market will witness action as some new initial public offerings (IPO) and important listings are slated across the mainboard and small and medium enterprises (SME) segments. The week will be critical from the domestic and technical point of view as investors will track corporate results, global markets and macroeconomic data.

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

Q2 Results, Domestic macroeconomic data

With key global events behind us, the market’s focus will return to domestic factors, such as domestic macroeconomic data and the final phase of the Q2 earnings season. The recent rebound in India's domestic manufacturing activity is a positive sign for analysts. Analysts expect government spending to be back-ended this year due to general elections.

"So there is a leading expectation of improved corporate earnings in H2FY25. The festive season in Q3 is likely to revive consumption, which should support market sentiment and will aid in finding a floor in the near future," said Vinod Nair of Geojit Financial Services.

Also Read: US Fed cuts policy rate by quarter-point to 4.50-4.75% after Donald Trump’s poll victory; 5 key takeaways

Upcoming high-frequency economic data, including industrial production and retail inflation, will be released on November 12, and wholesale inflation data will be released on November 14. Analysts say consensus expects an increase in inflation in the short term and an expansion in IIP.

3 new IPOs, 4 listings to hit D-Street

In the mainboard segment, Zinka Logistics Solution Limited IPO or BlackBuck IPO will open for subscription this week, while Niva Bupa Health Insurance IPO will close for bidding on November 11. In the SME segment, two new issues will open for bidding.

Among listings, shares of Sagility India, Swiggy Ltd, ACME Solar Holdings, and Niva Bupa Health Insurance will debut on stock exchanges BSE and NSE this week. In the SME segment, no new listings are scheduled for this week so far.

Also Read: New-Age Tech Stocks: Ola Electric crashes 12% to log steepest weekly drop with Q2 results, CarTrade Tech biggest gainer
 

FII Activity

Indian markets underperformed compared to global peers, primarily due to aggressive selling by foreign institutional investors (FII). FIIs were net sellers and offloaded roughly ₹20,000 crore from Indian equities last week, while domestic institutional investors (DIIs) maintained their support and bought equities worth ₹14,391.02 crore in the last five days.

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FIIs have sold equities for 29 consecutive days, amounting to ₹1.41 lakh crore, denting investor sentiments. Analysts say FII activity will remain a crucial driver for the Indian equity market in the near term. Concurrently, China’s monetary stimulus attracted foreign capital, contributing to FIIs pulling funds from Indian equities. 

Foreign portfolio investors (FPIs) stood disinterested in Indian markets, starting November on a dull note amid the uptrend in the US market, which was fueled by Republican Donald Trump's victory in the US presidential elections and the latest US Federal Reserve's interest rate cut verdict.

According to the National Securities Depository Ltd (NSDL) data, FPIs offloaded ₹19,994 crore worth of Indian equities, and the net outflow stood at ₹16,477 crore as of November 8, taking into account debt, hybrid, debt-VRR, and equities. October's FPI outflow hit a 10-month high, the highest sell-off from the Indian market YTD. The total debt investment was ₹2,896 crore.

Global Cues

On the global front, "the conclusion of the US elections and a strong Republican majority have reduced political uncertainty, providing relief to global markets. The US Fed’s 25 bps interest rate cut, which was in line with expectations, also offers some support. The US market is expected to outperform the rest in the short to medium term," said Vinod Nair of Geojit Financial Services.

Also Read: US Elections 2024: Can a Trump presidency jeopardize the US Fed’s independence? Here’s what economists say

Globally, the US inflation report on November 13 will be critical, as it may influence the US Federal Reserve’s upcoming policy stance. Investors will monitor developments in China’s economic stimulus package. According to Santosh Meena, Head of Research, Swastika Investmart Ltd, the performance of US bond yields and the dollar index will be pivotal for emerging markets like India, as both have surged since the US election outcome. 

"Indian markets have reacted to global risks while not fully participating in positive global momentum. For instance, despite US markets rallying over 4.5 per cent after the US Presidential election results, Indian indices failed to mirror that uptrend," said Ajit Mishra – SVP, Research, Religare Broking Ltd.

Also Read: October surprise: An influx of retail investors hasn’t made FIIs irrelevant

The US dollar index and 10-year bond yield strengthened following Donald Trump’s election victory, exerting pressure on the rupee. The outlook for the market will be guided by major global economic data, such as US core CPI (Oct), US initial jobless claims, US retail sales (MoM) (Oct), US PPI (MoM) (Oct), UK GDP (Q3), and China Industrial Production (YoY) (Oct) data.

Oil Prices

International crude oil prices settled more than two per cent lower in the previous session as traders grew less fearful of prolonged supply disruptions from a strong hurricane in the US Gulf of Mexico, while top importer China's latest economic-stimulus packages failed to impress some oil traders.

US West Texas Intermediate (WTI) futures led the decline and settled at 70.35 per barrel on Friday, November 8, down by 2.7 per cent, or $1.98. Global benchmark Brent crude futures dropped 2.3 per cent, or $1.76, to $73.87 per barrel.

Despite Friday's losses, oil prices gained more than one per cent week-over-week, drawing support from expectations of tighter sanctions on Iran and Venezuela by US President-elect Donald Trump, which could cut oil supply to global markets. Back home, crude oil futures settled 0.1 per cent lower at ₹5,950 per barrel on the multi-commodity exchange (MCX).

Corporate Action

Shares of several major companies will trade ex-dividend in the coming week, starting from Monday, November 4, such as Oil India, Power Grid Corporation of India, RITES, Indraprastha Gas Ltd, Indian Railway Catering and Tourism Corporation (IRCTC), among others, will trade ex-dividend in the coming week, starting from Monday, November 11, 2024. Some shares will also trade ex-bonus and ex-split. Check full list here

Technical View

The Nifty remains in a consolidation range between 24,000-24,500, with mixed signals indicating that this phase may continue. Experts say a clear breakout above the 24,500 level could drive the index toward 24,800. In contrast, a breakdown might increase pressure, potentially pushing it down to the 200-day exponential moving average (DEMA) near 23,500. Among sectors, the IT sector’s resilience offers a glimmer of hope for recovery.

According to Santosh Meena of Swastika Investmart Ltd, the index struggled to cross its 20-day moving average (20-DMA) around the 24,500 level. Sustaining above the 20-DMA is essential for a meaningful short-covering rally.

However, the continued consolidation in the banking sector between the 50,500 and 52,500 levels keeps market participants uncertain about the next move. “Given this environment, traders are advised to align their positions with the current range, focus on selective stock picking, and adopt a hedged approach to mitigate risks,” said Ajit Mishra of Religare Broking Ltd. 

Palka Arora Chopra of Master Capital Services believes that until the index moves above 24,500, a "sell on rise" strategy is recommended to align with the ongoing bearish trend. On the other hand, Bank Nifty ended the week flat, facing strong resistance in the 52,500-52,600 range. The index is trading within a 2,000-point range, with buying seen around 50,500 and selling at 52,500. 

"It’s now expected to move toward the lower end of this range. Immediate resistance is at 51,800, which could push the index back to 52,500. On the downside, if Bank Nifty breaks below 51,300, it may fall further to 50,800. It gave closing below the 21-day EMA; a "sell on rise" approach is advised for the coming week to stay aligned with the current trend," said Palka Arora Chopra.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.