BackWeek Ahead: Macro data, BoE, China policy verdicts, FII activity, global cues among key market triggers this week
Overall, market analysts expect that the tone is likely to remain positive in this truncated week as volatility related to election jitters has significantly gone down. Nifty 50 may move towards 23,600 or 24,000 on the upside if it breaches 23,500 level.
PremiumThe Indian stock market is likely to witness a consolidative-to-positive movement this truncated week in the absence of any major triggers. The Indian stock market will remain shut on Monday June 17 due a public holiday on the occasion of Bakri Id. However, investors will keenly eye any Union Budget-related or government policy announcements which may result in stock-specific action. Domestic and global macroeconomic indicators, foreign fund inflow, crude oil prices, central bank policy verdicts, corporate announcements and global cues will drive market movement in the third week of June.
Last week, markets stayed in a consolidation phase and ended slightly higher, taking a pause after the volatile post- election week. The NSE Nifty 50 settled 0.29 per cent higher at 23,465.60, while the S&P BSE Sensex added 0.24 per cent at 76,992.77, with both benchmarks also recording their second-straight weekly gain.
On a weekly basis, the BSE benchmark climbed 299.41 points or 0.39 per cent, while the Nifty advanced 175.45 points or 0.75 per cent. The benchmark index's tone was subdued from start to finish, resulting in modest gains for both indices. Sectoral buying and traction in select themes kept traders engaged.
State-run firms and lenders also added 4.94 per cent and 2.5 per cent, respectively, for the week, on hopes of policy continuity after key ministers were retained in the new government's cabinet. Oil and gas stocks gained 3.41 per cent this week.
The IT index was the worst weekly sectoral performer with its 1.62 per cent decline, after gaining 8.6 per cent last week. They jumped one per cent on Thursday on renewed expectations that U.S. interest rate cuts were imminent.
The US Federal Reserve kept its key interest rate unchanged in its June policy verdict and scaled back its forecast from three rate cuts to just one this year after an inflation pickup in early 2024. However, US inflation has now eased for two straight months. India's retail inflation print came at a one-year low in May.
The significant decrease in India VIX, the volatility index, by nearly 60 percent from its recent high of 31.71 on June 4 contributed to a more stable market environment after the election-related uncertainties were resolved.
Notably, broader indices outperformed significantly, with gains ranging from 3.82 per cent to 4.81 per cent, surprising participants positively. Analysts expect market uptrend to continue, supported by positive macro trends, expectation of sustained government spending and policy continuity, healthy monsoon and strong earnings.
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"There is a temporary blip in the market momentum, due to a lack of fresh triggers after the hawkish commentary from the US Fed, lowering the plausibility of rate cut in the short-term,'' said Vinod Nair, Head of Research, Geojit Financial Services.
‘’A near term consolidation seems probable as domestic investors await cues from the upcoming union budget. There is a growing opinion that the government could place emphasis on welfare, giving a fillip to consumption-led stocks,'' added Nair.
As expectations start building up from the government in the run up to the Budget next month, markets may face bouts of intra-day volatility going ahead, according to Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.
In the coming week, primary markets will stay abuzz with a few new initial public offerings (IPO) and listings, slated across the mainboard and small-and-medium enterprises (SME) segment. The holiday-shortened week will be critical from the domestic and technical point of view as investors will global indicators and the macroeconomic data.
Overall, market analysts expect that the tone is likely to remain positive as volatility related to election jitters has significantly gone down. Nifty 50 may move towards 23,600 or 24,000 on the upside if it breaches 23,500 level. Experts advise traders to remain cautious on small-and midcap stocks and rather focus on theme-related stocks.
Here are the key triggers for stock markets in the coming week:
9 new IPOs, 1 listing to hit D-Street
In the mainboard segment, DEE Piping Systems IPO and Aasaan Loans IPO will open for subscription on June 19, while Stanley Lifestyles IPO will open for bidding on June 21. In the SME segment, United Cotfab IPO and GPES Solar IPO will close on June 19 among the ongoing issues.
GEM Enviro IPO, Durlax Top Surface IPO, and Falcon Technoprojects India IPO will open for subscription on June 19. EnNutrica IPO and Winny Immigration IPO will open for bidding on June 20. Medicamen Organics IPO will open on June 21. Among listings, shares of ixigo will debut on stock exchanges BSE, NSE on June 18.
FII Activity
Foreign Institutional Investors (FIIs) were net buyers, purchasing around ₹2,029 crores in the cash segment last week, adding positive sentiment to the market. Analysts also highlighted that there was a notable short covering in the Futures and Options (F&O) market. The net short contracts in index futures dropped significantly to 24,000 from a peak of 3.4 lakh.
Foreign portfolio investors (FPIs) significantly reduced their selling streak last week as the net outflows in June now stand at ₹3,064 crore in Indian equities till June 14. The total debt inflows stand at ₹5,703 crore so far this month. This comes after FPIs offloaded ₹5,586 crore worth of Indian equities in May.
Global Cues
Global macroeconomic data will drive market sentiment this week as investors will look out for China Industrial Production, US industrial production, UK inflation rate, US initial jobless claims, Bank of England (BoE) interest rate, and US manufacturing PMI.
According to Alex Volkov, Market Analyst at VT Markets, the market will look for signs of stable price growth around the two per cent target. Persistent wage growth feeding into inflation could prompt further rate hikes from the Bank of Japan (BoJ), impacting currency and market dynamics. Movements in the dollar index and US bond yields will be crucial.
‘’Participants will look at global markets, particularly the US, for cues in the absence of major events. Currently, US markets show mixed signals: the Dow Jones Industrial Average (DJIA) is fluctuating after a decline, while the Nasdaq Composite and the S&P 500 are climbing to record highs,'' said Ajit Mishra – SVP, Research, Religare Broking Ltd.
Oil Prices
Crude oil prices settled slightly lower in the previous session after a survey showed deteriorating US consumer sentiment that hit a seven-month low in June. Still, oil prices rose four per cent on the week as investors weighed forecasts for solid demand for crude oil and fuel in 2024.
Brent crude futures last settled down 13 cents at $82.62 per barrel, while West Texas Intermediate (WTI) US crude futures were down 17 cents at $78.54. Brent and the US benchmark gained four per cent on the week, the highest weekly rise in percentage terms since April. Back home, crude oil futures settled 0.05 per cent lower at ₹6,571 per barrel on the multi-commodity exchange (MCX).
Corporate Action
The coming week has a slew of companies whose stocks will trade ex-dividend. Some companies have declared bonus issues and stock splits. To list a few, Tata Steel, Punjab National Bank (PNB), Cyient Ltd, HDFC Asset Management Company, Larsen & Toubro ( L&T), Bajaj Finance, among others. Oil marketing companies (OMCs) Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) will declare bonus issues. Check full list here
Technical View
Recent movements in the Nifty index suggest a time-based correction, yet the overall tone remains positive. Ajit Mishra of Religare Broking expects the 22,800-23,100 zone to provide support in case of profit-taking, and a decisive close above 23,600 could drive the index to a new milestone of 24,000.
‘’In addition to key sectors, we recommend focusing on themes such as agriculture, chemicals, cement, and select defense stocks, which are attracting significant interest for long trades. However, traders should exercise caution and select midcap and smallcap stocks wisely despite the current buoyancy,'' said Mishra.
Santosh Meena, Head of Research, Swastika Investmart Ltd said, ‘’Nifty is encountering resistance in the 23,400-23,500 range, while the downside support is found between 23,200-23,100. The 20-DMA at 22,900 serves as the next support level in case of a pullback.''
On a daily chart analysis, Nifty has been consolidating within a wide range of 23200 to 23500. The hourly momentum indicator shows a positive crossover from the equilibrium line, indicating that the consolidation phase has likely matured, and there's potential for the next upward movement to begin, according to Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
Bank Nifty is hovering around the psychological mark of 50,000, with an immediate hurdle at 50,250. If this level is surpassed, a move towards 51,000 can be expected. On the downside, 49,500 serves as immediate support, while the 20-DMA around 49,000 is the next support level, according to Meena.
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.
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