Domestic equity benchmarks Nifty 50 and Sensex logged their worst performance since the week ending October 27 dragged by information technology (IT) stocks – culminating in a second consecutive week of losses. The frontline indices fell about 1.3 per cent each over the three sessions in the last holiday-truncated week, primarily driven by weakness in the banking sector.
In the six sessions since then, foreign funds have sold shares worth ₹34,766 crore, pulling the Nifty 50 down about three per cent. On the weekly front, the BSE benchmark fell by 982.56 points or 1.37 per cent, and the Nifty declined 269.8 points or 1.24 per cent.
The high-weightage financials led the losses for a second straight week, adding 1.6 per cent to their 4.1 per cent drop last week that was sparked by HDFC Bank reporting disappointing margins. Nifty 50 is down nearly two per cent this month so far despite the sharp cut in banking majors, over rotational buying in other heavyweights.
Analysts said that the truncated trading week witnessed heightened market activity and volatility. A sharp cut in the index at the beginning pushed the bulls on the back foot however resilience in the select heavyweights capped the damage. Profit booking affected several midcap and smallcap stocks, though certain sectors exhibited resilience, according to analysts.
‘’Anticipation of the Fed policy meeting next week, likely retaining the existing rate, triggered increased US bond yields and FII selling in the market,” said Vinod Nair, Head of Research, Geojit Financial Services.
‘’The broader market is unable to hold gains due to high valuations, subpar results, and persisting geopolitical tension in the Middle East, followed by an F&O expiry weighing down the market. Going forward, global market factors like the policy rate decisions of major countries will affect the market, and markets are likely to witness stock-specific actions during the ongoing earnings season,” added Nair.
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 corporate results along with and budget announcements and global cues.
Overall, analysts expect volatility to remain high due to the prevailing earnings season and the scheduled Interim Budget presentation on February 1, but expect that Nifty 50 will rebound to 21,500 only upon stability in the banking index. Experts also noted that stock-specific approach may continue despite market consolidation.
Here are the key triggers for stock markets in the coming week:
Interim Budget 2024:
Finance Minister Nirmala Sitharaman will unveil the Interim Budget for the financial year 2024-2025 (FY25) on February 1, 2024, which is likely to keep the focus on fiscal consolidation, but may not involve any major policy changes.
Since 2024 is an election year, with Lok Sabha Elections expected in April-May, the finance minister will present an Interim Budget or a Vote on Account in February, rather than a comprehensive annual budget. After the formation of the new government, the new full Budget is expected in July this year.
Sitharaman’s declaration that it will be a vote of account suggests that no significant policy announcements are likely expected in this interim budget. As a Vote on Account is merely an interim authorisation to spend money, as opposed to a full Budget that includes details of expenditures and receipts, including tax changes and government policies, this time significant tax and policy changes are unlikely.
‘’The upcoming week is poised to be pivotal, marked by a series of significant events, with the budget taking center stage. However, the finance minister’s indication of a modest, vote-on-account budget suggests a lack of extravagant announcements,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Q3 Results, Auto sales:
The ongoing Q3FY24 earnings season will be a major factor in driving the market movement. Some major companies will announce their quarterly numbers such as Adani Enterprises, Bharat Petroleum Corp Ltd (BPCL), State Bank of India (SBI), Adani Green Energy, Tata Motors, Maruti Suzuki, NTPC, Dabur, among others. Auto stocks will remain in focus as major automakers will begin releasing their January sales figures starting from February 1.
6 new IPOs, 10 listings to hit D-Street:
In the mainboard segment, BLS E-Services IPO will open for subscription on January 30. In the SME segment, Megatherm Induction IPO, Harshdeep Hortico IPO, Mayank Cattle Food IPO, and Baweja Studios IPO will open for bidding on January 29. Gabriel Pet Straps IPO will open for bidding on January 31.
Among the ongoing issues, Fonebox Retail IPO, DelaPlex IPO, and Docmode Health Technologies IPO will close for subscription on January 30.
Among listings, shares of EPACK Durable IPO will get listed on stock exchanges BSE, NSE on January 30, while Nova AgriTech will get listed on January 31. From the SME segment, shares of Qualitek Labs will get listed on BSE SME on January 29. On January 30, shares of Lawsikho, Konstelec Engineers will get listed on NSE SME and shares of Euphoria Infotech India on BSE SME.
Shares of Brisk Technovision will be listed on BSE SME on January 31. Shares of Fonebox Retail, DelaPlex, and Docmode Health Technologies will be listed on NSE SME on February 2.
FII Activity:
Foreign institutional investors (FIIs) also emerged net sellers for all sessions last week with a total divestment of ₹12,194.38 crore, while domestic institutional investors bought for all sessions with a total investment of ₹9,701.46 crore. The substantial net sales by FIIs has exceeded Rs. 35,000 crore in the Indian equity market this month.
Foreign portfolio investors (FPIs) snapped their buying streak in January and turned into massive sellers in Indian markets, driven by global cues. However, FPIs started 2024 on a positive note as investments saw a sharp uptick in December 2023 after FPIs reversed their three-month selling streak in November 2023.
FPIs have sold ₹24,734 crore worth of Indian equities and the total outflow stands at ₹9,663 crore as of January 25, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. The US bond yields rose from 3.9 per cent to 4.18 per cent, which has triggered capital outflows from emerging markets such as India, according to market experts.
Global Cues (US Fed, BoE policy verdicts):
In the coming week, the US Federal Reserve and Bank of England (BoE) are expected to announce their next monetary policy verdicts, influencing the global interest rate trajectory in the next few weeks. The outcome of the US Federal Reserve’s policy meeting is scheduled for January 31, which could provide insights into the potential timing of interest rate cuts.
‘’A rise in US bond yields coupled with mixed Q3 earnings so far and an uptick in international crude oil prices due to simmering tensions in West Asia has been making investors jittery about the near term prospects. Prospects of imminent US rate cuts are diminishing. Bets on a rate cut at the Federal Reserve’s (Fed) March meeting have dwindled from 76 per cent to 41 per cent over the past month,” said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.
Investors will also keep a close watch on US macro data, China announcements, and geopolitical developments. The market will also react to global events, foreign investment patterns, US bond yields, the movement of the rupee against the dollar, and crude oil prices.
‘’Cues are favorable from the global front wherein the US markets are showing noticeable strength and inching higher every week. We are eyeing the “39,000″ mark in the Dow Jones Industrial Average (DJIA), with a strong base at the 37,500-37,800 zone,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
Oil Prices:
Oil prices rose for a second week in a row and settled at their highest in nearly two months on Friday, January 26, as positive US economic growth and signs of Chinese stimulus boosted global demand expectations, while Middle East supply concerns added support to price rise.
Brent crude futures rose $1.12, or 1.4 per cent, to settle at $83.55 a barrel, their highest close since November 30. US West Texas Intermediate crude (WTI) climbed 65 cents or 0.8 per cent to $78.01, also the highest close since November.
Both oil benchmarks made weekly gains of over six per cent, marking their biggest weekly increase since the week ending October 13 after the start of the Israel-Hamas conflict in Gaza, according to news agency Reuters.
Corporate Action:
Shares of some companies, including Havells India, Siemens Ltd, Metro Brands, Mangalore Refinery & Petrochemicals Ltd (MRPL), and others will others will trade ex-dividend in the coming week, starting from Monday, January 29. Some other companies will also trade ex-bonus and ex-split while some have announced a buyback of shares next week. Check the full list here
Technical View:
The Nifty is currently undergoing a corrective phase, grappling to sustain levels above the 20-day moving average (20-DMA) at 21640. Key support rests at the 50-DMA of 21,050, with a crucial demand zone between 20,970–and 20,770 in case of further weakness, according to Swastika Investmarts’ Santosh Meena.
‘’With the banking index at its long-term moving average i.e. 200 DEMA, we feel stability in private banks may provide the impetus for rebound however 21,750-22,000 zone would continue to act as a hurdle. On the downside, we expect the index to hold the 20,800-21,000 zone in case the pressure increases. We thus advise focusing on stock selection and risk management and using recovery to reduce positions in midcap and smallcap space,” added Religare Brokings’ Ajit Mishra.
Meanwhile, Bank Nifty faces challenges as a notable underperformer, hovering near the critical support of the 200-DMA at 44,500. The bulls successfully defended the crucial support level, establishing it as a critical line of defense, said analysts.
‘’If the index sustains above this support, a potential pullback rally towards the resistance levels of 45,500/46,000 is anticipated in the near term. However, a breach below this support on a closing basis could lead to further downside pressure, with the index targeting levels around 44,000-43,500,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.
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: 28 Jan 2024, 06:08 AM IST