Market week ahead: Wall Street likely to dictate trends in Indian equities

on Friday, Sensex And Nifty 50 snapped its 3-day winning streak. The 30-issue benchmark barely moved above the 61,000 mark and closed at 61,002.57, down 316.94 points, or 0.52%. Meanwhile, the Nifty 50 retreated from its psychological level of 18,000 to close at 17,944.20, down 91.65 points or 0.51%.

Overall, the weekly gain in Sensex is around 0.53%, and in Nifty 50 is around 0.49%.

In addition, foreign institutional investors Stopped buying for five consecutive days to emerge as a net seller with outflows of Rs. 624.61 crores on Friday. Similarly, domestic institutional investors (DIIs) made a U-turn from their straight four days of buying to selling 85.29 crores in one day.

However, broadly speaking, both FII and DIIs were buyers in the week of Feb 13 to Feb 17 6,088.48 crore and 2,820.39 crore respectively in Indian equity.

Meanwhile, the rupee continued to depreciate for the fourth straight day against the US dollar on concerns over rising US yields. However, further losses in the rupee were limited due to possible intervention by RBI in the non-deliverable forward (NDF) market. The local unit closed at 82.83 against the greenback as compared to the previous session’s print of 82.7175 per dollar.

What to expect in the coming week?

According to Ajit Mishra, VP Technical Research, Religare Broking, the market continued to be volatile amid mixed signals and closed with a gain of about half a per cent. After initial decline, Nifty gained some strength in between, tracking favorable global cues and buying in select heavyweights. However, profit-booking reduced the gains in the final session and finally closed at 17,944.20. On the sectoral front, a bounce in IT and energy heavyweights kept the tone positive while banking and financials were under pressure. Meanwhile, the broader indices underperformed the benchmarks and each declined more than a per cent.

Mishra pointed out that as with all major events, the performance of global markets, especially the US, would be the focus for cues. Apart from this, the movement of crude oil and rupee will continue to give signals in between.

“We do not expect any surprises from the global front, however, intermediate consolidation/profit-taking in US markets may trigger mid-term volatility. The recent poor performance of banking and financial packs may continue, hence Participation of other sectors may also continue.” Sectors such as IT, energy, FMCG and auto can play an important role going forward. On the indices front, Nifty should hold 17,700 and move towards 18,200 -18,350 zone to extend the recovery. In the meantime, we advise participants to be selective and prioritize sectors that are showing strength and choose index majors over others.”

Besides, Vinod Nair, Head of Research, Geojit Financial Services, said, “Domestic markets witnessed a positive trend during the week on the back of release of key macroeconomic data and sustained buying by FIIs.”

However, Nair said, “An adverse combination of higher-than-expected inflation and a strong job market in the US dragged the markets down at the end of the week, raising concerns about tighter monetary policy.” % as RBI’s tolerance level cooled. US inflation, though slowed compared to last month, was higher than expected at 6.4% YoY. Oil prices fell during the week as the U.S. announced the release of excess crude oil from its Strategic Petroleum Reserve (SPR), raising supply concerns.”

Nair said on similar lines, “Lack of major triggers in domestic market will attract global cues to guide market trend going forward.”

Apart from global cues, other key factors that could add fuel to sentiment in Indian markets — scheduled expiry of February monthly derivatives contracts; RBI’s agenda for February 2023 monetary policy where it raised the repo rate by 25 bps to 6.5%; Changes in NSE, MSCI, and FTSE Russell Indices and their impact on Adani Group shares; and Q3 earnings.

Amid index rejig, NSE has added two stocks namely Adani Wilmar and Adani Power to its Nifty Next 50 Index and Nifty Next 500 Index with effect from March 31, 2023 respectively. While reports say three Adani group companies – Adani Power, Adani Total Gas, and Adani Transmission – are expected to be removed from the MSCI India index during a rebalancing exercise in May following a sharp correction in their stock prices.

On the other hand, the London Stock Exchange, FTSE, confirmed that it intends to go ahead with the scheduled index review changes for Adani Group (India) and its associated securities. Earlier, FTSE added 10 Indian stocks to its Global Large-Cap Index as part of its half-yearly index review, but Adani’s shares remained unaffected.

With respect to Q3 earnings, some of the major companies announcing their financial results for the third quarter are – SpiceJet, Sanofi and Mahindra CIE Automotive.

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.