Week Ahead: Macro data, IPO action, FII activity, global cues among key market triggers this week

Domestic markets extended their bullish tone for the third week in a row and gained more than one percent. The start was bearish but the trend changed in the following sessions with a boom in the US markets.

The NSE Nifty 50 index gained 1.58 percent this week, the best in two months, while the Sensex rose 1.37 percent. Stocks of IT companies, which earn a significant share of their revenue from the US, climbed 5.07 percent, their best week in 16 months. Small- and mid-caps that focused more on the town achieved record gains, outperforming the benchmarks during the week, helped by retail inflows.

Shares of banks and NBFC firms fell sharply after the Reserve Bank of India (RBI) tightened consumer credit norms asking them to assign a higher risk weight for unsecured personal loans, a move it aim to make lenders more alert to such developments.

On Friday, benchmark indices ended in the red over weak cues from Asian markets and saw extremely volatile trading trends. However, the broader market outperformed the benchmark indices in the session.

Also read: These 50 small-cap stocks surged 15-50% as Sensex logs third IT-led weekly gain; is it yours?

The 30-share BSE Sensex ended lower by 187.75 points or 0.28 per cent at 65,794.73 level while the Nifty 50 closed at 19,731.80 level, down 33.40 points or 0.17 per cent. The broader market closed inched higher than the benchmark indices on Friday’s session, the Nifty Midcap 100 closed 0.20 percent higher and the Nifty Smallcap ended flat or 0.09 percent higher.

“Domestic markets ended the week on a positive note, with global cues and favorable Indian macroeconomic indicators pointing to subdued inflation. Softer-than-expected inflation figures in the US, UK, and at home with investors’ optimism, fueling hopes for an end to the interest rate cycle. This sentiment led to gains across the broader market, particularly in small- and mid-cap stocks,” said Vinod Nair, Head of Research at Geojit Financial Services.

“Confidence rebounded in export-oriented sectors such as IT and Pharma, expecting an increase in spending, while the automobile and real estate sectors found favor during the festive season. The market is expected to maintain its positive momentum in the short term, supported by easing oil prices and softening US yields,” Nair added.

From now on, a busy week awaits the primary market as several major initial public offerings (IPOs) and listings are set across the mainboard and small and medium enterprise (SME) segments. The week will be crucial from a domestic and technical point of view as investors will be closely watching the global cues along with domestic economic data.

Overall, analysts believe that global trends are largely driving the market’s direction and will continue to keep investors on their toes in the coming weeks as well. Nifty 50 is likely to be supported by positive net foreign capital inflows along with sharp decline in oil prices and moderation in US bond yields.

Here are the key drivers for stock markets next week:

6 new IPOs, 1 listing to hit on D-Street:

In the main program segment, five new IPOs are opening for subscription in the coming week. IREDA IPO will open for bidding on November 21.

Tata Technologies IPO, Gandhar Oil Refinery India IPO, Fedbank Financial Services IPO, and Flair Writing IPOs are opening for subscription on November 22.

In the SME segment, Rocking Deals Circular Economy IPO will be open for subscription on November 22. Among new listings, shares of Sunrest Lifescience will be listed on NSE SME in the coming week.

FII Activity:

Foreign institutional investors (FIIs) snapped their selling streak on November 15 after US consumer price index (CPI) inflation eased in October, sending US 10-year bond yields down sharply to 4.45 percent.

However, the total foreign capital outflow stands at ₹7,630 crore in the first two weeks of November. The domestic institutional investors (DIIs) won the tug of war and remained net buyers in the first 15 days of the month.

Foreign portfolio investors (FPIs) finally reversed their selling streak this month after being net buyers till 15 November. During August, September October and till November 15, FPIs sold stocks for ₹83,422 crore through the exchanges.

“FIIs have seen some buying activity in the last few days, and their buying momentum may have picked up amid falling US bond yields and the dollar index,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Global Tips:

US inflation fell sharply in October to 4.6 percent from 6.7 percent, encouraging markets and reducing the risk of further rate cuts by the Federal Reserve in the near term. “This may attract FII flows towards emerging markets amid increased festive demand and a good quarterly earnings season,” said Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd.

The domestic market will take cues from US existing home sales, initial jobless claims, US manufacturing and services PMI, Federal Open Market Committee (FOMC) minutes, UK manufacturing and services PMI. Investors will also focus on US bond yields, crude oil inventories, and the movement of the rupee against the dollar.

“The trend is largely driven by global cues and we expect this trend to continue in the coming week as well. Among all the major indices, the US markets have been showing significant strength and have rebounded significantly over the past three weeks,” said Ajit Mishra, SVP – Technical Research, Religare Broking.

“The Dow Jones Industrial Average (DJIA) may take off after the recent run but we expect the bullish tone to remain. The previous swing high ie 35,679 would be the next major breakthrough and any decline in the 34,300-34,600 zone would attract buying interest,” Mishra said.

Oil Prices:

Oil prices jumped more than 4 percent on Friday, recovering from a four-month low hit in the previous session, as investors who took short positions took profits and although US sanctions on some Russian oil exporters lent support.

Brent crude futures settled up $3.19, or about 4.1 percent, at $80.61 a barrel, while West Texas Intermediate (WTI) crude rose $2.99, or 4.1 percent, at $75.89, according to Reuters news agency.

Some of the losses were offset after the United States imposed sanctions this week on shipping companies and vessels for shipping Russian oil sold above the Group of Seven (G7) price cap.

Still, both benchmarks ended the week more than 1 percent lower, their fourth straight weekly decline, largely weighed down by rising US crude inventories and sustained record high yields.

The OPEC+ group, made up of the Organization of the Petroleum Exporting Countries and its allies, is to consider whether to make further cuts to oil supply when the group meets on November 26.

Corporate Action:

Shares of several companies will trade ex-dividend in the coming week including Coal India, Oil and Natural Gas Corporation (ONGC), Oil India, Aurobindo Pharma among others will trade ex-dividend in the coming week, starting from Monday, November 20. Tata Consultancy Services (TCS) will announce a share buyback on November 24. Check out the full list here

Technical View:

From a domestic perspective, investors could see some consolidation in Nifty after testing 19,850, but the trend would remain positive, according to investors. “A decisive breakout above that level would help the index move towards the all-time high ie 20,222 levels. On the downside, the zone would offer 19,300-19,500 cushions in case of any dip,” said Ajit Mishra of Religare.

Investmarts’ Santosh Meena Swastika said, ”From a technical point of view, Nifty is currently in a short consolidation phase, coming across a significant barrier around the 19,850 mark before a possible significant upside move.”

”Amidst life, the underperformance of the banking package could continue to weigh on sentiment, but weakness in other sectors would continue to offer buying opportunities. Additionally, traders can selectively seek long trades from the mid-cap and small-cap portfolio as well,” said Ajit Mishra.

Bank Nifty underperforms, but a strong demand zone emerges at 43,400-43,300, marked by the convergence of the 20-day Moving Average (20-DMA) and the 200-day Moving Average (200-DMA), leading to understanding that a replay could be made.

“After the RBI’s announcement of tighter provisions for consumer loans, the next support from Bank Nifty lies at the 43,300-43,250 zone, acting as a critical line of defense for the bulls,” said Kunal Shah, Senior Analyst Technical & Derivatives at LKP Securities.

”If this level holds, it could pave the way for a possible recovery towards the 44,000 mark. However, a breach of the mentioned support may intensify selling pressure, which will push the index lower towards the 42,700 level on the downside,” said Shah.

Disclaimer: The above opinions and recommendations are the opinions and recommendations of the individual analysts and brokerage firms, not the opinions of the mint. We encourage investors to check with certified experts before making any investment decision.

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Updated: 19 November 2023, 06:12 AM IST