Dalal Street Week Ahead: 10 factors that will keep traders busy

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After briefly scaling past the 18,700 mark, the Nifty 50 took a breather and settled only 0.16 percent higher at 18,563 for the week ended June 9. Sensex gained 0.13 percent to end at 62,625.

Within sectors, infra (up 1.8 percent) and autos (up 1.7 percent) were the top gainers while IT (down 3.4 percent) and FMCG (down 1.2 percent) were top losers.

The broader markets were also buoyant with Nifty Midcap 100 gaining 0.5 percent to end the week at 34,153. Nifty Smallcap 100 gained 1.17 percent. In fact, Nifty Midcap 100 touched a new high of 34,534.70.

There was both good and bad news from the Reserve Bank of India's monetary policy decision. The central bank on June 8 held interest rates, keeping the repo unchanged at 6.5 percent. But, it did not cut the inflation forecast by a large quantum.

"The domestic market witnessed some pressure as investors eagerly await the domestic inflation data due on Monday (June 12) as the RBI refrained from an aggressive cut in their inflation forecast," Vinod Nair, Head of Research at Geojit Financial Services said.

Let's take a look at all the factors that would determine the market movement next week

1. India CPI Inflation

The market is hopeful that the CPI (consumer price index) inflation for May will further moderate from its current level of 4.7 percent. Most economists have pegged headline inflation at 4.34 percent. The data will be released on June 12.

"CPI inflation is likely to continue to trend lower in May, driven largely by base effects, a more manageable seasonal rise in food prices, and sequential easing in energy costs. Core inflation will likely rise modestly owing to persistence in output and services costs," Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said.

2. FOMC decision

The U.S. Federal Reserve is expected to not raise interest rates for the first time in well over a year at its June 13-14 meeting, according to economists polled by Reuters.

Fed Chair Jerome Powell signaled in May that the U.S. central bank might soon pause its hiking cycle to assess the impact of a historically aggressive 500 basis points worth of tightening, having raised rates at every meeting since March of 2022.

The number of Americans filing new claims for unemployment benefits has surged in the recent past, suggesting that the labour market is slowing amid mounting risks of a recession, said experts. Thus, a pause in key rates is highly anticipated.

3. Domestic economic data points

Apart from CPI data, wholesale price index (WPI) inflation for the month of May is scheduled to be released on June 13.

In April, the WPI witnessed its first deflation since 2022 as it stood at a negative 0.92 percent owing to a drop in manufacturing, mainly basic metals. In May, WPI is expected to contract 2.2 percent.

Other data points to watch out for will be Foreign Exchange Reserves number for the week ended June 9, and deposit & bank loan growth numbers for the fortnight ended June 2. These will be released on June 16.

4. Central bank decisions

Apart from the Federal Reserve, the European Central Bank and the Bank of Japan will also announce their interest rates decisions. ECB interest rate decision is scheduled for June 15 and BoJ's decision is on June 16.

ECB is expected to hike its key interest rates by 25 basis points as inflation still remains sticky in the region. Meanwhile, BoJ is expected to maintain ultra-loose monetary policy while signalling inflation overshoot.

"The BoJ has a reputation to surprise markets, the same could be expected from the Federal Reserve this time," Dilip Parmar, Research Analyst, HDFC Securities said.

5. Monsoon progress

The southwest monsoon arrived in Kerala on June 8, said the India Meteorological Department (IMD). The onset occurred four days later than the original forecast date.

Meanwhile, Australian Meteorological Bureau’s ENSO outlook on El Nino has now changed to an “alert” status (from and earlier “watch” status). There is now roughly a 70 percent chance of El Nino forming.

"Any significant alteration of the timeliness and distribution of the southwest monsoons could have its implications on food inflation and needs to be watch," Indranil Pan, Chief Economist at YES Bank said.

6. FII and DII flows

Foreign institutional investors bought equity shares worth Rs 979 crore in the week gone by while domestic investors bought shares worth Rs 1938 crore. It is crucial that this momentum sustains going forward to support the market.

“The recent anticipated proposal by SEBI to make disclosure norms more stringent for FPIs has reignited the discussion on India’s stand on promulgating ease of doing business for foreign investors," Manoj Purohit, Partner & Leader – Financial Services Tax, BDO India said.

7. Technical levels

From a technical standpoint, the Nifty is not displaying any major signs of weakness. However, at higher levels, signs of exhaustion are emerging, with negative divergence observed in momentum indicators, according to experts.

"This is suggesting a potential for profit booking in the market. The immediate and crucial support level stands at the 20-day moving average (DMA) around 18,450, and if breached, the next support level would be at 18,180. On the upside, the range of 18,800-18,888 poses as a resistance area," according to Santosh Meena, Head of Research, Swastika Investmart.

8. F&O Cues and India VIX

Option data clearly indicated that 18,600-18,800 is expected to remain key resistance area as crossing of the same can help Nifty reclaim its record high of 18,887, whereas the Nifty may find support at 18,500-18,300 zone.

As per the weekly Option data, the 18,700 strike has the maximum Call open interest, followed by 18,800 and 18,600 strikes, with meaningful Call writing at 18,600 strike, 18,700 strike, and 18,900 strike.

On the Put side, we have seen the maximum open interest at 18,700 strike, followed by 18,600 strike, and 18,300 strike, with writing at 18,300 strike, 18,600 strike, and 18,000 strike.

The volatility remained at lower levels, trading well below 12 zone for more than a week now, indicating stability in the market. India VIX, the fear index, closed flat at 11.12 levels on week-on-week basis, forming Doji kind of candlestick pattern on the weekly charts, indicating the possibility of trend reversal.

9. Global Economic Data Points

Here are key global economic data points to watch out for next week:

10. Corporate Action

Tata Consultancy Services, HDFC Life Insurance Company, Cyient, ICICI Lombard General Insurance Company, Indian Bank, Jindal Saw, Canara Bank, Tata Chemicals, DCB Bank, Angel One, Power Finance Corporation, and Torrent Power will go ex-dividend next week, while Varun Beverages will turn ex-split, and Wipro is going to turn ex-buyback.

Here are key corporate actions taking place in the coming week:

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