The market eked out half a percent gains amid volatility for week ended January 13, backed by easing inflation concerns indicating less aggressive policy tightening by central banks, and good set of quarterly earnings by IT companies. However, cautious growth forecast by IT firms and consistent selling by FIIs capped the gains.
Technology, metal, auto and select banking & financial services stocks lifted the market mood, whereas the selling was seen in FMCG, and select infra stocks.
For the week, the BSE Sensex climbed more than 360 points to 60,261, and the Nifty50 gained nearly 100 points to 17,957. The broader markets underperformed front liners as the Nifty Midcap 100 index fell third of a percent and Smallcap 100 index gained 0.2 percent.
On Monday, the market will first react to earnings by HDFC Bank and Wipro. Overall, the experts expect that Indian equities will continue to consolidate in the coming week with focus largely on corporate earnings and global cues. The stock-specific moves in pre-budget expectations and earnings will be seen, they feel.
"Going ahead, earnings and global cues will largely dictate the trend. On the macroeconomic front, we have WPI Inflation data scheduled on January 16. On the earnings front, banking stocks will largely be in focus," Ajit Mishra, VP - Technical Research of Religare Broking said.
Align your positions accordingly while keeping a check on leveraged trades citing the prevailing volatility, he advised.
Here are 10 key factors that will keep traders busy this week:
We will enter into second week of corporate earnings season with total 190 companies releasing their quarterly scorecard. IndusInd Bank, Asian Paints, Hindustan Unilever, JSW Steel, Reliance Industries, ICICI Bank, Kotak Mahindra Bank, SBI Life Insurance Company, HDFC Life Insurance Company, and UltraTech Cement are the prominent ones to look at this week.
Among others, Angel One, Federal Bank, Bank of India, Delta Corp, ICICI Lombard General Insurance Company, ICICI Prudential Life Insurance Company, Tata Metaliks, Persistent Systems, Happiest Minds Technologies, Havells India, Hindustan Zinc, ICICI Securities, L&T Technology Services, PVR, Bandhan Bank, Coforge, Indian Energy Exchange, JSW Energy, LTIMindtree, Union Bank of India, IDFC First Bank, and Yes Bank will also release their quarterly numbers this week.
2) WPI Inflation
Apart from earnings, India's wholesale inflation scheduled to be released on January 16 is another key data point to watch out for by the market participants. Analysts largely expect further ease in inflation numbers for December, against 5.85 percent reported in previous month due to fall in input prices and high base in year-ago month.
Retail inflation for December further dropped to one-year low of 5.72 percent against 5.88 percent in November 2022, which remained below the upper band of the Reserve Bank of India's target range of 2-6 percent for second straight month.
"The wholesale price index or WPI inflation is likely to come in at 5.45 percent in December 2022, down from 5.85 percent in November 2022 due to a high base and moderation in input prices. Core WPI inflation is expected at 2.84 percent in December 2022 versus 3.93 percent in November 2022," Teresa John of Nirmal Bang Institutional Equities said.
In addition, balance of trade data for December will also be released on Monday, and foreign exchange reserves on coming Friday.
3) Global Macroeconomic Data
Here are key global macroeconomic data points to watch out for next week including China's Q4CY22 GDP growth rate; monthly industrial production by US, Japan & China; and inflation by Japan & Euro Area.
4) FII Flow
We have seen relentless selling by foreign institutional investors as they seem to be investing in cheaper markets like China, the world's second largest economy which is reopening from Covid lockdowns. Experts expect the outflow to continue for some more days, though DIIs and retail investors have been providing great support to the equity market which is why we have not seen deep correction yet.
FIIs have been net sellers in India for 16th consecutive session, offloading more than Rs 17,000 crore worth shares in current month itself, whereas DIIs have managed to offset the FII outflow to major extent by buying nearly Rs 12,800 crore worth shares in January so far.
"An important trend in the market this month is the sustained selling by FIIs. FIIs are selling in India and moving money to cheaper markets like China, Hong Kong and South Korea where valuations are much lower," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said.
In 2022 FIIs were selling in China. "This trend has changed to long China and short India. This trend may continue for a few more days. Since DIIs and retail investors are buyers and are keen to buy the dips, the FII selling is unlikely to lead to a sharp correction in the market even though the market appears weak for the near-term," the expert said.
5) Oil Prices
Oil prices climbed more than 8 percent, the biggest weekly gain since October 2022 amid indications of rising demand for oil in China due to reopening from Covid lockdowns and fall in US dollar to a seven-month low, but have still been moving in a range for around two months now.
The market participants will closely watch the oil price movement for coming weeks given the rising demand from China and expectations of Fed may be less hawkish given easing inflation.
International benchmark Brent crude futures closed at $85.28 a barrel, up 8.5 percent for the week passing by, though the prices have been below $90 a barrel for couple of months now.
6) US Dollar
The markat participants will also keep an eye on the movement in US dollar index, which measures the value of US dollar against basket of world's leading six currencies.
The DXY corrected since November and now slumped below 102 in the week gone by, the lowest level since June 2022, as falling inflation may be increasing chances for less hawkish mood among Fed officials that means they will go slow on further rate hikes.
The next FOMC meet is scheduled on January 31 and February 1. Most of experts expect the FOMC may take the Fed funds rate to around 5.00-5.25 percent in upcoming policy meetings and then may take a pause.
7) Technical View
The Nifty50 has formed bullish candle on the daily charts on Friday, while there was a Long Legged Doji kind of pattern formation on the weekly scale, indicating indecisiveness among bulls and bears about future market trend.
On the levels, the index fell below 17,800 many times last week, but gave good closing above the same, which is expected to be a crucial support for the market in coming days with resistance at 18,000-18,200 area, experts said.
Overall the frontline index has been trading in a very narrow range from 18,300 to 17,800 levels since past four weeks, hence breaking decisively on either side of range can give direction to the market.
"The present scenario for traders has become very difficult because as volatility in the market has shot up on the one side and the trading range has narrowed down considerably on the other," Rohan Patil, Technical Analyst at SAMCO Securities said.
Currently, he advised that traders should wait patiently for the prices to break above 18,150 or below 17,800 levels to initiate the next actionable move because presently market is in no trading zone.
8) F&O Cues
The weekly Option data also indicated that the Nifty50 may remain rangebound in the 17,800-18,300 area for coming days, with 17,900 seems to be crucial for near term.
We have seen the maximum Call open interest (OI) at 17,900 strike, followed by 19,000 and 18,000 strikes, with Call writing at 18,300 strike, then 18,200 & 18,400 strikes.
On the Put side, the maximum OI was seen at 17,900 strike, followed by 17,800 strike & 17,000 strike, with writing at 17,900 strike, then 17,800 strike.
"FIIs' short exposure in index futures stands at 57 percent while the Put/Call ratio is 1.03; therefore, there is scope for a short covering move. Option data, on the other hand, continues to point to a range-bound market movement," Santosh Meena, Head of Research at Swastika Investmart said.
9) India VIX
The India VIX, which measures the expected volatility in the market, fell by 3.8 percent to 14.46 level, from 15.03 level, making the trend favourable for bulls. Further fall in volatility may provide support and stability to the market.
The market participants will closely watch the VIX move especially ahead of Union Budget 2023.
10) Corporate Action
Here are key corporate actions taking place this week:
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