The market stayed heading upwards for the third straight week ended August 5, with the benchmark indices rising 1.4 percent, despite volatility and rangebound movement on the back of fresh rate hike by the Reserve Bank and a simmering geopolitical tension between China and the US over Taiwan. The encouraging auto sales data for July and consistent FII buying interest and falling oil prices supported the market gains.
The BSE Sensex rallied more than 800 points to 58,388, and the Nifty50 climbed 239 points to 17,397, while the Nifty Midcap 100 and Smallcap 100 indices outperformed frontliners, rising 2.1 percent and 1.6 percent, respectively.
All sectoral indices, barring realty, participated in the uptrend with the IT, Metal, Auto and Oil & Gas taking the lead.
The market seems to be overbought after a 14 percent rally in the last one-and-a-half months with increasing volatility last week, hence consolidation and rangebound trade can continue in the coming week too with focus on global cues, domestic data points and last phase of corporate earnings, though the overall tone is likely to remain positive, experts said.
The market will first react to the earnings figures from SBI, HPCL and BPCL scheduled to be declared on Monday. "The coming week is a holiday-shortened one and participants will be closely eyeing global markets and domestic factors like earnings and macroeconomic data for cues. Further escalation of Taiwan crisis may result in volatile swings," Ajit Mishra, VP - Research at Religare Broking, said.
"Since we are seeing rotational buying across sectors, participants should continue with a stock-specific trading approach and utilise dips to add quality name," suggested Mishra.
The market will remain closed for trading for Muharram on August 9.
Let's take a look at the 10 key factors that will determine the market movement in the week beginning tomorrow.
As we will be in the last week of June quarter earnings season, the number of companies to release quarterly corporate scorecard will be quite higher. Nearly 2,400 companies will report their numbers next week with important ones like Bharti Airtel, Adani Ports, Power Grid, Coal India, Eicher Motors, Hindalco Industries, Tata Consumer Products, Divis Laboratories, Grasim Industries, Hero MotoCorp, and ONGC.
Life Insurance Corporation of India, NALCO, Astrazeneca Pharma India, City Union Bank, Delhivery, Vedant Fashions, Samvardhana Motherson International, Sun Pharma Advanced Research Company, Torrent Power, Whirlpool of India, ABB India, Bectors Food Specialities, IDFC, Indraprastha Gas, MRF, MTAR Technologies, Nuvoco Vistas Corporation, Prestige Estates Projects, Sobha, Tata Chemicals, Trident, and Tata Teleservices (Maharashtra) will also be in focus ahead of June quarter earnings in coming week.
Among others, Ashoka Buildcon, CESC, Cummins India, Glenmark Pharma, Indiabulls Housing Finance, Ipca Laboratories, IRCTC, Indian Railway Finance Corporation, Metropolis Healthcare, NHPC, Oil India, Patanjali Foods, Pidilite Industries, PB Fintech, SAIL, Zydus Lifesciences, Apollo Hospitals Enterprises, Aurobindo Pharma, Bata India, Bharat Forge, Page Industries, Phoenix Mills, Sapphire Foods India, Trent, Apollo Tyres, Bajaj Electricals, Bharat Dynamics. Campus Activewear, Dilip Buildcon, Godrej Industries, Hindustan Aeronautics, India Cements, Info Edge India, Sun TV Network, Wockhardt, and Zee Entertainment Enterprises will also announce its quarterly earnings next week.
2. Inflation and Industrial Output
The CPI inflation for July and industrial output for June will be released on Friday. The key data to watch out for would be CPI inflation that has been declining on a month-on-month basis to 7 percent in June, after hitting an eight-year high of 7.8 percent in April, but the RBI in its policy meeting retained its FY23 inflation forecast at 6.7 percent, assuming oil at $105 a barrel and normal monsoon in 2022, and expect it be below its 6 percent threshold in Q4FY23 and Q1FY24.
Hence, given the elevated inflation and resilience in domestic economic activity, the Monetary Policy Committee has decided to increase the repo rate by 50 bps to 5.4 percent in August policy meeting, and also decided to remain focused on withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth. Experts expect inflation to fall below 7 percent in July given the decline in food prices with effect of fuel tax cuts.
"We expect a CPI inflation of 6.65 percent on-year in July, as declines in some food prices, coupled with the lagged effect of fuel-tax cuts, feed through. Core inflation should stay broadly steady. There is more evidence that inflation in India has peaked for now, and it is likely to slow faster than RBI’s published trajectory, coming into the target band by October, according to our latest tracking estimates," Rahul Bajoria, MD and Chief India Economist said.
The growth in industrial production for May 2022 was 19.6 percent YoY, the highest growth since May 2021, against 6.7 percent rise in April 2022, following growth in most of sectors.
Foreign exchange reserves for week ended August 5, and bank loan & deposit growth data for fortnight ended July 29 will also be released on Friday.
3. US inflation
Globally, investors will keep a close watch on the inflation numbers by the United States for July, which most of experts expect around 8.6-9 percent with a fall in gasoline and jet fuel prices.
In June, the US inflation rate reached to 9.1 percent, the highest since November 1981, against 8.6 percent in May with rising energy prices.
The US as well as China will release their inflation numbers on Wednesday.
4. Other Global Data Points
Here are other key global data points to watch out for next week:
5. Oil Prices
Further cooling off in oil prices seems to be one more reason for the positive mood in equity market participants, but the market is cautiously watching the rising risk of recession in the US and Europe as oil prices are declining on concerns over demand outlook.
As we are the net oil importer, any decline in prices is always beneficial but if the recession hits the US and Europe then that might have some impact on our economic growth, experts said.
International benchmark Brent crude futures fell up to $95 a barrel in the week gone by, against $110 a barrel in previous week amid rising recession fears.
It was a strong start to the month of August, though we have more than 1 percent gains on the benchmark indices, as foreign institutional investors were net buyers on every day during the week gone by, the first time in a week after several months. This gives a confidence to the market participants and hence it held on to the gains it recovered in last one-and-half-month despite volatility, though DIIs have utilised the opportunity to take some profit off the table.
The fall in US dollar index, which measures the value of US dollar against a basket of world's leading currencies, from its June high of 109.29 levels following commentary by Federal Reserve in its July policy meeting, and remained rangebound around 105-106 levels for last couple of weeks also aided FIIs inflow. As a result, the Indian rupee came off its all-time low of 80.24 against the US dollar and traded above 80 levels now.
Hence, we need to see whether FIIs will continue pouring in money in coming weeks or not. FIIs have net bought nearly Rs 7,000 crore in the week ended August 5, whereas DIIs have net sold Rs 1,766 crore worth shares in the same period.
7. Technical View
The Nifty50 has made several attempts to reclaim the crucial resistance point 17,500 amid the fight between bulls and bears but failed, and finally ended the week with bullish candlestick pattern on the weekly charts, while on the daily scale, there was Doji kind of pattern formation, indicating the indecisiveness about future trend among market participants. But the good thing was that bulls strongly defended its bullish gap zone (17,158-17,243) created on August 1 and also took support at 17,150-17,200, the low of August 1, though bears tried to break the same on August 4.
Hence the consolidation is likely to continue with 17,150 as the next support area followed by 17,000, while the resistance would be 17,500 and breaking of the same can take the index towards 17,800 levels, experts said.
"The short term trend of Nifty continues to be choppy with high volatility. As long as Nifty stays below the hurdle of 17,500 levels, there is a possibility of muted movement in the market. A sustainable move above 17500 could open the next upside targets of 17,800-17,900 levels in the near term," Nagaraj Shetti, Technical Research Analyst at HDFC Securities said, adding the immediate support placed at 17,200 levels.
8. F&O Cues
On Option front, we have seen maximum Call open interest at 18,000 strike followed by 17,500 and 17,600 strikes with Call writing at 18,100 strike then 17,600 and 18,000 strikes. The maximum Put open interest was seen at 17,000 strike, followed by 16,500 and 17,300 strikes, with Put writing at 17,400 strike then 16,500 and 17,100 strikes.
The above Option data indicated that the Nifty50 may remain in range of 17,100 and 17,600 levels in immediate term, experts said.
"From the options space, we are witnessing continued Put writing at ATM and OTM strikes with 17,400 Put holding the major open interest. Call writers continue to remain under pressure while the highest Call base remained at the 17,500 strike. Closure among these options is likely to take the Nifty towards 17800. On downsides, we remain positive with stop loss near 17,200 levels," ICICI Direct said.
The volatility index India VIX has jumped to around 21 levels during the week indicating the market may be at a little overbought zone with focussing on geopolitical tensions (US-China-Taiwan), and recession fears due to falling oil prices.
The index settled at 18.92 levels on Friday, rising 14.3 percent on week-on-week basis, making the bulls a bit of uncomfortable. Hence, it needs to fall below 18 levels to get some stability in the market, experts feel.
9. Corporate Action
Here are key corporate actions taking place in the coming week:
The primary market is going to be active in the coming week, after a break of around two-and-half-month. Syrma SGS Technology, a Chennai-based engineering and design company, will open its initial public offering for subscription on August 12 and will close on August 18.
The offer comprises a fresh issue of Rs 766 crore and an offer for sale of 33.69 lakh equity shares by the promoter. The price band for the offer will be disclosed by the company on Monday, August 8.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.