The market extended its northward journey for the fourth consecutive week ended November 11, and may surpass the record high hit a year back. Falling inflation, the possibility of lower rate hikes by the US Federal Reserve (the Fed), a declining US dollar, and healthy FII (foreign institutional investor) buying supported the market sentiment.
During the week, the Nifty50 climbed more than 200 points, or 1 percent, to 18,350, the highest closing level since October 19, led by buying in banking & financial services, technology, and metal stocks.
The BSE Sensex moved closer to the 62,000 level, rising 845 points to 61,795, but the broader markets had a dismal performance as the Nifty Midcap 100 index fell 1 percent and the Smallcap 100 index declined half a percent.
However, if global markets provide healthy support, then the leading indices may touch record highs, on the back of strong performance by IT and bank stocks. But subsequent to a strong rally, some consolidation can't be ruled out in the coming week, experts said.
"We’re gradually progressing towards a record high, however, mixed signals on the global front are keeping the momentum in check," said Ajit Mishra, VP–Research, at Religare Broking.
Besides, he said, "we have not seen broad-based buying yet and participation from the index majors is also restricted. In such a scenario, sector selection and then cherry-picking the right stocks become critical," he added.
With the banking index at a record high, Mishra expects the positive tone to continue, and thinks the IT index also looks upbeat, all set to regain some strength after a year-long corrective phase.
Here are 10 key factors that will keep traders busy next week:
1) CPI inflation
On the domestic front, the key data point to watch out for would be the CPI (Consumer Price Index) inflation on Monday. Economists, as well as RBI (Reserve Bank of India) Governor Shaktikanta Das, largely expect retail inflation to be below 7 percent for October due to a fall in prices of imported goods. Also, there could be some moderation in the core inflation. However, if the inflation is above the threshold level of 6 percent, a further rate hike by the RBI can't be ruled out at the December Monetary Policy Committee (MPC) meeting, followed by a pause.
Also read: Inflation print for October likely to be lower than 7%: RBI Governor Shaktikanta Das
For October, "we expect CPI inflation to moderate to 6.5 percent year-on-year (YoY) from 7.4 percent in September, primarily due to favourable base effects. Indeed, while food prices continue to rise for now, favourable base effects likely helped drag down both food and core inflation," said Rahul Bajoria, Head of EM Asia (ex-China) Economics Research at Barclays Bank.
Also read: Buccaneering traders bet Nifty rally has more legs to run on
He expects core inflation to moderate slightly to 6.1 percent YoY in October, from 6.3 percent in September.
While inflation is moderating, 10 straight months of above-target inflation would warrant further tightening of the monetary policy. Barclays maintained its forecast for a final 35-basis point (bps) rate hike by the MPC at its December policy review, Bajoria said.
Apart from this, WPI inflation data will also be released on Monday, while balance of trade data for October will be announced on Tuesday.
On Friday, we will also know foreign exchange reserves for the week ended November 11, and deposit and bank loan growth for the fortnight ended November 4.
2) Global cues
On the global front, market participants will keep an eye on October inflation numbers from the UK, which was at 10.1 percent in September. Also, the UK will release its unemployment figures for September, which was at 3.5 percent in August, the lowest level since 1974.
For the US, industrial production data for October, and initial jobless claims for the week ended November 12 will be keenly watched by global investors. China will also release its industrial production numbers for October next week.
Here are key global economic data points to watch out for next week:
3) The Rupee
The Indian rupee recovered last week after the greenback fell amid rising hope of moderation in rate hikes by the Fed . This was because inflation in the US dropped to 7.7 percent in October (from 8.2 percent in September), and there was a positive air in the equity markets.
The Rupee strengthened by 2 percent during the week to settle at 80.81 against the US Dollar, while the US Dollar index closed at 106.42, down sharply from 110.88 levels on a week-on-week basis. In fact, other currencies also gained compared to the USD.
"We expect the Rupee to trade with a positive bias following the rise in risk appetite in global markets and weakness in the greenback. The USD:INR spot price is expected to trade in a range of Rs 80- 81.7," said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
US 10-year treasury yields moderated to 3.82 percent on Friday, from 4.16 percent on a week-on-week basis.
4) FII flows
FIIs (foreign institutional investors) have been gradually increasing their purchase of Indian equities given the hope of easing US Fed concerns, and also because India is the fastest-growing country. If the flow sustains, the market is likely to hit new highs going ahead, experts said.
FIIs have net bought more than Rs 6,300 crore worth of shares last week, taking total monthly buying to nearly Rs 12,500 crore, after being net sellers for the past two months.
There was significant moderation in FII selling in October, when they had sold just Rs 489 crore worth shares.
On the other side, domestic institutional investors (DII), who have always supported the market in a correction, preferred to book profits in the FII-led rally. They have been net sellers in seven out of eight sessions in the current month, offloading more than Rs 5,600 crore worth of shares so far in November.
5) Earnings
We are at the end of quarterly corporate earnings season. So far earnings are broadly in line with analysts' estimates, with an optimistic outlook indicated by the companies through their management commentaries.
More than 1,400 companies will release their quarterly numbers in the early part of next week, a majority of which will be on Monday.
ONGC, Grasim Industries, Biocon, Bharat Forge, Apollo Tyres, IRCTC, and SpiceJet are the prominent names to watch out for on Monday.
Among the others, Aarti Industries, Abbott India, Ahluwalia Contracts, Aarey Drugs & Pharmaceuticals, Balkrishna Industries, BGR Energy Systems, Birla Tyres, CESC, Dilip Buildcon, Godrej Industries, Greaves Cotton, HUDCO, Indiabulls Housing Finance, Jyothy Labs, Linde India, Lux Industries, Mindspace Business Parks REIT, NBCC (India), Radico Khaitan, and Sobha will also be in focus.
6) IPOs
The action in the primary market is going to continue in the coming week as three IPOs will open for subscription.
Electronics manufacturing company Kaynes Technology India will close its Rs 858-crore public issue on Monday, with a price band of Rs 559-587 per share. So far, investors have bid 1.1 times the IPO size.
The maiden public issue of Inox Green Energy Services, the wind power operation and maintenance service provider, will remain open for subscription for two more days, with a price band of Rs 61-65 per share. The last day for the Rs 740-crore offer is November 15. It was subscribed 46 percent on day 1, Friday.
Click Here To Read All IPO Related News
Real estate developer Rustomjee Group-owned Keystone Realtors will open its Rs 635-crore IPO for bidding on November 14. The closing date is November 16. The price band for the offer is Rs 514-541 per share.
7) Listings
In the coming week, three companies will make their grand debut on the bourses. After raising more than Rs 1,100 crore via their public issue, Fusion Micro Finance will list on November 15. Its issue price has been fixed at Rs 368 per share.
Snacks company Bikaji Foods International, as well as Global Health, the operator of the Medanta hospital chain, will debut on the BSE and NSE on November 16.
Bikaji Foods raised Rs 881 crore in its IPO, at Rs 300 per share, while Global Health mobilised little more than Rs 2,200 crore, at Rs 336 per share.
Fusion Micro Finance shares were available at a premium of around Rs 5-7 per share in the grey market, while Bikaji Foods and Global Health shares traded at a premium of around Rs 35-40 and Rs 20, respectively, analysts said. The improvement in equity market conditions may be a reason for the grey market premium, they added.
8) Technical view
Technically also, the charts seem to be looking better now as the Nifty50 has formed a bullish candle on the daily, weekly, as well as monthly time frames, trading far above all important moving averages. Even the momentum indicators — the MACD (moving average convergence and divergence), and the RSI (relative strength index) — reflected a positive mood.
Hence, after touching a high of 18,350, the Nifty50 seems set to march towards a record high provided it holds 18,300 as well as 18,000 levels in the coming sessions, experts said.
"Nifty has created a bullish candle on the weekly chart, maintaining its previous bullish trend. The weekly RSI trend is above the corresponding reference lines, suggesting a positive bias," said Apurva Sheth, Head of Market Perspectives at Samco Securities.
According to the chart pattern, he feels the Nifty may see bullishness if it remains above the 18,300 level, which would take the index up to the 18,600 level. If the index falls below 18,000, profit-taking will begin at 17,800, followed by 17,650.
9) F&O cues
The monthly Options data indicated that traders seem to be betting on higher levels, like 19,000, as there was maximum open interest in deep out-of-money Calls like 19,500 and 19,000 strikes (which are riskier compared to strike prices closer to current index level), with crucial support at 18,000.
We have seen maximum Call open interest with 26.17 lakh contracts at 19,500 strike, followed by 19,000 strike, with Call writing at 18,300, 18,400 and 18,800 strikes.
On the Put side, there was maximum open interest at 18,000 strike, followed by 17,000 and 18,300 strike, with writing at 18,300, 18,400, and 18,200 strike.
"Options data suggests a broader trading range between 17,900 to 18,700 zones, and an immediate trading range between 18,100 to 18,600 levels," said Chandan Taparia, Vice-President, Analyst-Derivatives, at Motilal Oswal Financial Services.
Volatility also cooled down significantly, giving more comfort to the bulls. India VIX, the fear index, was down 8 percent during the week, to 14.41 levels. If it stabilises at lower levels, then the sentiment is likely to be positive, experts said.
10) Corporate action
Here are key corporate actions taking place in the coming week:
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.
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