Indian benchmark indices recorded gains this week despite mixed signals from the global market, particularly regarding inflation concerns. Markets concluded a two-week consolidation phase by gaining over 2 percent this week, continuing the prevailing uptrend. The market is expected to trade sideways next week due to the absence of strong buying or selling triggers, said experts.
Key factors to watch include the progress of the monsoon, which will be closely monitored for its near-term impact on investor confidence. The upcoming GST meeting may result in rate adjustments in certain sectors, potentially influencing market direction. Investors will also keep a close eye on FII and DII fund flows, as well as crude oil prices, to gauge overall sentiment.
On the global front, the rise in US jobless claims and weak housing data have raised expectations of a rate cut in September. For the week ahead, focus will be on the release of US & Indian manufacturing PMI data and the FED Chair’s speech. "The release of economic data points next week would keep a little volatility in the market. The sector like Auto is expected to be in the limelight as OEMs would release their monthly auto Sales number," said Siddhartha Khemka, Senior Group VP, Head - Research, Motilal Oswal.
Sector-specific movements are anticipated amid budget-related buzz. While the underlying sentiment remains bullish, dips might attract opportunistic buying, which could support the market, said analysts. However, strong rallies may be capped by profit booking, said experts.
In the previous session, benchmark indices ended lower amid volatility. At close, the Sensex was down 210.45 points or 0.27 percent at 79,032.73, and the Nifty was down 33.90 points or 0.14 percent at 24,010.60.
"The consolidation phase in broader indices is expected to conclude soon, although participation may be limited to quality names. Traders are advised to continue with a "buy on dips" strategy, focusing on careful stock selection," said Ajit Mishra – SVP, Research, Religare Broking Ltd.
Here are 10 key factors to watch:
Auto Sales
Market participants will keep an eye on the monthly auto sales numbers for June, which will be released on July 1. Automobile wholesale volumes across segments are expected to be a mixed bag with expectations of growth in two-wheelers and passenger vehicles (PV).
The commercial vehicles (CV) segment is likely to see flat sales growth, while tractor sales are estimated to fall for the month. According to Nuvama Institutional Equities, two-wheeler and tractor volumes would grow in high single digits vis-à-vis low-single digits for PV over FY24–FY26.
Domestic Economic Data
HSBC Manufacturing PMI Final for June, on July 1
HSBC Services & Composite PMI Final for June, on July 3
Foreign exchange reserves for the week ended Jun 28, on July 5
FOMC Minutes, US Jobs Data and Fed Chair Speech
FOMC Minutes on July 3
Federal Reserve Chairman Jerome Powell's upcoming speech on Tuesday, July 2, 2024, is anticipated to influence markets.
Global Economic Data
Aside from FOMC Minutes, Powell's speech, the focus will also be on S&P Global Manufacturing PMI, non-farm payrolls, Unemployment rate, JOLTs job openings and exits, Initial jobless claims, and monthly factory orders data from the United States next week.
Manufacturing PMI numbers from other developed and developing nations, ECB non-monetary policy meetings, Euro inflation flash and unemployment rate, Japan's Jibun Bank manufacturing PMI, and Consumer Confidence will also be watched.
FII Flow
Foreign institutional investors (FII) activity will also be watched next week, though FII outflow has been more than compensated by consistent, robust buying by domestic institutional investors (DIIs) in the equity markets over the previous week where FIIs net sold Rs 14,704 crore worth of shares in the cash segment, while DIIs net bought stocks worth Rs 20,796 crore, per provisional data.
Ahead of the Union Budget and India's inclusion in JP Morgan's bond index, FIIs purchased Indian stocks worth approximately Rs 26,565 crore in June, driven by expectations of continued reforms post-elections. This renewed interest is on account of improved GDP growth forecasts and strong earnings from Indian companies, said analysts.
“FII buying can sustain provided there is no sharp up move in U.S. bond yields,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. In the year so far, FIIs have net bought shares worth Rs 129,046 crore, while DIIs have bought shares worth Rs 236,325 crore at the same time
IPO
The primary market is set for another exceptional week as three companies prepare to launch their initial public offerings (IPOs) to raise over Rs 2,700 crore. Next week, the IPOs of Emcure Pharmaceuticals, where Namita Thapar of Shark Tank fame serves as Executive Director and Bansal Wire will open for subscription on the mainboard.
Additionally, Ambey Laboratories will have its SME issue. Besides these three public offers, the market will see as many as 11 listings, including Allied Blenders and Vraj Iron and Steel, both of which received strong investor interest in their recent IPOs.
Technical View
After showing consistent up moves in the last four sessions, Nifty slipped into minor profit booking from the new highs on Friday. A small negative candle was formed on the daily chart with a small upper shadow.
"Technically, this formation is indicating a minor negative set-up for the market at the highs. Further weakness below 23800 levels could confirm a short-term top reversal pattern. However, a sustainable move above 24200 levels is likely to negate this bearish formation," said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.
"The near-term uptrend status of Nifty remains intact. Having moved up sharply Nifty is currently facing a hurdle at the resistance of 24,000-24,100 levels. Any dip from here is likely to be a buying opportunity. Immediate support is at 23,800 levels," he added.
As for Bank Nifty, for the selling pressure to continue, there needs to be follow-up selling; otherwise, the index may get stuck in a consolidation range, according to Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.
"The immediate support is at 52,000, where the highest open interest is built up on the put side, while the immediate resistance lies in the 52,700-53,000 zone," he said.
F&O Cues
The weekly options data shows that the 25,000 strike holds the maximum open interest. This level can act as a key resistance level for the Nifty in the short term. The 24,500 strike and the 24,000 strike followed it.
Maximum Call writing was observed at the 25,000 strikes, followed by the 24,500 and 24,900 strikes. The maximum Call unwinding was seen at the 23,800 strikes, followed by the 23,700 and 23,900 strikes.
On the Put side, the maximum open interest was observed at the 23,000 strike, which can act as a key support level for the Nifty. It was followed by the 24,000 strike and the 23,500 strike.
The maximum Put writing was visible at the 23,500 strike, followed by the 23,000 and 24,100 strikes. Put unwinding was observed at the 22,700 strike, followed by the 22,300 and 22,600 strikes.
India VIX
The volatility sustained below the 15-mark as well as the 200-day EMA (Exponential Moving Average), keeping the bulls comfortable. The India VIX, the fear index, fell 2.47 percent to 13.8 levels on Friday, but for the week, it gained 4.72 percent.
Corporate Action
Here are key corporate actions taking place next week:
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