Dalal Street Week Ahead | FOMC minutes, crude prices, FII flow and all that will dictate D-St next week

The BSE Sensex climbed 535 points to 65,795, and the Nifty50 jumped 206 points to 19,732.

The markets kept up the rally for the third straight week ended November 17 with a 1 percent gain, despite banking and financial stocks being beaten by the Reserve Bank of India's move to raise the risk weights for unsecured loans. The bullish trend in the market was supported by dalling crude oil prices and hopes of an end to the rate hike cycle globally on the back of easing inflation.

Experts expect the positive sentiment in the markets to sustain in the coming week too, with focus on the US bond yields and oil prices, and advised continuing with the buy-on-dips strategy.

The BSE Sensex climbed 535 points to 65,795, and the Nifty50 jumped 206 points to 19,732, while the Nifty Midcap 100 and Smallcap 100 indices gained 2 percent and 2.7 percent.

Most of sectors participated in the weekly run-up, barring banking and financial services stocks.

"Despite the RBI's new rule, the market is likely to maintain its positive momentum in the short term, supported by declining oil prices and moderating US yields," Vinod Nair, research head at Geojit Financial Services, said.

Santosh Meena, research head at Swastika Investmart, feels the trajectory will hinge on the movements of US bond yields, the dollar index, crude oil prices, as well as institutional flows. The market's stability may be influenced until the end of state elections, at which point a discernible trend might materialise, he said.

Let's take a look at the key factors that will determine the market movement in the week ahead.

FOMC Minutes

Global markets will watch out for the FOMC minutes of the monetary policy meeting concluded on November 1. Global investors and economists will look for more signals for possible end to the rate hike cycle given the falling inflation. The Fed, which held rates steady at 5.25-5.50 percent in November policy meeting, is focussing on a few important things like bringing inflation at 2 percent target, report maximum employment and avoid recession or, looking for soft landing for the US economy, as well as avoid excessive policy tightening which can hit the banking sector. Some experts expect the Fed may start rate cuts in the first half of 2024, instead of the second half.

Also read: Opportunity in market correction: New midcaps that MFs added in Oct

The US inflation in October came in at 3.2 percent, which was below market expectations, against 3.7 percent in September, fuelling the rally in equity markets in the week gone by.

Global Economic Data

Apart from FOMC minutes, manufacturing and services PMI flash numbers for November, Japan's inflation for October, and US jobs data are other factors to keep an eye on.

Oil Prices

Market participants will also focus on the oil prices that acted as another supportive factor for rally in equity benchmarks. Oil, the biggest risk for emerging markets like India as an importer, is on a slide on the back of demand concerns, steep increase in US crude inventories and rising non-OPEC supplies.

Brent crude futures, the international benchmark for oil prices, dropped to four-month low in the last week. Prices fell 1 percent during the week to settle at $80.61 a barrel, the lowest closing level since second week of July, taking the total loss to nearly 13 percent from the October high ($92.38).

Also read: Nifty IT index poised for a breakout, HCL Tech, TCS, Infosys on analyst hotlists

Mohammed Imran, research analyst at Sharekhan by BNP Paribas, holds a bearish view on crude oil amid softening demand from Asia and US that is visible through the surging US commercial inventories.

FII Flow

The slowdown in FII selling especially after the decline in US bond yields with rising hope that the Fed is done with the rate hike cycle also lifted the equity market sentiment, but strong DII data suggest that the influence of FIIs on the market seems to be declining.

Foreign institutional investors net sold Rs 215 crore worth of shares during the last week due to two-day buying interest, but that is completely getting offset by domestic institutional investors who have bought Rs 1,580 crore worth of shares during the week. Even for the current month, they bought Rs 7,700 crore worth shares in the cash segment against FIIs selling of Rs 6,575 crore.

The US 10-year treasury yields settled on Friday at 4.44 percent against 4.64 percent on week-on-week basis, while the US dollar index dropped to 103.82, from 105.86 levels during the same period.

"The sharp decline in the US 10-year bond yields has turned out to be an inflection point for the mother market and thereby to the global stock markets. Markets now believe that the Fed is done with rate hikes and will slowly start discounting rate cuts in 2024," VK Vijayakumar, chief investment strategist at Geojit Financial Services, said, adding that if the declining trend in US inflation persists the Fed may cut rates by mid 2024. This can facilitate FPI inflows into EMs like India.

Domestic Economic Data

On the domestic economic data front, there won't be much of an activity, barring foreign exchange reserves data for the week ended November 17, which is scheduled to be released on November 24.

Technical View

Technically also, the market seems to be looking positive given the sustainability of the Nifty above the falling resistance trendline and continuing uptrend for third consecutive week with bullish candlestick pattern formation and higher highs, higher lows formation for second straight week. Also, it holds 20-week EMA, which can be critical support for the Nifty50.

Thursday's swing high of 19,875 could be considered as a new higher top of the sequence, experts said.

"Buy the dip is likely to remain in favour as prices managed to trade above the key mark of 19600," Arvinder Singh Nanda, Senior Vice President of Master Capital Services said. 19,600-19,500 is expected to be immediate support for the Nifty50. "If it manages to close above 19,900 then we can expect new high. Conversely, a decisive fall below 19,500 will be seen as a short-term trend reversal which can lead Nifty towards 19,300-19,100."

F&O Cues

Options data also indicated that the Nifty50 may face resistance at 19,900, which can decide the move towards 20,000-20,200 levels, with support at 19,500 mark.

As per weekly options data, the maximum Call open interest was visible at 19,900 strike, followed by 19,800 and 20,500 strikes, with Call writing at 19,800 strike, then 20,400 & 20,500 strikes.

On the Put side, 19,700 strike held the maximum open interest, followed by 19,500 strike & 19,000 strike, with writing at 19,100 strike, then 19,000 strike and 19,500 strike.

"Despite a robust 1,000-point rally in the Nifty, FIIs maintain a substantial 79 percent short exposure in index futures. This elevated level suggests that there is still room for a potential short-covering move," Santosh Meena said.

India VIX

The volatility increased for second consecutive week, but still within the broad range of 8-13 levels for several weeks now. Meanwhile, the bulls retained their leading position in the market.

India VIX, which measures the expected volatility for next thirty days in the Nifty50, has risen 8.7 percent in two weeks to settle at 11.83 levels on November 17.

IPO

The focus by the market participants will also be on the primary market as six companies will be hitting Dalal Street with Rs 7,400 crore worth of IPOs plan. State-owned Indian Renewable Energy Development Agency will be the first, opening its Rs 2,150-crore initial public offering for subscription on November 21 and closing on November 23, with a price band at Rs 30-32 per share.

Next four IPOs from the mainboard segment would be by Tata Technologies, Gandhar Oil Refinery India, Fedbank Financial Services and Flair Writing Industries, wherein the bidding will start on November 22 and the last day will be November 24.

Pune-based Tata Technologies will be raising Rs 3,042.51 crore via public issue, at higher end of price band of Rs 475-500 per share, while Gandhar Oil Refinery India, the white oils manufacturer, aims for Rs 500-crore fund raising via IPO, and fixed a price band at Rs 160-169 per share.

NBFC Fedbank Financial Services is planning to mop up Rs 1,092.26 crore from the issue at the upper end of price band of Rs 133-140 per share, while stationery products manufacturing company Flair Writing Industries intends to raise Rs 593 crore from the maiden issue, which has a price band at Rs 288-304 per share.

In the SME segment, B2B re-commerce player Rocking Deals Circular Economy will also open its Rs 21-crore public issue for subscription during November 22-24, with a price band of Rs 136-140 per share, while dryers manufacturer Arrowhead Seperation Engineering will be closing its IPO on November 20.

Healthcare and personal care products supplier Sunrest Lifescience will debut on the NSE Emerge on November 20.

Corporate Action

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

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