Dalal Street Week Ahead: New govt, CPI, IIP, FOMC meet among 10 things that will keep traders on toes

This week, the markets should start on an upbeat note, now that there is more clarity on policy continuity as the Bharatiya Janata Party-led National Democratic Alliance (NDA) is expected to form the government on June 9.

Last week, the markets were swinging in a 2,000+ points range, the widest weekly range since May 2020, according to experts. This was after the decisive victory that was predicted for the BJP in the exit polls didn’t come through. By the end of the week, the market had recovered to its earlier levels.

This week, after the new government takes charge, we  should see calmer waters.

Here’s a look at the top 10 things across the world that are likely to have a bearing on the market.

1. CPI inflation

The inflation figures for May are expected to be released On June 12. Economists expect it to inch down further to 4.8 percent from April’s 4.83 percent, which was slightly lower than 4.85 in March. In April, the drop was mostly driven by a fall in prices for fuel and energy (-4.24 percent vs -3.24 percent in March); food inflation remained on a persistently  upward trajectory (7.87 percent vs 7.68 percent in March). On June 14, the wholesale price index (WPI) numbers will be out too, and it is expected that they would have gone up to 4 percent in May  from 1.26 percent in April; this may be largely because of fuel inflation, which is expected to have gone up to 7 percent in May from 1.38 percent in April.

2. IIP data

On the same day, the Index of Industrial Production (IIP) data is also likely to be released. It is expected to slow down to 3.9 percent in May from 4.9 percent in April, when was below the anticipated 5.1 percent. Manufacturing, which comprises 78 percent of the index, is expected to see a slower growth of 4.9 percent in May, a drop from 5.2 percent in April.

3. Passenger vehicle sales

On June 13, the market will be watching the May passenger-vehicle sales numbers to track consumer sentiment. In April, there was a sharp decline in growth — 1.2 percent year-on-year (YoY) growth, down from 8.9 percent YoY growth in March. Market watchers had linked it to the waning of pent-up demand following the pandemic. They had predicted that the picture would improve with continuity in policymaking and a better-than-expected monsoon.

4. Global economic data

The Federal Open Market Committee (FOMC) will meet between June 11 and 12, and the US Fed will announce its policy stance on June 13. The market is largely expecting the central bank to hold its rates at 5.25-5.50 percent. Opinion is divided on whether the first rate cut will be in September or December 2024.

On June 10, Japan will release its economic growth figures and the Eco Watchers Survey, which is a good gauge of consumer-facing businesses. On June 11 and 12, the UK will reveal key economic figures — its jobs report, and industrial production and GDP growth numbers — which will be tracked to get a sense of how the Bank of England will decide on the policy rate next week. On June 12, China will release its inflation data; it is expected to have cooled to 0.2 percent in May from 0.3 percent in April.

5. FII flows

Last week, foreign institutional investors (FIIs) continued to be net sellers, selling more than Rs 16,971 crore of equities. But they were net buyers of debt, buying over Rs 4,669 crore's worth. DIIs (domestic institutional investors) were net buyers in the cash segment, buying equities of over Rs 5,578 crore. In the coming week, foreign investors may continue to be net sellers with the poll verdict going against predictions, and a small chance of policy change, particularly in capex spending.

6. IPO

The two mainboard IPOs that will be watched closely will be a Rs 120 crore issue by Le Travenues Technology (opens on June 10, closes on June 12); and the listing of Kronox Lab Sciences on June 10. Le Travenues helps people plan their travel better, and Kronox is a specialty chemicals manufacturer.

In the SME segment, 3C IT Solutions, Magenta Life Care (sells matresses and pillows), and Sattrix Information Security (provides cyber-security solutions) are all scheduled to be listed on June 12.

7. Technical view

It’s been a wild week for the Nifty, swinging in a range of over 2,000 points. Also, with every trading session, the index opened either gap up or gap down. Despite this, the index gained 3 percent.

Next week, SBI Securities’ Sudeep Shah suggests that traders should avoid over-leveraged positions. “The weekly chart (from the past week) revealed a Hanging Man-like candlestick pattern. A negative divergence was also spotted in the daily time frame on the 14-period RSI (relative strength index). A negative divergence occurs when the price is touching a higher high, while the RSI forms a lower high. This clearly indicates that traders should avoid building over-leveraged positions and chasing prices,” Shah explained.

Experts suggested buying on dips.

8. F&O cues

Options data suggests that the key resistance level for Nifty 50 will be 23,700, the support level will be 22,500, and the immediate range will be between the two.

Market experts point out that the weekly maximum Call open interest (OI) is at 24,000, then at 23,500 strike, with maximum call writing at 23,700, then at 23,500 strike. Maximum Put open interest is at 23,000, then 22,800 strike, with maximum Put writing at 23,000, then 23,200 strike.

9. India VIX

Volatility in the market has cooled down  significantly, which is good news for the bulls, who will be more comfortable with increasing their positions. India VIX, the fear index, dropped  nearly 43 percent to 16.88, from around 24 a week ago.

10. Corporate action

Here are the key corporate actions this week: