Dalal Street Week Ahead: Powell's testimony, Services PMI, oil among 10 key factors in focus next week

Market likely to hit 22,500-22,600 before entering into possible consolidation

The market jumped to new highs on March 1, the first day of the new F&O series and helped the benchmark indices to close in the green for third consecutive week. Stellar Q3 GDP numbers, healthy performance in the manufacturing sector and strong auto sales data for February lifted the sentiment.

The Nifty gained 166 points to end at 22,378, and the Sensex climbed 663 points to close at 73,806. The broader market underperformed. The Nifty Midcap 100 index was down 0.3 percent and the smallcap 100 index 0.03 percent during the week

The bulls, however, are expected to keep the momentum strong in the coming week, though there is a possibility intermittent consolidation with focus on US Federal Reserve chairman Jerome Powell's testimony, monthly global services PMI numbers, US economic data and China's inflation, experts said.

"We expect ongoing momentum to continue while taking cues from a fresh set of economic data next week," Siddhartha Khemka, head - retail research at Motilal Oswal Financial Services, said.

Vinod Nair, Head of Research, Geojit Financial Services, said the release of additional data from the US such as PMI and payroll data and China's inflation data may influence market dynamics.

A correction in mid and smallcaps is underway and is expected to continue, with regulators urging disclosure of associated risks to AMCs.

Here are 10 key factors to watch next week:

Fed chair Powell's testimony

Globally, investors will keep any eye on Jerome Powell's testimony due on March 6 and 7, when the the US Federal Reserve chair presents the semiannual monetary policy report before the Senate committee on banking, housing, and urban affairs.

The report is expected to include the progress made in fight against inflation and offer cues to interest rate cuts .

The rates are at a 23-year high of 5.25-5.5 percent and in the last policy, Powell hinted at three rate cuts in current calendar year.

Federal officials throughout the last week indicated that the pace of rate adjustments would be contingent on incoming economic data, signalling a nuanced approach.

The US 10-year treasury yield remained above 4 percent, closing the week at 4.18 percent on March 1 against 4.25 percent in February 23. The dollar index dipped to 103.89 from 103.94 during the period.

Global economic data

The participants will also pay attention to monthly services PMI data, ECB interest rate decision, third estimates for Euro zone GDP numbers for Q3CY23 and China's inflation. The US jobs data, unemployment rate and factory orders will also be announced during the week.

Domestic Economic Data

On the domestic front, too, the HSBC Services PMI (Final) numbers for February will be released on March 5. As per the preliminary data, the India Services PMI jumped to 62 in February from 61.8 in January.

Bank loan & deposit growth for fortnight ended February 23, and foreign exchange reserves for week ended March 1 will also be announced during the week.

Oil prices

Crude oil rebounded and recouped the previous week's losses in the week gone by with healthy volumes but still seems like in the range with a strong hurdle at $84-84.50 on the higher side. Unless it decisively takes out this hurdle, consolidation may continue, experts said, adding immediate resistance is at $85-86 a barrel with support at $80.

Brent crude futures, the international oil benchmark, closed 3.4 percent higher at $83.55 a barrel during the week amid the Red Sea crisis and OPEC+ cuts.

"The upcoming OPEC+ meeting in March is now a focal point, with producers likely to maintain voluntary production limits, stabilising the oil market," Ravindra Rao, VP-Head Commodity Research at Kotak Securities said.

FII Flow

Foreign institutional investors (FIIs) during the week to the tune of Rs 1,089 crore despite US bond yields remaining elevated at around 4.2 percent. Experts said they may turn net sellers again in the coming days, though aggressive selling is unlikely.

In February, they net sold nearly Rs 16,000 crore worth of shares on top of nearly Rs 36,000 crore of selling in the previous month, while DIIs have remained net buyers since August.

Domestic institutional investors' buying is one of the key reasons for the market stability as well as at new historic high. They net bought Rs 4,585 crore worth of shares during the week and experts expect the trend to continue in coming months too.

IPO

The primary market will be busy as eight IPOs are going to hit Dalal Street, and seven companies are scheduled for listing. In the mainboard, RK Swamy will open its public issue for subscription from March 4-6, JG Chemicals March 5-7, and Gopal Snacks March 6-11, while Mukka Proteins will be closing the IPO on March 4.

In the SME segment, VR Infraspace's offer  will be the first to open on March 4 followed by Sona Machinery the next day. Shree Karni Fabcom, and Koura Fine Diamond Jewelry IPOs will open March 6 and Pune E-Stock Broking on March 7.

On the listing front, Platinum Industries and Exicom Tele-Systems will debut on the bourses on March 5, Bharat Highways Infrastructure Investment Trust on March 6 and Mukka Proteins on March 7 in the mainboard segment. On the SME side, the trading in Owais Metal and Mineral Processing shares will commence on the NSE on March 4, Purv Flexipack on March 5, and MVK Agro Food Product on March 7.

Technical View

Technically, the Nifty 50 looked quite strong with continuation of higher highs formation for third consecutive week with positive bias in momentum indicators RSI (relative strength index) and MACD (moving average convergence divergence). With a decisive breakout of consolidation above 22,300, experts expect the Nifty to hit 22,500, the immediate resistance level, with support at 22,200 in the coming week.

"The Nifty is resuming its bullish momentum after a period of two months of consolidation. 22,500 is an immediate target level, while 22,750 is the next target level," Santosh Meena, head of research at Swastika Investmart said.

On the downside, 22,200–22,000 will act as a strong demand zone (support levels), he feels.

F&O Cues

The options data indicates that the Nifty may hit 22,800-23,000 levels in the medium term but in the immediate term, it may face resistance at 22,500, with support at 22,200-22,000.

On the weekly options front, the 23,000 strike owned the maximum Call open interest, followed by 22,800 strike and 22,500 strike, with meaningful Call writing at 23,000 strike, then 22,800 strike and 22,400 strike, while the maximum Put open interest was seen at 22,000 strike, followed by 22,200 strike and 22,100 strike, with Put writing at 21,400 strike, then 22,400 & 21,700 strikes.

India VIX

The volatility has crossed the 16 mark several times this year but hasn't sustained on weekly closing basis. If the index closes above the same level and sustains, then volatility may increase and may give discomfort to bulls, experts said. In the last three days of the week gone by, volatility cooled.

India VIX, the fear gauge, closed at 14.99, up 0.13 percent during the week.

Corporate Action

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

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