After a flat close for markets in the previous week, a slew of important factors including the start of Q3 earnings season, inflation numbers and stock-specific triggers are set to dictate the mood this week. Amid this, investors will eye Nifty's move towards the 22,000 mark after having hit a new high of 21,834.
For the week ended January 5, the Nifty ended 0.1 percent lower at 21,710 while Sensex ended 0.3 percent lower at 72,026. Within sectors, Nifty Realty (up 7.8 percent) and Nifty Media (up 3.3 percent) were the top gainers while IT (down 1.9 percent) and Metal (down 1.3 percent) were top losers.
The broader market sustained its outperformance for the second straight week. Nifty Midcap 100 gained 2.5 percent while Nifty Smallcap 100 gained 1.9 percent. However, analysts believe that investors must stay cautious ahead of results season and persisting uncertainties in Red Sea.
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"The exuberance of the broader index may be tested if the December quarter earnings do not justify the valuation," Vinod Nair, Head of Research, Geojit Financial Services said. On a yearly basis, the Street expects profit growth to be strong for industrials, autos and cement but weak for BFSI, FMCG, IT, chemicals, consumer services.
Here are 10 factors to watch:
According to BSE earnings calendar, about 65 companies are slated to release their results between Jan 8 to Jan 13. Among Nifty 50 companies, TCS (Jan 11), Infosys (Jan 11), HCL Tech (Jan 12), Wipro (Jan 12) and HDFC Life Insurance (Jan 12) will declare their December end results.
Analysts at Elara Securities expect the IT firms to post muted results, with an average constant currency (CC) growth of 1.4-1.6 percent in dollar terms.
The muted sequential growth in the December quarter due to prolonged higher inflation, delay in discretionary projects and a sluggish growth. The October-December period is typically a slow quarter due to the holiday season in the US and European countries, which are the biggest markets for Indian IT firms.
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US inflation numbers and Global Economic Data
US CPI (consumer price index) will be released on Jan 11 by the Bureau of Labor Statistics. Headline CPI is estimated to rise 0.3 percent month-on-month for December. As per reports, a similar monthly increase of 0.33 percent is expected for core CPI, which removes changes in food and energy prices. The inflation trajectory will determine how long will US Federal Reserve keep rates higher, while it has already indicated that three cuts could happen this year.
Red Sea Crisis
The crisis is not showing any signs of abating, with Houthi rebels continuing to attack commercial ships in the Red Sea as Israel-Hamas conflict deepens. Shipping giant Maersk has already said that it will divert all vessels away from the Red Sea for the foreseeable future, warning customers of disruptions.
The increasing Red Sea crisis may impact trade as it is expected to push shipping costs by up to 60 percent and insurance premium by 20 percent, a report by economic think tank GTRI said on January 6. In India, government officials met shipping companies last week to assess the impact of the situation.
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Oil prices
Both Brent and WTI ended the first week of the year higher. WTI rose 3 percent for the week, to $73.81 per barrel. Meanwhile, Brent futures gained 2.2 percent to settle at $78.76 a barrel.
"With the tensions in the Middle East, the geopolitical trading premium has to get pushed higher," John Kilduff, partner at Again Capital LLC told Reuters. "It's hard for traders to fight the headlines."
Domestic Economic Data Points
On the domestic front, CPI inflation for the month of December scheduled to be released on January 12 will be closely watched. Most experts expect the inflation to be increasing by around 10-20 bps from 5.5 percent reported in November due to likely increase in food inflation but sees core inflation moderating further a bit from 4.05 percent in November.
Apart from CPI, industrial production data for November, foreign exchange reserves (for week ended January 5) and bank loan & deposit growth (for fortnight ended December 29) will also be released on January 12.
Primary market action
The first mainboard IPO of the calendar year, Jyoti CNC Automation will open for subscription on January 9 and close on January 11.
Action in the SME IPO space will also continue. Investors can watch out for listing of Kaushalya Logistics on January 8 and IPOs of IBL Finance, New Swan Multitech and Australian Premium Solar.
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In the first trading week of the year, foreign institutional investors were buyers while domestic counterparts were sellers. FIIs bought equities worth Rs 3,290.23 crore in the week gone by while DIIs sold Rs 7,296.50 crore.
FII inflow follows the trend of last two months of 2023, as foreign investors made a return thanks to the sharp decline in US bond yields and declining dollar.
"In December, FPIs were big buyers in financial services and also in IT. FPIs also bought in sectors like autos, capital goods, oil and gas and telecom. Since 2024 is expected to witness further declines in U.S. interest rates, FPIs are likely to increase their purchases in 2024 too, particularly in the early months of 2024 in the run up to the general elections," Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said.
Technical view
On the charts, Nifty is forming new higher highs daily, with identified support levels at 21,500 and 21,400. Immediate resistance is anticipated at 21,800 and 21,900, said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services.
To this, Pravesh Gour, senior technical analyst at Swastika Investmart added that if Nifty manages to sustain above the 21,800 mark, then 22,000 and 22,200 will be the next target levels.
"Bank Nifty is respecting its 20-DMA around the 47,800 mark. On the upside, 48,500–48,800 is acting as an immediate supply zone; above this, we can expect a move towards the 49,500–50,000 level. If it slips below 20-DMA, then 47,000 will be the key support level," Gour said.
F&O Cues
Options data indicated that the 21,800 is expected to be an immediate resistance for the Nifty 50 as clearance of the same may possibly take the index beyond 22,000 mark, while the 21,700-21,500 is the crucial support area.
On the options front, 22,500 strike owned the maximum Call open interest, followed by 23,000 strike and 21,800 strike, with meaningful Calll writing at similar strikes in similar sequence, while on the Put side, the maximum open interest was visible at 21,000 strike, followed by 21,500 strike, and 21,700 strike, with writing at 21,700 strike, then 21,000 strike & 21,500 strike.
Meanwhile, the volatility dropped sharply during the last week, after consistently rising for previous five weeks, making the trend favourable for bulls. The fear index, India VIX was down 12.91 percent to 12.63, from 14.5 levels on week-on-week basis.
Corporate Action
Here are key corporate actions taking place in the coming week:
Disclaimer: The views and investment tips expressed by 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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