Dalal Street Week Ahead: US GDP, Manufacturing PMI Flash, FII Flow among 10 key factors to watch

Market Trend

The market recorded healthy performance in the week ended September 20, hitting a fresh all-time high after the US Federal Reserve delivered a 50 bps rate cut (the first reduction in interest rates since March 2020), although the Bank of England and Bank of Japan kept the interest rate unchanged. The index started the week with consolidation, but the Fed action and strong FII buying boosted sentiment in the later part of the week. Going ahead, the positive move is likely to sustain in the benchmark indices despite the underperformance of broader markets, with a focus on US GDP numbers, Fed Chair Jerome Powell's speech and Manufacturing & Services PMI flash data, according to experts. The volatility can't be ruled out given the monthly expiry of September Futures & Options contracts due next week.

Benchmark indices ended at new closing high. The Nifty 50 climbed 1.71 percent for the week to 25,791, and the BSE Sensex rallied 2 percent to 84,544, while the Nifty Midcap 100 index was up 0.3 percent and Smallcap 100 index fell 0.9 percent. Bank and financial services, auto, FMCG and realty stocks saw strong buying interest, despite correction in IT, pharma and oil & gas stocks.

"Markets are gradually climbing up and we expect this positive momentum to continue next week backed by strong FII inflow, healthy domestic macros, and receding concern about the US economy slowing down," Siddhartha Khemka, Head - Research, Wealth Management at Motilal Oswal Financial Services said.

There has been a sectorial rotation among investors to largecaps, especially in consumption, staples, auto, finance, and realty. In the short term, investors are being cautious on export-oriented sectors like pharma and IT due to depreciation in the dollar, said Vinod Nair, Head of Research, Geojit Financial Services.

Here are 10 key factors to watch:

Powell Speech and US GDP

Globally all investors will focus on the US GDP growth numbers for the second quarter ended June 2024, followed by the Federal Reserve Chair Jerome Powell's Speech on September 26. The world's largest country recorded a 3 percent growth (at an annualised rate) for the June quarter as per the second estimates, which was better than initial estimates of 2.8 percent and 1.4 percent in the March quarter.

According to experts, the economic data pointed to a soft landing of the US economy at the start of the rate cut cycle and the series of rate cuts may be seen in the coming policy meetings. The participants will look for comments on the timeline of further rate cuts, economic growth, and labour data from Powell's speech.

Additionally, PCE prices and real consumer spending for the Q2-CY24, durable goods orders, personal income & spending, and new home sales data for August will also be watched by the participants.

Global Economic Data

Further, globally, all eyes will also be on the Manufacturing and Services PMI flash data due in the early part of the next week.

Domestic Economic Data

On the domestic front, too, the focus will be on the HSBC Manufacturing and Services PMI flash numbers for September due on September 23. In the last print, Manufacturing PMI declined to 57.5 in August, from 58.1 in previous month, while the Services PMI during the same month rose to 60.9, from 60.3.

In addition, the foreign exchange reserves for the week ended September 20 will also be released next week on September 27.

FII & DII Flow

Meanwhile, the foreign institutional investors made a strong comeback in September with Rs 14,064 crore worth of buying on Friday alone (the biggest after several months) following the big Fed pivot (50 bps rate cut). Hence, the street will keep an eye on the FII flow going ahead. "The Fed rate is expected to decline steadily to 3.4 percent by the end of 2025. Bond yields in the US are steadily declining, nudging the FIIs to invest in emerging markets like India," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said.

US 10-year Treasury yield finished the week at 3.74 percent, against 3.65 percent in the previous week, but far lower compared to 4.74 percent recorded in April this year, while the US dollar index closed at 100.74, falling from 101.11 on week-on-week basis.

FIIs have net bought Rs 11,518 crore worth of shares in the cash segment during the week gone by, but domestic institutional investors (DIIs) preferred profit booking in the week, selling shares worth Rs 634 crore.

Oil Prices

The oil prices rebounded sharply in the last week, after falling below $70 a barrel in the previous week, driven by the 50 bps federal funds rate cut and escalating tensions in the Middle East. Experts remained bullish on the crude, and expect the downside for the oil prices to be limited as Israeli military has reportedly advised residents in northern communities to stay close to shelters and limit outdoor activities due to the potential for retaliation from Hezbollah. Overall, the current oil prices are supportive for the oil importers like India.

Brent crude futures, the international benchmark, finished the week at $74.49 a barrel, up 4.02 percent over previous week.

IPO

The action in IPO market remained strong in the coming week starting from September 23 as 11 public issues will hit Dalal Street including 2 from the mainboard. Manba Finance's Rs 151-crore IPO will open for subscription on September 23, while KRN Heat Exchanger and Refrigeration's Rs 342-crore offer on September 25.

In the SME segment, there will be 9 IPOs - WOL 3D India, Rappid Valves (India), TechEra Engineering, Unilex Colours and Chemicals, Thinking Hats Entertainment Solutions, Divyadhan Recycling Industries, Sahasra Electronics Solutions, Forge Auto International, and Saj Hotels - opening next week, while five IPOs namely Kalana Ispat, BikeWo GreenTech, SD Retail, Phoenix Overseas, and Avi Ansh Textile will close their subscription in the early part of the week.

On the listing front, Western Carriers India, Arkade Developers, and Northern Arc Capital from the mainboard segment will debut on the bourses on September 24, while from the SME segment, the trading in Popular Foundations, Deccan Transcon Leasing, Envirotech Systems, Pelatro, Osel Devices, Paramount Speciality Forgings, Kalana Ispat, Avi Ansh Textile, Phoenix Overseas, SD Retail, and BikeWo GreenTech will commence next week.

Technical View

Technically, the Nifty 50 has broken the congestion zone of previous three weeks and gave a strong close above the rising resistance trendline with positive bias in the momentum indicators RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence). Hence, considering the positive momentum, experts see the index moving beyond the psychological 26,000 mark in the coming week, with immediate support at 25,500 followed by 25,300 being a key support.

F&O Cues

The monthly options data also indicated that the 26,000 may act as the next resistance for the Nifty 50, while the support lies at 25,500 and 25,000 being the crucial support.

On the Call side, the maximum open interest was seen at the 26,000 strike, followed by the 26,500 and 25,800 strikes, with maximum writing at the 25,700 strike, and then the 26,200, 26,600 and 26,100 strikes. On the Put front, the 25,000 strike holds the maximum open interest, followed by the 25,500 and 24,500 strikes, with maximum writing at the 25,700 strike, followed by the 25,600 and 25,500 strikes.

India VIX

Volatility increased a bit after a big fall in the previous week, but remained at lower zones and below all key moving averages which is favourable for bulls going ahead. The India VIX, the fear index, gained by 1.91 percent at 12.79, from 12.55 levels on week-on-week basis.

Corporate Action

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

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