Dalal Street This Week | 10 key factors that will keep traders busy

The market managed to eke out gains in yet another week of volatile and rangebound trade, and stayed in the green on the back of technology, metal, capital goods, oil and gas, and power stocks. Selling in healthcare, auto, and select FMCG stocks, however, capped the rise.

A mixed bag of quarterly earnings, no major expectations from the Union Budget 2023, continued FII selling, a hawkish tone by Fed officials and optimisim about China's reopening kept the market rangebound for the week gone by. But still the market participants seem to be cautiously waiting for the Union Budget scheduled to be tabled by the finance minister on February 1, and also the outcome of the FOMC meeting due the same day.

On Monday, the market will first react to quarterly earnings announced by major companies like Reliance Industries, ICICI Bank, Kotak Mahindra Bank and UltraTech Cement. Overall the coming holiday-shortened week, too, is expected to be rangebound and volatile amid expiry of monthly derivative contracts, with continuing stock specific actions due to quarterly earnings season, and eye on the Budget, experts said.

The BSE Sensex climbed 361 points to 60,622, and the Nifty50 jumped 71 points to 18,028, while the broader markets underperformed the benchmarks, with the Nifty Midcap 100 and Smallcap 100 indices falling 0.7 percent and 1.1 percent.

"Although we started the third quarter on a shaky note, the latest set of financial announcements from IT and banking blue chips are encouraging. Given the mixed undercurrents, the second line of Q3 and global market cues will determine the trend going forward," Vinod Nair, Head of Research at Geojit Financial services, said.

The market will remain shut on January 26 for Republic day.

Here are 10 key factors that will keep traders busy this week:

1) Corporate Earnings

We have entered the third week of quarterly earnings season and more than 300 companies are set to release their numbers for December FY23 quarter.

Prominent companies like Axis Bank, Maruti Suzuki India, HDFC Asset Management Company, Bajaj Auto, Cipla, Dr Reddy's Laboratories, Tata Motors, Bajaj Finance, and NTPC will announce their earnings this week.

Among others, Amber Enterprises India, Canara Bank, Container Corporation of India, Gland Pharma, IDBI Bank, Jindal Stainless, Poonawalla Fincorp, Syngene International, Tata Communications, Colgate-Palmolive, Indus Towers, Macrotech Developers, Nazara Technologies, Pidilite Industries, PNB Housing Finance, SBI Card, Sona BLW Precision Forgings, TVS Motor Company, United Spirits, Amara Raja Batteries, Dixon Technologies, DLF, Indian Bank, Patanjali Foods, Vedanta, and Bharat Electronics will also unveil their numbers for the December FY23 quarter.

2) US Q4CY22 GDP Estimates

Investors will keep an eye on the first estimates for the fourth quarter of 2022 US GDP data due on January 26, to know the progress in the world's largest economy amid continuing rate hike cycle by the Federal Reserve. The Fed has been raising rates since the start of this financial year, taking the targetted range to 4.25-4.5 percent in the December policy meeting.

In the last quarter, which was October-September period, the US economy registered a 3.2 percent growth, which was better than the second estimates of 2.9 percent. The growth was after contraction for previous two quarters.

3) Global Macroeconomic Data Points

Here are key global macroeconomic data points to watch out for this week:

4) Oil Prices

Oil prices have shown good uptick for more than couple of weeks now, with international benchmark Brent crude futures rising by around $10 barrel since January 4 as the encouraging data points with the China's reopening after lifting of Covid-19 restrictions raised expectations for improving oil demand in the world's second largest economy. In the week gone by itself, the prices increased by around 3 percent.

Overall Brent futures have been in a range below $90 a barrel mark for more than two months now, which is a supporting factor for the oil importer like India. If the said prices keep rising in the coming weeks, then there could be a concern for our markets, experts said.

5) Domestic Economic Data

On the domestic front, we will have bank loan and deposit growth numbers for fortnight ended January 13 scheduled to be released on coming Friday. Also foreign exchange reserves for week ended January 20 will be released on the same day.

The forex reserves in the earlier week ended January 13 increased by $10.417 billion to $572 billion, which was the biggest rise on weekly basis in recent times.

6) FII Flow

Foreign institutional investors remained net sellers for yet another week, but overall the selling seems to be slowing down to some extent. Experts feel the FII may be shifting their money from India, an expensive market, to cheaper markets like China and Hong Kong, which may continue for some more time with optimism about China's reopening.

FIIs have net sold shares worth Rs 2,461 crore for the passing week, taking the total monthly outflow to near Rs 20,000 crore for January, which is bigger than outflow we have seen in previous month.

"FPIs were big sellers in financials, IT and telecom. They bought significantly only in metals and mining. The sustained selling by FPIs is a bit surprising since the dollar index has been steadily declining," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

The Dollar Index has declined from the 2022 peak of 114 to around 103 now. "Declining dollars is favourable for emerging markets and, therefore, India should have received inflows. But what is happening now is that FPIs are investing heavily in cheaper markets like China, Hong Kong, South Korea and Thailand and they are selling in relatively expensive India," he said.

On the contrary, domestic institutional investors have created a strong support for the Indian markets as they have bought nearly Rs 3,400 crore worth shares during the week and their buying in current month is more than Rs 16,000 crore.

7) Technical View

The Nifty50 has formed bearish candle on the daily charts with lower high lower low on Friday as the index lost about half a percent, while on the weekly scale, it has seen Doji kind of pattern formed for second consecutive session with higher high higher low formation, indicating the tough fight between bulls and bears.

Overall, the index has been moving in a range of 17,800-18,250 for the third week, which is expected to continue in the coming week too, and once the Budget is over, there may be a bigger move on either side of trade, experts said.

"Technically, the Nifty is trading in a well-defined trading range of 17,800-18,250, but it is getting narrower, so we can expect a breakout or breakdown. The move is similar to what happened in 2022, when Nifty formed doji candles in the second and third weeks of January before exploding in the fourth week ahead of the budget," Santosh Meena, Head of Research at Swastika Investmart said.

On the upside, he feels if the Nifty manages to take out the 50-DMA of 18,250, then we can expect a rally towards 18,500 and 18,650 levels. On the downside, a cluster of 20 and the 100-DMA of 18,040–17,940 is an immediate demand zone, while 17,800 is a sacrosanct support level, he said.

8) Monthly F&O Expiry Week

Option data clearly indicated that the Nifty may see resistance around 18,100-18,200 levels, with support at 18,000-17,800 area, which is expected to be the range for coming days, with higher target on the upside-downside if the said levels get broken could be 18,500-17,500, experts said.

We have seen maximum Call open interest at 18,100 strike followed by 18,500 strike and 18,200 strike, with writing at 18,100 strike then 18,200 strike, whereas on the Put side, the maximum open interest was seen at 18,100 strike followed by 18,000 and 17,800 strikes, with writing at 18,100 strike, then 17,800 and 17,700 strikes.

"The FIIs' long exposure in index futures is near 50 percent, indicating a neutral position; however, a Put-Call below 1 suggests the possibility of a short covering move," said Santosh Meena.

9) Volatility Cools Down

India VIX cooled down further by 4.63 percent during the week, to 13.79 level, from 14.46 level, giving support to the bulls as we already have seen the support-based buying. Hence experts said if the VIX sustains below 14 level then there could be more stability in the market going ahead.

10) Corporate Action

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

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