Despite touching fresh lifetime high levels, domestic equity benchmarks settled flat last week as investors’ hope for a June rate cut were dashed by higher-than-expected inflation in the US, compounded by positive US employment and manufacturing data. Escalating geopolitical tensions in the Middle East, alongside supply concerns, have propelled crude oil prices upward, impacting the overall market sentiment.
Also Read: Oil traders stay bullish as Brent hovers at $90: ‘Crude to stay elevated even if Middle-East tensions cool down’
Gold prices also experienced an uptick due to geopolitical uncertainties, increased central bank purchases, and heightened safe-haven demand. Consequently, emerging markets witnessed a late-week consolidation. Conversely, European markets demonstrated strong performance, buoyed by indications from the ECB suggesting a potential rate cut in the near term.
On the domestic front, foreign investors are exercising caution given the subdued expectations for Q4 results and the premium valuations of mid- and small-cap stocks. Within the IT sector, consolidation persists due to lacklustre Q4 earnings amid slowdowns in spending and uncertainties surrounding US policy rates.
Vinod Nair, Head of Research at Geojit Financial Services said, ‘’Profit-taking is evident in banking stocks, particularly in PSU banks, as the banking sector’s loan growth is moderating, and valuation has surpassed long-term averages.”
Also Read: FPIs pump ₹13,347 crore in Indian equities, debt flows reduce in April so far: Will inflows continue in FY25?
‘’Conversely, the auto and realty sectors are showing resilience, driven by expectations of strong earnings momentum. Large-cap stocks are viewed as a safer bet amidst heightened volatility given stable earnings outlook and valuation,” added Nair.
Moving ahead, a few initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segment in the primary market this week. The week will be critical from domestic and technical point of view as investors will eye economic indicators and the latest corporate results.
Overall, analysts expect Nifty 50 is likely to go for a further dip but support lies around the 22,350-mark. They added that bulls will heave a sigh of relief only above the 22,800-mark. Experts advise traders to focus more on stock selection and prefer a hedged approach.
Here are the key triggers for stock markets in the coming week:
Domestic Macroeconomic Data, Q4 Results:
On the macroeconomic front, India’s wholesale price index (WPI) -based inflation, trade deficit data, among other indicators will be eyed by investors. Analysts expect markets to remain volatile in the near term given the global concerns and the start of a the first phase of elections this week.
The ongoing Q4FY24 earnings season will be a major factor in driving the market movement. Some major companies will announce their quarterly numbers such as Wipro, Infosys, Bajaj Auto, Mastek, HDFC Asset Management Company, Jio Financial Services, CRISIL, Angel One, among others. Analysts said that the beginning of the earnings season could result in erratic swings across sectors.
3 new IPOs, 2 listings to hit D-Street
In the mainboard segment, Vodafone Idea FPO (VI FPO) will open for subscription on on April 18 and in the SME segment, Ramdevbaba Solvent IPO and Grill Splendour Services IPO or Birdy’s IPO will open for bidding on April 15. Among listings, shares of Teerth Gopicon and DCG Cables & Wires will debut on NSE SME on April 16.
FII Activity
Foreign portfolio investors (FPIs) started the year on a strong note and have so far extended the buying streak in Indian markets. However, analysts have raised concerns if the inflows in equities and debt markets will continue in near-term due to the India-Mauritius tax treaty.
FPIs have bought ₹13,347 crore worth of Indian equities and the total inflow stands at ₹15,706 crore as of April 12, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. The total debt inflows stand at ₹1,522 crore so far this month.
Foreign institutional investors (FIIs) were net sellers for four out of five sessions last week and the net outflow stands at ₹6,526.71 crore, while domestic institutional investors (DIIs) were buyers for all sessions, with a total investment of ₹12,232.61 crore, according to stock exchange data.
‘’The rise in bond yields due to hotter-than-expected US inflation and amendment in the India-Mauritius tax treaty likely to impact FII flow dampened the sentiments,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.
Global Cues, Israel-Iran conflict
Iran seized a cargo ship—identified as the Portuguese-flagged MSC Aries — linked to Israeli businessman Eyal Ofer on Saturday amid growing concerns about a wider Middle East war. Indian authorities are now in touch with their Iranian counterparts as 17 citizens on board MSC Aries. Iranian state media said the ship had now been “directed towards the territorial waters” of Tehran.
Analysts noted that the week promises to be crucial for the market as fresh worries about a potential conflict between Iran and Israel emerge. Any significant escalation in tensions could trigger panic selling and volatility in global equity markets. Movements in US bond yields and the dollar index will be important factors influencing market sentiment.
The market will also be closely monitoring the movement of crude oil prices, which are impacted by geopolitical events. Global economic data including China economic growth rate, US retail sales, US Manufacturing Production Index, US Initial Jobless Claims and quarterly results will also be eyed by investors.
‘’Among the key factors, participants will be closely eyeing the performance of the global indices, especially after the recent slide in the US markets. The Dow Jones Industrial Average (DJIA) has support around the 37,800- 38,000 zone and its breakdown would add more pressure, which may reflect in our markets too,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
Oil Prices
Global crude oil prices were up around one per cent but posted a weekly loss due to bearish world oil demand outlook from energy watchdog International Energy Agency (IEA) and concerns of a delayed interest rate cut by the US Federal Reserve after inflation rose more-than-expected in March.
Brent crude futures settled 71 cents higher at $90.45 per barrel, while US West Texas Intermediate (WTI) crude futures gained 64 cents to close at $85.66. For the week, Brent shed 0.8 per cent, while WTI dropped more than one per cent.
The Organisation of Petroleum Exporting Countries (OPEC) said on Thursday that the world oil demand will rise by 2.25 million barrels per day (bpd) in 2024 as against the IEA which cut its forecast for 2024 world oil demand growth to 1.2 bpd. However, during the week, crude neared a six-month high on concern that Iran might retaliate for a suspected Israeli warplane attack which could result in fresh geopolitical tensions in the region and support oil prices.
Corporate Action
In the coming week, shares of some companies such as Gujarat Toolroom, Stovec Industries, and Schaeffler India will trade ex-dividend, while other firms such as Suratwwala Business Group Ltd, Pulsar International will undergo a stock split. Some other companies have declared a bonus issue and a right issue. Check full list here
Technical View
‘’Nifty has been trading in a broadening formation and facing hurdles around the upper band i.e. 22,700-22,800 zone. Indications are in favor of a further dip and likely to retest the support zone of short term moving average (20 DEMA) around 22,350 and next at 22,150. Considering the scenario, traders should focus more on stock selection and prefer a hedged approach,” said Religare Brokings’ Ajit Mishra.
Nifty formed a spinning top candlestick pattern on the weekly chart around the 22,800 mark. The overall bullish trend remains intact as long as Nifty stays above its 20-day moving average (DMA) of 22,300, according to Santosh Meena, Head of Research, Swastika Investmart Ltd.
‘’A breakthrough above the 22,750 mark could trigger a rally towards 23,000 in the near future. Given the market’s current range-bound nature, adopting a strategy of buying on declines and selling during upswings could be advantageous, provided it’s accompanied by appropriate stop-loss measures,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
The Bank Nifty index experienced significant selling pressure, marking a return of bearish momentum after a prolonged period. ‘’The index is currently facing strong resistance at the 49,000 mark, and only a decisive close above this level could revive the upward trend towards the 50,000 mark. Immediate support for the index is established at 48,000,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.
Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before taking any investment decisi4s,
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Published: 14 Apr 2024, 06:07 AM IST