In the coming week, after consistent run up in past six weeks, the market is expected to see a rangebound trade and consolidation, with major focus on the Fed meet outcome and the Powell commentary.
The equity markets had a spectacular run in the week ended December 8, reporting the biggest weekly gain in last 16 months and hitting the much-awaited psychological 21,000 mark for the first time. Favourable state elections results hinting more infrastructure investment from government, better-than-expected economic growth for Q2FY24, increase in full year GDP growth estimates by RBI while maintaining status quo on policy rates & retaining full year inflation forecast, strong hopes of ending rate hike cycle despite inflation concerns, and stable oil prices lifted market sentiment.
In the coming week, after consistent run up in past six weeks, the market is expected to see a rangebound trade and consolidation, with major focus on the Fed meet outcome and the Powell commentary especially after latest better-than-expected jobs data and lower unemployment rate in November, and monthly inflation data by US & India.
During the last week, the benchmark indices as well as Bank Nifty ended at fresh record closing high. The Nifty50 closed at 20,969, up 702 points or 3.46 percent, the biggest weekly gain since July 2022, while the BSE Sensex rallied 2,344 points or 3.47 percent to 69,826.
Banking & financial services, energy, infrastructure, technology, metal, oil & gas, and auto stocks supported the market, while FMCG and pharma stocks were under pressure.
The broader markets also recorded gains with the Nifty Midcap 100 and Smallcap 100 indices rising 2.35 percent and 1.16 percent respectively.
Also read: Nifty at 21k: Four solid reasons why you should not be worried about a correction
"Markets on Monday would react to US non-farm payroll and unemployment rate data. Further, major central banks globally are lined up next week to announce their policy decision, which is likely to keep the equity market rangebound," Siddhartha Khemka, head - retail research at Motilal Oswal Financial Services said.
Vinod Nair, head of research at Geojit Financial Services said in the upcoming data-centric week, focus would be on crucial releases, including inflation data from India and the US, while the outcome of the awaited Fed policy meeting will be pivotal in shaping market sentiments.
Here are 10 key factors to watch in the coming week:
US FOMC Meet
The most important factor to watch, in the upcoming big data-centric week, will be the outcome of two-day FOMC meeting and the commentary by Fed Chair Jerome Powell on December 13, especially after the better-than-expected jobs data and declining unemployment rate in November. Fed is trying hard for soft landing.
Most of experts expect the fed funds rate to remain unchanged at 5.25-5.5 percent, while they look for any cue about the timing for beginning of rate cut cycle, given the consistently falling inflation though still above Fed's 2 percent target. Some experts expect the rate cut may start by the end of first quarter or beginning of second quarter of 2024.
Also read: SEBI working with mutual funds to make Rs 250 SIPs viable: Madhabi Puri Buch
The FOMC will also release its note on long term economic growth projections & interest rate projections.
Meanwhile, the US dollar index increased to 103.98 from 103.27 levels on week-on-week basis, while the US 10-year treasury yields rose to 4.23 percent, from 4.2 percent in the same period.
US Inflation
The market participants will also keep an eye on US inflation numbers releasing a day before FOMC meet outcome, i.e. December 12. Inflation and core inflation numbers are largely expected to be steady in November at 3.2 percent and 4 percent respectively, according to experts.
Global Economic Data
Apart from the above two key factors, European Central Bank and Bank of England will also announce its interest rate decision next week on December 14, which are also expected to be unchanged at 4.5 percent and 5.25 percent. Further, manufacturing and services PMI Flash data for December will also be released by key economies including US, Europe, Japan and UK.
CPI Inflation
Coming back to India, the CPI inflation will be releasing on December 12. It is expected to increase to around 5.5-6 percent for November, according to experts, from 4.9 percent in October due to higher food inflation, though core inflation may remain steady around 4.3 percent in November.
Also read: 58 smallcaps give double digit gains as broader indices hit fresh highs
This ultimately means, "Investors should be mindful that achieving the RBI's 4 percent CPI inflation target may take time. Concerns arise from reduced rabi sowing and declining reservoir levels, signalling a potential rise in foodgrain prices," Vinod Nair said.
In fact, the RBI maintained its full year inflation forecast at 5.4 percent for FY24, citing food and weather related risks, while raising full year growth forecast.
Industrial and manufacturing production numbers will also released on the same day, which experts expect to expand in October.
Further, WPI inflation will be announced on December 14, while the bank loan & deposit growth for fortnight ended December 1, foreign exchange reserves for week ended December 8 and balance of trade data for November will be released on December 15.
FII Flow
Foreign institutional investors came back strongly in December, buying nearly Rs 10,900 crore worth of shares in the current month so far, in addition to more than Rs 7,000 crore worth buying in previous month. Hence, this is one of the factors that helping the market to make a new high last week. Experts expect the flow to continue given the increasing possibility of continuation in economic policies after BJP winning three key States elections, strong economic growth, falling oil prices and declining US 10-year treasury yields.
On the other side, domestic institutional investors also provided good support to the market, buying more than Rs 5,700 crore worth of shares in the cash market segment.
Oil Prices
The market took major support from falling oil prices as the lower oil prices not only reduce the fiscal worries but also boost the earnings of companies which see the lower input cost. India is the net oil importer.
Brent crude futures, the international benchmark for oil prices, extended southward journey after breaking 200-week EMA (exponential moving average) in previous week. The prices corrected 3.85 percent during the week to settle at $75.84 a barrel, though saw some buying at lower levels.
It was at $96.55 a barrel on September 25, which means a 21.5 percent correction so far. Hence, the market participants will keep an eye on oil prices.
IPO
The primary market will remain active with the mainboard segment coming back in action after a silent period seen in previous week. Next week, stationary and art products manufacturer Doms Industries and housing finance company India Shelter Finance Corporation will be opening their Rs 1,200-crore IPOs each, during December 13-15.
In the SME segment, the Presstonic Engineering IPO will be opening for subscription during December 11-13, and S J Logistics December 12-14, while the public issues by Shree OSFM E-Mobility and Siyaram Recycling Industries will be launched during December 14-18.
Accent Microcell will be closing its public issue on December 12, which was subscribed 28.77 times on day 1 (December 8), while Sheetal Universal will debut on December 11 and Graphisads on December 13.
Technical View
The market momentum looks very strong with the Nifty50 hitting 21,000 mark last week. And overall, experts expect the trend to remain positive, but considering the one-way rally in the recent past, they see some kind of consolidation in coming weeks before getting into another leg of upmove towards 21,500-22,000 levels. The immediate support is expected at 20,850 and 20,600-20,500 may act as crucial support.
"I feel that some consolidation in the markets is imminent; the markets will consolidate in a defined range before resuming their move," Milan Vaishnav, CMT, MSTA, founder of Gemstone Equity Research and ChartWizard FZE said.
He said the levels of 21,500 and 22,000 would definitely be achieved but that may not happen in this month.
F&O Cues
The Options data also indicated that 21,000 is the crucial level to watch as closing decisively above the same can take the Nifty towards 21,500, while the immediate support seems to be at 20,800, and crucial support at 20,500.
The maximum weekly Call open interest was seen at 21,000 strike, followed by 21,500 and 22,000 strike, with Call writing at 22,000 strike, then 21,500 and 21,000 strike, while the maximum Put open interest was at 20,900 strike, followed by 20,000 strike and 20,800 strike, with Put writing at 20,300 strike, then 20,500 strike.
"Going forward, 21,000 is likely to act as a crucial level for the Nifty as Call writers have built their maximum positions at that strike price. A resumption of the current uptrend might be seen above 21000, with the potential to reach towards 21,550. On the lower end, Put writers have built significant positions at 20,900 and 20,800; below these levels, profit booking might increase," Rupak De, senior technical analyst at LKP Securities said.
Corporate Action and Earnings
Here are key corporate actions taking place next week:
Fedbank Financial Services, SpiceJet, Gandhar Oil Refinery India, and Flair Writing Industries will release their July-September quarter earnings.
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