Domestic equity benchmark indices recorded their biggest two-week winning streak in the last five months amid the election rally gripping the pulse on D-Street. Nifty 50 and Sensex reclaimed their record highs and gained around two per cent this week logging their best week in three months. Analysts say that the positive tone was evident from the start, influenced by global markets, but it was the strong buying in select heavyweights on Thursday significantly boosted sentiment.
As a result, the Nifty 50 reached a new milestone of 23,000, and the Sensex closed near the week’s high at 75,410.3. All major sectors contributed to this movement, with metal, energy, and auto leading the way. The broader indices showed mixed performance, with midcaps gaining about one per cent while smallcaps ended in the red. The sentiment improved significantly following the Reserve Bank of India’s announcement of a ₹2.11 lakh crore record dividend payout to the government for FY24, which surpassed expectations.
‘’Markets are continuously making steady gains, with Nifty achieving a historic mark of 23,000 zones just after a few days of BSE-listed companies’ market cap crossing $5 trillion. Further, India saw a record rise in exports and employment at an 18-year high in May…Overall we expect the market to witness a gradual up-move and see some volatility next week as both election and earning season are nearing the end,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.
In the coming week, the buzz in primary markets may remain subdued a few new initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segment. The week will be critical from the domestic and technical point of view as investors will global indicators and the latest corporate results.
Overall, analysts expect Nifty 50 to move toward the 23,150-23,400 range soon. They added that a gradual up-move is expected, however, markets may still witness some volatility this week due to the scheduled expiry of May month derivatives contracts. Experts advise traders to continue the stock-specific trading approach, with a preference for large-cap and large mid-cap stocks for short-term trades.
Here are the key triggers for stock markets in the coming week:
Q4 Results, Lok Sabha election updates
On the domestic front, markets have reached the final curtain for the Q4 earnings season. Many companies, including some big names such as Tata Steel, PTC India, Reliance Capital, Apollo Hospitals, among others, will release their financial results next week.
The markets are seeing a significant boost from the Indian economy, political stability, and expectations of a BJP-led alliance winning a third term, ensuring economic growth, according to analysts. The positive earnings reports from the fourth quarter could provide strength for the market to continue its bullish momentum.
5 new IPOs, 2 listings to hit D-Street
In the mainboard segment, no new issues are listed so far, to open for subscription in the coming week. Out of the ongoing issues, Awfis Space Solutions IPO will close for bidding on May 27.
In the SME segment, Vilas Transcore IPO will open for subscription on May 27, Beacon Trusteeship IPO will open on May 28, and Ztech India IPO will open on May 29. Aimtron Electronics IPO will open for bidding on May 30 and TBI Corn IPO will open on May 31. Among the ongoing issues, GSM Foils IPO will close on May 28.
Among listings, shares of Awfis Space Solutions will debut on BSE, NSE on May 30. Additionally, shares of GSM Foils will get listed on NSE SME on May 31.
FII Activity
Foreign institutional investors (FIIs) significantly lowered their selling streak amid robust domestic market sentiments. Though FIIs were sellers for three out of four sessions last week, yet a net inflow was recorded at ₹1,165.54 crore. Domestic institutional investors (DIIs) were net buyers for all sessions, with a total investment of ₹6,977.71 crore, according to stock exchange data.
The massive short-covering caused by this sudden change in FII trade contributed to a sharp rally in markets. The change in FII stance has been caused by the underperformance of the Hang Seng index which is down 4.1 per cent during the last five days.
‘’The outperformance of the Hang Seng had led to “sell India, buy China” trade during the last one month. It appears that this trade is over and that’s why FIIs have again turned buyers in India.
What makes this rally healthy is the fact that it is being led by fairly valued largecaps with the overvalued broader market taking a backseat. The trend of outperformance of largecaps is likely to continue,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Foreign investors have largely been on a selling spree in Indian markets this year, but, sentiments may shift after June 4. ‘’We are very close to the Lok Sabha election results, and the election verdict will give a boost to FII flows,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.
Foreign portfolio investors (FPIs) remained assertive sellers but also toned down their bearish sentiments last week. FPIs offloaded ₹22,046 crore worth of Indian equities and the total outflow stands at ₹17,848 crore as of May 24, taking into account debt, hybrid, debt-VRR, and equities. The total debt inflows stand at ₹2,009 crore so far this month.
“The long-term outlook for FPI flows into Indian debt is positive due to India’s inclusion in global bond indices. However, near-term flows are being impacted by global macroeconomic uncertainty and volatility. The trend will reverse once the interest rate outlook becomes clearer,” said Vipul Bhowar, Director, Listed Investments, Waterfield Advisors.
‘’The RBI’s dividend payout is a positive development for the fiscal situation. However, its impact on FPI interest in the debt market is uncertain and will depend on how the government utilises the dividend. Considering the overall economic conditions, clarity on this matter will emerge in the full budget in July 2024, providing a clearer picture for FPI investors,” added Bhowar.
Global Cues
The Dow Jones and S&P 500 both ended their multi-week winning streaks. The unexpected strength in the economy has prompted many to push back their expectations for US Federal Reserve rate cuts, creating caution in interest rate-sensitive sectors.
‘’Nasdaq is set to extend its winning streak, buoyed by Nvidia’s standout performance. Nvidia’s earnings report was a major highlight, with shares surging 9.3 per cent, reflecting strong investor confidence in the company’s future prospects,” said Alex Volkov, Market Analyst at VT Markets.
The US monthly inflation indicator, ‘personal consumption expenditures’ (PCE) index will be released on Wednesday and the Eurozone consumer price index (CPI) data will come out on Friday, May 31. Traders and analysts will keenly watch out for signs of inflationary trends that might influence monetary policy decisions.
The Federal Reserve has indicated a willingness to hike rates further if necessary, reducing the probability of a rate cut in the near term. The PCE data will be essential in determining the Fed’s monetary policy direction.
Also, a 25 basis points rate cut by the European Central Bank (ECB) is almost fully priced in for June, contingent on no inflationary surprises. The upcoming CPI report will be pivotal in shaping market sentiment and ECB’s next moves.
‘’Globally, trends are mixed: The Dow Jones Industrial Average (DJIA) has sharply retreated from its record high, while the tech-heavy Nasdaq and the broader S&P 500 are still showing resilience and inching higher,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.
Other factors will be closely monitored, including US bond yield movement and commodity prices, including crude oil, gold, and silver, as they will influence market sentiment. Upcoming economic data releases from Japan and the US, along with movements in the global currency market, will also be important factors to consider.
‘The continuous decline in crude oil prices, which have fallen nearly 12 per cent from their recent swing high, has raised expectations of a reduction in US inflation figures. This potential mitigation of inflation could prompt US monetary authorities to lower the key benchmark rate sooner than anticipated,’’ said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
Oil Prices
International crude oil prices logged its longest weekly losing streak in five months after hawkish US Federal Reserve policy stance raised fuel demand worries among investors. In the previous session, the Brent crude July contract rose 76 cents to $82.12 per barrel. The more-active August contract closed 73 cents higher at $81.84. Also, US West Texas Intermediate (WTI) crude futures settled 85 cents, or 1.1 per cent, higher to $77.72.
On Thursday, Brent settled at its lowest since February 7 and US WTI futures at their lowest since February 23. The Brent crude benchmark closed down 2.1 per cent for the week. Crude oil prices declined for four straight sessions last week, recording its longest losing streak since January 2. WTI settled down 2.8 per cent for the week.
The oil market is awaiting the online meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on June 2, to decide whether to extend voluntary oil output cuts of 2.2 million barrels per day. Commodity analysts largely anticipate that current production cuts will be extended at least to the end of September amid the decline in crude prices.
Corporate Action
In the coming week, shares of several major companies will trade ex-dividend including CMS Info Systems, Muthoot Finance, Havells India, India Energy Exchange (IEX), JSW Energy and IT major Infosys. Additionally, Ajanta Pharma will declare a buyback of shares on May 30, 2024. Check full list here
Technical View
The market’s buoyancy over the last two weeks has countered the previous bearish sentiment, and we expect the Nifty to move toward the 23,150-23,400 range soon. In the event of a dip, the 22,550-22,800 zone is expected to provide strong support, according to Religare Brokings’ Ajit Mishra.
‘’While all key sectors are contributing to the rally, banking and IT still have significant upside potential, and their participation could drive the index to much higher levels. We recommend continuing a stock-specific trading approach, with a preference for large-cap and large mid-cap stocks for short-term trades,” added Mishra.
‘’The structure is now bullish with a buy-on-dip approach, where 22,780 is the first support and 22,500 is the next support level,” added Swastika Investmarts’ Pravesh Gour. Following the breakout, there has been a notable increase in positive momentum, said most analysts. ‘’The formation of a long bullish candle on the weekly charts, along with breakout patterns observed on both daily and weekly charts, indicates a continued upward trend from the current level,” said Master Capital Services’ Arvinder Singh Nanda.
Bank Nifty remained strong throughout the day, bolstered by strength in HDFC Bank. ‘’Going forward, sentiment is likely to remain positive as long as the index stays above 48,500. Any dips towards 48,500 might attract buying interest. On the higher end, immediate resistance is placed at 49,000, above which the index might move towards 49,500. On the lower end, immediate support lies at 48,800,” said Rupak De, Senior Technical Analyst, LKP Securities.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
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Published: 26 May 2024, 06:10 AM IST
