Dalal Street This Week | 10 key factors that will keep Dalal Street buzzing this week

It was a great week for the stock market as a healthy earnings season barring top IT firms, FIIs buying, falling oil prices, VIX near historical lows, rally in IT stocks after strong earnings growth by Meta, etc., lifted sentiment at Dalal Street.

The benchmark indices recouped all their previous week’s losses and closed at the highest levels since December 2022, while the weekly gains were the highest since July 2022. The BSE Sensex rose 1,457 points or 2.44 percent to 61,112, and the Nifty50 jumped 441 points or 2.5 percent to 18,065, with buying across sectors for the week ended April 28.

The broader markets also participated in the run-up, with the Nifty Midcap 100 and Smallcap 100 indices gaining 2.3 percent and 3.2 percent respectively.

The coming truncated week is going to be action-packed for the market with all eyes on corporate earnings, monthly GST collection, auto sales numbers, PMI data globally, FOMC meet, and ECB interest rate decision. The market is likely to stay in positive territory going ahead too with main focus on the commentary by US Federal Reserve Chair Jerome Powell, experts said.

“We expect this momentum to continue. This week would be crucial as US Fed and ECB policy meetings are lined – up,” Siddhartha Khemka, Head – Retail Research at Motilal Oswal Financial Services said.

Apart from this, investors would continue to track Q4 results along with global cues and auto monthly sales data, he added.

The market will remain shut on May 1 for Maharashtra Day.

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

1) Corporate Earnings

As we will be entering into the fourth week of earnings season, nearly 200 companies are set to announce their quarterly numbers in the week ending May 8. So far the earnings season has been good and broadly on expected lines with strong numbers by banks and corporates indicating the worst related to margin pressure is behind, though there was weakness in select frontline IT companies, experts said.

Among frontliners, Tata Steel, HDFC, Hero Motocorp, Coal India, Ambuja Cements, Titan Company, and Adani Enterprises will be releasing their numbers this week.

Among others, Bank of India, Union Bank of India, Tata Power, ABB India, Britannia Industries, Dabur India, Adani Green Energy, Adani Total Gas, Varun Beverages, Anupam Rasayan India, Adani Wilmar, Bajaj Consumer Care, Cholamandalam Investment, Godrej Properties, Havells India, KEC International, Petronet LNG, Sula Vineyards, Tata Chemicals, Blue Star, MRF, Ceat, IDFC, TVS Motor, United Breweries, Alembic Pharmaceuticals, Bharat Forge, DCB Bank, Equitas Small Finance Bank, Federal Bank, and Marico will also be in focus ahead of their numbers this week.

2) FOMC Meet

We will have the much-awaited meeting of the US Federal Open Market Committee (FOMC) on May 2-3. Most experts expect the Fed to conclude the meeting with a 25 bps hike in the Fed funds rate. But the commentary by Chair Jerome Powell will be key to watch out for given the lower-than-expected GDP growth for the first quarter of 2023 at 1.1 percent annualised rate, as per advance estimates, following an increase in interest rates, while experts feel the inflation, the most worried part and important data point for the Fed, is likely to decline further going ahead, but getting it at Fed’s long term target of 2 percent will take time.

Whether the Fed will signal about further rate hikes or pause for a longer period will be important to watch. “We expect once the Fed pauses, the headroom will open for the RBI to cut rates in the second half of FY 2024 as the inflationary pressure, most probably, will remain under control given base effect and slowing global growth,” Jitendra Gohil, Director – Global Investment Management at Credit Suisse Wealth Management, India said.

He further said once the Fed pauses, FPI will have more incentive to buy Indian equities given the attractive long-term potential of India.

The US dollar index and 10-year treasury yields remained volatile ahead of FOMC meet, closing at 101.67 and 3.42 percent in the week before the last.

3) Global Economic Data Points

Further, the US jobs data along with non-farm payrolls and unemployment rate numbers released later this week will also be watched by the market participants. Apart from that, we will have manufacturing and services PMI numbers by US, India, China, and Europe.

European Central Bank will also announce its interest rate decision this week. Experts largely expect a 25 bps hike in interest rates by ECB, after a 50 bps hike in the previous meeting, as the inflation still remained high at 6.9 percent in March, against the central bank’s long-term target of 2 percent.

Here are key global economic data points to watch out for next week:

4) Oil Prices

Oil prices largely remained rangebound and volatile below the $90 a barrel mark on the Brent crude futures since November last year, which is quite positive for countries like India, the net oil importer. Hence we have seen great support for our equity markets as it not only lowers our fiscal deficit concerns but also supports corporate earnings with easing margin pressure.

International oil benchmark Brent crude futures remained under pressure for yet another week given the weak US economic data and demand outlook worries after rising interest rates, closing with over a percent loss at $80.33 a barrel, while on a monthly basis, it managed to close with just half a percent gains in April after a downward journey in previous five months.

WTI crude oil futures closed at $76.61 a barrel, down 1.7 percent for the week gone by.

Additionally increased export from Russia weighed on price. Short-term fundamentals turn moderately bearish in the crude oil market and prices are likely to correct further from the current level, Saumil Gandhi, Senior Analyst – Commodities at HDFC Securities said.

5) Domestic Economic Data Points

On the domestic front, we will also have PMI numbers, with the S&P Global Manufacturing PMI for April released on May 1, and Services & Composite PMI data on May 3.

The manufacturing sector activity continued to expand in March, with S&P Global Manufacturing PMI rising to three-month high of 56.4 levels against 55.3 in February, while the services sector also expanded in March, though the sector’s Purchasing Managers’ Index dropped to 57.8, from 59.4 levels in February.

Apart from this, foreign exchange reserves for the week ended April 28, and deposit & bank loan growth for fortnight ended April 21 will be released on May 5.

6) Auto Sales

The monthly auto sales numbers will also be announced by the companies from the starting of next week. Hence, auto stocks including Maruti Suzuki, TVS Motor, Tata Motors, Ashok Leyland, Mahindra & Mahindra, Bajaj Auto, Eicher Motors, and Hero MotoCorp will be in focus.

Experts largely expect two-wheeler industry volumes to improve in the month of April, while passenger vehicle sales growth may be in single digits and commercial vehicle volumes growth is likely in double-digit on a year-on-year basis, but the tractor segment may report a decline for the month.

“2-wheeler industry volumes are expected to improve around 13 percent YoY in April on a lower base, aided by production ramp-up of BS6 phase 2 models as well as improving replacement demand,” Emkay Global said.

“CV industry’s volumes should grow by 10 percent YoY, driven by replenishment of channel inventory (post the strong pre-buy in March 2023), while Escorts’ and M&M’s tractor volumes are likely to decline 2-5 percent YoY, respectively,” the brokerage added.

7) FII Flow

The FII flow turned out to be strong towards the end of last week, boosting the confidence among market participants. If the said flow continues in the coming days, the market may sustain its momentum with intermittent correction and consolidation, experts said.

FIIs have net bought Rs 5,400 crore during the last week and closed the month with over Rs 5,700 crore of inflow.

An important macro factor that has tilted the FPI approach is the appreciation of the rupee. Rupee which had touched a low of 82.94 to the dollar in late February this year has now appreciated to 81.75 to the dollar. India’s Current Account Deficit is declining and if this trend continues the rupee may appreciate further. FPIs are likely to bring more inflows into India in this context, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said.

Domestic institutional investors were also buyers last week, to the tune of nearly Rs 1,900 crore, which too supported the equity.

8) Technical View

The Nifty50 has formed a bullish candlestick pattern on the daily charts, and a long bullish candle on the weekly scale, recouping all the losses seen in the previous week, making higher highs formation for the fifth consecutive week.

The index closed above the psychological 18,000 mark for the first time since December 2022, decisively breaking out a downward sloping resistance trendline adjoining highs of record high in December last year and the high of the week ended April 21.

Even the momentum indicators RSI (relative strength index 14) at 56 levels showed bullish bias, and MACD (moving average convergence divergence) just gave a positive crossover above the zero line on the weekly charts, indicating the sign of momentum.

Hence experts expect the index at 18,200-18,300 levels in coming sessions, with supports shifting higher to 17,900-17,800 levels, from 17,500-17,600 area earlier.

“Overall trend is positive and we can see broad-based buying along with sector rotation. Nifty has managed to cross back above psychological 18,000 levels which is showing positive momentum. The overall tone is bullish,” Ashish Kyal, Founder / CEO at Waves Strategy Advisors said.

“It will be difficult to touch lifetime highs in May itself but we can see that possible in subsequent months. For now immediate hurdle is at 18,190 levels from where we can see profit booking. 17,756 is important Gann support level,” he added.

9) F&O Cues & India VIX

The Option data also indicated 18,200-18,300 is likely to be key hurdles for the Nifty50 in coming days, with immediate supports at 17,900-17,800 levels, while overall, the 18,000 is expected to crucial levels for further market direction.

The maximum Call open interest (OI) on a weekly basis was at 18,000 strike, followed by 18,200-18,300 strikes, with meaningful Call writing at 18,200, 18,100, and 18,300 strikes.

On the Put side as well, the maximum open interest was at 18,000 strike. This was followed by 17,800-17,900 strikes, with writing at 18,000 strike, 17,900/17,500 strikes.

“Derivative data is also indicating the continuation of an ongoing uptrend as cumulative open interest in the Put side recorded at 8.7 crore against 6.9 crore on the Call side, bringing OI PCR (Put Call ratio) at 1.25 for weekly expiry,” Arvinder Singh Nanda, Senior Vice President at Master Capital Services said.

The volatility also cooled down considerably with India VIX, which measures the expected volatility for next thirty days in the Nifty, falling to 10.95 levels, from the high of March at 17.35 levels, while it remained below 12 levels for fourth consecutive week. Now it is at lowest level since December 2019, which raised the investors’ confidence.

Technically too, the momentum indicators RSI and MACD gave negative crossover on the weekly timeframe.

10) Corporate Action

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

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