Week Ahead: US Fed chair speech, Q4 results, FII activity, global cues among key market triggers next week

As the high-stakes’ Lok Sabha election results approaches closer, the volatility in the stock market is weighing on investor’s sentiments, both domestically and across borders. Foreign outflow from Indian equities continues unabated amid the rising India VIX index and uncertainty of the election outcome.

In the fourth week of May, investors will keenly eye the ongoing the January-March quarter results for fiscal 2023-24 (Q4FY24), voter turnout, domestic and global macroeconomic data, foreign fund outflows, crude oil prices, and global cues.

Domestic equity benchmarks traded firmly, drawing strength from lower levels as investors aligned with the broader bullish market outlook. Nifty 50 reclaimed back 22,500 level and the Sensex closed the week above the 74,000 level. On the weekly front, the BSE benchmark climbed 1,341.47 points or 1.84 per cent, and the Nifty went up by 446.8 points or two per cent.

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The Nifty index closed the week at 22,506, while the Bank Nifty climbed by 1.68 per cent to end at 48,199. Nifty Midcap hit an all-time high at 11,347 and posted the biggest weekly gain in eight months and Nifty’s small-cap closed the week at 17,009 level. Nifty Realty and Nifty Metal hit a record high this week gaining seven per cent each. Nifty FMCG was the only sectoral indices that closed in red.

Initially, the market experienced some volatility due to a significant increase in the India VIX, which rose by more than 11 per cent, and concerns over low voter turnout in the ongoing general elections, which heightened fears of an unstable government at the center. However, market sentiment improved following comments from key government officials.

‘’Investors are expressing optimism regarding potential interest rate cuts in 2024, supported by favourable US consumer inflation data and improved jobless claims figures, which have also contributed to a surge in gold prices and strengthened the stock market rally. Uncertainties persist regarding the timing of US Fed rate adjustments…Amidst ongoing uncertainties surrounding election results and quarterly earnings, we anticipate continued volatility in the near term,” said Vinod Nair, Head of Research, Geojit Financial Services.

Also Read: FPIs offload ₹28,242 crore in Indian equities, continue selling streak since April: What’s fueling the outflow?

In the coming week, primary markets will attract investors as some 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 the volatile tone to continue for Nifty 50. However, the index may present an attractive opportunity above the 22,650 level in case of profit booking. Experts advise traders to adjust their positions accordingly and maintain a “buy on dips” strategy.

Here are the key triggers for stock markets in the coming week:

Q4 Results, US Fed chair Speech

Domestically, the last major batch of Q4 earnings reports will drive stock-specific movements. Zee Media, Sun TV Network, NTPC, Hindalco, Hindustan Copper, JK Lakshmi Cement, ITC, IndiGo, Sun Pharmaceuticals, among others are some of the big names in the list.

US Federal Reserve Chairman Jerome Powell is scheduled to deliver a speech on Monday, May 20, 2024, which is expected to further influence market sentiments. Last week, Powell tested positive for COVID-19 and is currently working from home, a US Fed spokesperson said in an emailed statement.

2 new IPOs, 8 listings to hit D-Street

In the mainboard segment, Awfis Space Solutions IPO will open for subscription on May 22. In the SME segment, GSM Foils IPO will open for bidding on May 24. Among the ongoing issues, Rulka Electricals IPO and Hariom Atta & Spices IPO will close on May 24.

Among listings, shares of Go Digit General Insurance Limited will debut on stock exchanges BSE, NSE on May 23. Additionally, shares of ABS Marine Service, Mandeep Auto Industries, and Veritaas Advertising will debut on NSE SME on May 21. Shares of Indian Emulsifier will get listed on NSE SME on May 22. Shares of Quest Laboratories will debut on NSE SME on May 23.

FII Activity

Foreign institutional investors (FIIs) are on a selling spree and were sellers for five out six sessions last week with the total outflow from Indian equities recorded at ₹10,649.92 crore. Domestic institutional investors (DIIs) were net buyers for five out of six session, with a total investment of ₹14,410.18 crore, according to stock exchange data.

According to market analysts, the main trigger for the FII selling has been the outperformance of the Kong Kong index Hang Seng which shot up by 19.33 per cent during the last one month. ‘’FIIs are moving money from expensive markets like India to cheap markets like Hong Kong where the PE is around 10 compared to around 20 PE in India,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Foreign portfolio investors (FPIs) have turned aggressive sellers in Indian markets due to high market valuation, uncertainty over the outcome of Lok Sabha elections 2024, rise in the volatility index–India VIX and high US bond yields.

Analysts said that the situation can change dramatically when clarity emerges on the election outcome. Going forward, there is likely to be a dramatic change in FPI equity flows in response to election results. Political stability will attract huge inflows, according to Dr. V K Vijayakumar.

Global Cues

Global markets are currently in a buoyant mood, driven by positive global cues such as cooling US inflation, which raises hopes for potential rate cuts by the Federal Reserve, and strong earnings from tech stocks. The Dow Jones has climbed 1.24 per cent, reaching the 40,000 mark for the first time, while the Nasdaq has risen 2.12 per cent in the third week of May 2024.

The outlook for the market will be guided by the major global economic data. UK inflation data, US initial jobless claims, US bond yields, China loan prime rate, S&P global services data and S&P global manufacturing PMI and quarterly results will be among key triggers in global markets.

US Fed chair Powell’s comments is likely to bring market movement. The cooling off of US 10-year bond yields and the dollar index is further strengthening the market, according to Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.

Oil Prices

International crude oil prices gathered steam and settled nearly one per cent higher in the previous session, with global benchmark Brent crude recording its first weekly gain in three weeks. The rebound in prices came after bullish macroeconomic data indicators from the world’s top two oil consumers – China and the US – bolstered hopes for higher oil demand.

Brent settled 71 cents higher, or 0.9 per cent, at $83.98 a barrel. US West Texas Intermediate crude (WTI) gained 83 cents, or 1.1 per cent, to $80.06. For the week, Brent gained about one per cent, while WTI rose two per cent, according to news agency Reuters. The International Energy Agency (IEA) trimmed its global oil demand forecast for 2024, widening the gap with the producer group Organization of Petroleum Exporting Countries (OPEC).

Corporate Action

Several major private companies and public-sector undertakings will trade ex-dividend in the coming week, starting from Tuesday, May 21. Stocks including Trent, State Bank of India (SBI), Vedanta, Tata Consumer Products, among others will trade ex-dividend, while Bharat Dynamics will undergo a stock split and trade as ex-split. Inox Wind will trade ex-bonus. Check full list here

Technical View

For Nifty 50, Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd anticipates some profit booking around the 22,650 level, as this retracement level is often considered significant in technical analysis, indicating a potential resistance zone.

‘’However, any resultant profit booking from 22650 could be viewed as an opportunity to initiate new long positions near 22200, suggesting a bullish outlook beyond this retracement level. On the downside, the zone between 22,200 and 22,000 is identified as a crucial support level for the upcoming sessions,” said Nanda.

For Bank Nifty in the coming sessions, the market analyst anticipates further upside movement towards the 48,800 level, which corresponds to the 61.8 per cent retracement of the recent decline. On the downside, short-term support is expected around the 47,300 level for the upcoming sessions.

‘’The immediate support level is at 47,700, with 47,200 providing an additional cushion. A breakout above 48300 could indicate a bullish trend, potentially driving the index towards the 48,800 and even the 49,200 levels,” added Nanda.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, and 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.