Markets Outlook This Week: Will Nifty 50 Touch 20k Critical Mark? Key Triggers here

Indian market witnessed a volatile week from July 24-28 with Sensex and Nifty 50 ending in red. The latest volatility in domestic equities is owing to mixed Q1 earnings, a pickup in the dollar, bond yields, and crude oil prices coupled with a reversal in the trend of foreign institutional investors. In the trading week from July 31st to August 4th, the market is expected to be dominated by earnings, monsoon session of parliament, major macroeconomic data and global indices. Apart from this monthly auto sales and production data of metal companies will also be in focus.

Sensex ended at 66,160.20 down by 106.62 points or 0.16% on Friday, while Nifty 50 closed at 19,646.05, marginally lower by 13.85 points or 0.07%.

In the trading week that ended on July 28, 2023, Sensex dipped by 421.98 points or 0.63%. However, the impact of volatility was much smaller in Nifty 50 as the benchmark's weekly drop was by 73.30 points or 0.37%.

Talking about the market performance, Vinod Nair, Head of Research at Geojit Financial Services said, "The domestic market passed through a volatile week, with the benchmark index underperforming its broader peers. The recent correction of the domestic market can be attributed to several headwinds, including mixed Q1 results, a reversal in FII activity, a rising dollar index & US bond yields, and an increase in crude oil prices. Pharma stocks, on the other hand, showed resilience amid the volatility due to a positive start to the earnings season and expectations of increased demand from developed economies. Furthermore, prospects of reduced US pricing issues and expanding operating margins also supported the sector."

Further, Ajit Mishra, SVP- Technical Research, Religare Broking said, "Markets ended a 4-week long gaining streak and ended marginally lower, taking a breather after the recent surge. The tone was subdued from the beginning however the key indices tried to regain some strength in the middle but profit-taking in final sessions trimmed the gains and pushed them into the red. Consequently, both the benchmark indices, Nifty and Sensex, closed at 19,646.05 and 66,160.20 levels respectively. Meanwhile, a mixed trend across sectors and the monthly expiry of July month derivatives contracts kept the participants occupied. The broader indices managed to outperform for yet another week and posted strong gains in the range of 1%-2%."

Also, Nair added, "The FOMC's decision aligned with market expectations, implementing a 25bps hike and emphasising a data-centric approach for future rate actions. However, the better-than-expected US Q2 GDP data, while positive, impacted the domestic market mood as it suggested the likelihood of another rate hike."

In the coming days, Nair believes domestic earnings will remain a crucial driver, while global cues will also play a vital role in shaping market trends.

While Pravesh Gour, Senior Technical Analyst, Swastika Investmart said, "As we step into a new month, the market is brimming with various domestic and global macroeconomic indicators that are expected to sustain its momentum. On the domestic front, investors will keep a close eye on the Q1 earnings of key companies such as Bharti Airtel, Britannia, Eicher Motors, M&M, Maruti Suzuki, SBI, Sun Pharma, Titan, and UPL, among others, as they are scheduled to announce their financial results in the upcoming weeks. Additionally, monthly auto sales figures and developments during the monsoon session of parliament will also be significant points of interest for investors and traders alike."

Gour further added, "From a macroeconomic perspective, market participants will be closely observing key events like the upcoming release of the US Manufacturing PMI data, US Services PMI data and US Non-farm Payrolls scheduled between August 01 and August 4. These indicators can provide valuable insights into the state of the global economy and may impact market sentiment. Additionally, Institutional activity will also have a significant impact on market trends."

Apart from earnings, Mishra believes global indices will also play a role in dictating domestic equities. He said, "We have been closely following the performance of global indices for cues and the prevailing buoyancy in the US markets gives us the comfort to hold the bullish view. However, we could see some volatility citing resistance around the 35800+ zone in Dow Jones Industrial Average (DJIA)."

On Nifty 50, Mishra said, "Nifty has almost retraced to the upper band of the critical support zone i.e. 19,300-19,500 and it may see further consolidation before resuming the trend. On the higher side, it could face a hurdle around the 19,850-20,000 zone during the week. We thus reiterate our advice to focus on identifying stock-specific trading opportunities with favorable risk to reward ratio."

Disclaimer

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