Markets Week Ahead: Q2, Inflation Data, Global Trends To Dictate Mood: Where Is Nifty Headed?

Indian stock market had a narrow escape from bears in the trading week that ended on October 6th. The first half of the week was extremely bearish due to feeble global cues, multi-year high treasury yields and continued strengthening of the dollar index. However, recovery was recorded in the second half of the week with IT and realty stocks posing strong gains ahead of the Q2 earnings season. Although, the week was holiday-shorten Sensex and Nifty 50 settled it with half a per cent upside each.

In the trading week between October 9th to 13th, major Q2 earnings of tech biggies like TCS, HCL Tech and Infosys will play a major role in influencing the market. Also, major macroeconomic data like CPI, WPI and IIP will further set a trend since investors would have further clarity on RBI's policy stance and rate decisions in forthcoming policies.

On October 6th, after RBI kept the policy repo rate unchanged at 6.5% and maintained its stance, Sensex ended at 65,995.63, up by 364.06 points or 0.55%, while Nifty 50 finished at 19,653.50, surging by 107.75 points or 0.55%. Bank Nifty settled at 44,360.60, gaining by 147.25 points or 0.33%.

During the week, Sensex surged by 315.15 points or 0.48%, while the 50-scrip benchmark Nifty advanced by 87.70 points or 0.45%.

Talking about the weekly performance, Ajit Mishra, SVP - Technical Research, Religare Broking said, that markets remained volatile for yet another week and managed to end flat amid mixed cues. The tone was negative in the first half, mainly pressurized by weak global cues however recovery in the final sessions pared losses and helped Nifty to settle around the week's high at 19,653.50 levels. Meanwhile, mixed trends on the sectoral front kept the traders busy wherein realty and IT posted strong gains while energy, pharma and metal were among the top losers.

He added, "We had a similar trend on the broader front as the midcap index ended in the red and smallcap gained over half a per cent."

Meanwhile, Arvinder Singh Nanda, Senior Vice President, of Master Capital Services said, "RBI's monetary policy committee decided to maintain the status quo, keeping Repo Rate unchanged at 6.50%. RBI forecasted CPI inflation at 5.4% for FY24 and economic growth target remained unchanged at 6.5%. The inflation outlook will be influenced by various factors such as kharif sowing, El Nino, volatility of global food and energy market."

Also, the India's 10 Year Bond Yield shot up the most in six months and came in at 7.32% after RBI Governor announced that the regulator will conduct open market operations through auctions to manage liquidity.

On the global front, Nanda said, "US 10yr Bond Yield hits 16 years high to 4.78% after employers data showed that it added 336,000 jobs in September well above the expectation which indicates resilience in the job market."

What to expect from stock markets during October 9-13 trade:

For the trading week that will end on October 13, Mishra highlighted that Nifty had failed to cross the hurdle short term moving average (20 EMA) in the recent past and we are again hovering around the same area. A decisive close above 19,670 could help the index to extend a rebound toward the 19,800-20,000 zone. On the downside, the 19,200-19,450 zone would continue to act as support, in case of a reversal. The surge in select IT majors ahead of their earnings is certainly encouraging but others are still not offering any clear signals.

Besides, Mishra added, "we are seeing early signs of exhaustion in the broader indices, especially in the midcap index. Considering all, traders should stay focused on stock selection and prefer index majors over others."

As per Nanda, global and domestic economic data, FII/DII trading activity, upcoming Q2 earning season, crude oil inventories, movement of rupee against dollar, treasury bond yields will drive the market in the coming days. Market will take further cues from major global events such as Eurozone inflation data, US PPI, Initial jobless claims, FOMC Meeting, crude oil, OPEC report UK GDP, Trade balance, China CPI, PPI, trade balance and many more. Domestic economic data points like India CPI, WPI data, forex reserves, trade balance will also be in focus.

While, Pravesh Gour, Senior Technical Analyst, Swastika Investmart said, all eyes will be on the beginning of corporate performance for the second quarter of the current fiscal year (Q2 FY24), spanning from July to September. The anticipation is particularly high as India's largest software services company, TCS, is slated to unveil its Q2 results on October 11, 2023, with HCLTECH and INFOSYS following suit on October 12, 2023. Market participants will be keeping an eye on the movement of the rupee against the dollar and crude oil prices. Investments by foreign institutional investors (FIIs) and domestic institutional investors (DIIs) will also be monitored.

Further, on the macro front, Gour said, there are important data releases scheduled. On October 12, 2023, we anticipate the release of industrial production and manufacturing production data for August. Simultaneously, the inflation rate for September will be announced, providing insights into the country's economic health. Lastly, the wholesale price index (WPI) data for September is slated for release on October 13, 2023. All of these factors collectively contribute to the broader understanding of India's economic landscape during this period.

Nifty Spot Index Weekly Outlook:

According to Gour, Nifty is bouncing back from the 19,333 level after a significant dip. The real challenge is surpassing the 20-day moving average (20-DMA) at 19,800, which also coincides with a high open interest area. Breaking through this level at 19,800 would signal the end of the correction, and Nifty might then aim for the 20,000-20,200 range. On the other hand, there's a critical support zone between 19,300 and 19,250. If Nifty falls below this range, it could continue to drop towards 19,000 and 18,800. So, it's important to keep a close eye on the range between 19,300 and 19,800, as it defines where Nifty is currently trading.

On the weekly scale, Nanda believes that a Dragonfly Doji pattern was observed in Nifty 50, which is typically considered a bullish signal. This suggests that the short-term trend for Nifty has turned positive. Looking ahead, the chart pattern indicates that Nifty may encounter resistance at around 19,800 levels in the coming week.

Bank Nifty Spot Index Weekly Outlook:

Bank Nifty is currently looking for support in the range of 44,000 to 43,700 points. On the other hand, a significant resistance zone exists between 44,800 and 45,000 points, characterized by the presence of both the 20-day and 50-day moving averages (20-DMA and 50-DMA). If Bank Nifty manages to break above 45,000 points, it could trigger short-covering and potentially lead to a rally towards the 45,400 to 45,600 point range. However, if it fails to surpass this resistance, there is an increased risk of renewed selling pressure, Gour said.

For Bank Nifty, Nanda believes, it is crucial to keep an eye on the 44,000 level, which is identified as a key support zone. If Bank Nifty manages to stay above this level, there is potential for a rally towards the range of 44,800 to 45,000. However, it's important to note that if Bank Nifty falls below the 44,000 to 43,800 range, the current uptrend in the index may become vulnerable. Therefore, market participants should closely monitor these levels to make informed trading decisions in the banking sector.

Disclaimer:

The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.