After enduring a five-week losing streak, the domestic Market managed to break free with its most significant single-day gain in the past two months. Frontline index Sensex rallied around 556 points on the first session of September, logging its best single day in two months, while Nifty closed above the 19,400 level on value-buying in power, metal and oil stocks following strong domestic macro data and global cues.

The five-week losing spell was broken after gross domestic product (GDP) data showed on Thursday that the Indian economy grew at its quickest pace in a year during the April-June quarter, which could boost foreign fund inflows. 

A sharp rebound on Friday helped Nifty to close around the week’s high at 19,435.30 levels. BSE Midcap and Smallcap indices hit their fresh record highs of 31,461.26 and 37,460.24 respectively during the session. Jio Financial Services shares were dropped from all the S&P BSE indices including Sensex with effect from September 1.

The frontline indices gained 0.88 per Cent and 0.77 per cent, respectively for the week after having logged losses in each of the past five weeks since hitting record highs on July 20. On the sectoral front, realty, auto and metal posted strong gains in the range of 3.5 per cent-5.5 per cent while defensive – pharma and FMCG ended in the red. Besides, the continued buying in midcap and smallcap space kept the traders busy.

“Investor sentiments were mostly cloudy due to mixed market trends on the global and domestic fronts. Concerns about the progress of US policy measures weighed on both domestic and global markets after the Fed Chair expressed his commitment to managing inflation within target bounds,” said Vinod Nair, Head of Research at Geojit Financial Services.

‘’The domestic market witnessed a significant rally at the end of the week, driven by higher-than-expected domestic manufacturing PMI and positive GDP growth data, reflecting a robust economic outlook. Favourable global cues also played a role in this upturn. Notably, there was heavy buying in metal stocks in anticipation of further stimulus measures from the Chinese government. Auto stocks also performed well, buoyed by strong sales figures,” added Nair.

Going forward, a buzzing week awaits the primary market with four new public issues to be rolled out for bidding, along with four listings across mainboard and SME segments. Analysts say that in the absence of any major triggers from the domestic market, sentiments will be driven by global cues, including the PMI data and US economic indicators.

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

Macro Data:

India’s GDP grew by 7.8 per cent during the first quarter of fiscal 2023-24, compared to a growth of 6.1 per cent in the preceding January-March quarter of fiscal 2022-23. As China’s post-pandemic recovery has slowed, India remains one of the fastest-growing major economies. The growth was mainly due to the government’s push for capex, higher activities in the services sector and stronger consumption demand.

S&P Global India manufacturing PMI continues to expand in August to rise to a three-month high of 58.6 compared to 57.7 in July. India’s April-July fiscal deficit at ₹6.06 lakh crore widened to 33.9 per cent on year and the eight core sectors posted a growth of 8 per cent in July which is slightly lower than 8.2 per cent posted in June.

On the macro front, some of the key factors that will be in focus in the coming days are India’s S&P global services PMI, forex reserves data, Euro zone S&P global composite PMI, UK Services PMI, Euro Zone Q2 GDP, US factory orders, S&P global US services PMI, crude oil prices, foreign and domestic investors’ activities will drive the market, according to analysts.
 

4 IPOs, 4 listings to hit D-Street:

In the coming week, four initial public offerings (IPO) await the bourses among main board and small-and-medium enterprises (SME) segment. These are as follows:

Ratnaveer Precision Engineering IPO: The mainboard IPO will open for subscription on Monday, September 4, and close on Wednesday, September 6.

Jupiter Life Line Hospitals IPO: The mainboard IPO will open for subscription on Wednesday, September 6, and close on Friday, September 8.

EMS Limited IPO: The mainboard IPO will open for subscription on Friday, September 8, and close on Tuesday, September 12.

Kahan Packaging IPO: The SME IPO will open for subscription on Wednesday, September 6, and close on Friday, September 8.

New Listings in the coming week:
-Vishnu Prakash R Punglia shares will get listed on stock exchanges BSE and NSE on Tuesday, September 5.
-Sahaj Fashions shares will get listed on the NSE SME platform on Wednesday, September 6.
-Mono Pharmacare shares will get listed on the NSE SME platform on Thursday, September 7.
-CPS Shapers: Shares of the SME IPO will get listed on the NSE SME platform on Friday, September 8

FII Inflow:

Foreign institutional investors (FIIs) started September on a positive note as domestic markets took cues from strong domestic macro data as India’s economic growth quickened to 7.8 per cent in the April-June quarter, which could likely boost foreign fund inflows.

Foreign inflows had moderated to a four-month low of ₹122.52 billion ($1.48 billion) in August.  The domestic institutional investors (DIIs) emerged as net buyers in August and extended their buying spree in the first session of September as well.

FIIs broke their buying streak of the last five months and cumulatively sold equities worth ₹20,621 crore in August. DIIs had an offsetting position and bought to the tune of ₹25,017 crore last month.

Foreign portfolio investors (FPIs) emerged net sellers in August with a muted performance on D-Street, compared to the earlier three months of sustained buying. FPIs bought ₹12,262 crore worth of Indian equities and infused a total of ₹18,338 crore as of August 31, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data.

In the cash market FPIs sold Indian stocks worth ₹20,620 crore so far this month. Strength in the US dollar index and the US 10-year bond yield remaining high are short-term negatives for FPI flows to emerging markets like India, according to analysts.

‘’If we look at the derivative data, then FIIs are starting the September series with 51 per cent long positions in index futures. The put-call ratio is at a 1.30 level. Overall, derivative data is indicating a neutral to positive bias,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.

Global Cues:

Markets are likely to react to the US nonfarm payroll and unemployment rate data which came after (Indian) market hours on Friday. US nonfarm payrolls rose 1,87,000 last month following a downwardly revised advance in July, the US Bureau of Labor Statistics reported on September 1. The nonfarm payrolls print came in above the Dow Jones estimate for 1,70,000.

However, wage growth slipped and the jobless or unemployment rate climbed to 3.8 per cent – the highest level since early 2022. More people entered the labor force from 3.5 per cent in July. It remains below the US central bank’s latest median estimate of 4.1 per cent by the fourth quarter of this year.

Separate US government data released last week showed that US Q2 GDP grew at 2.1 per cent compared to 2 per cent from Jan to March and is estimated to 2.4 per cent. Also, China’s manufacturing PMI shrunk for the fifth consecutive month in August to 49.7. Non-manufacturing PMI fell to 51 in August hitting another low for the year. 

‘’Lacklustre economic data from Europe contributed to the downturns in the domestic market last week, though domestically focused small and mid-caps remained resilient….Several weak economic indicators from the US, including softer labour market data, a moderated GDP figure, and US PCE inflation aligning with expectations, increased the likelihood of the Fed pausing its rate tightening,” said Geojit Financial’s Vinod Nair.

Investors and market analysts will keenly watch the US bond yields data and the strength of the dollar index as these will play a pivotal role in shaping market dynamics throughout the week.

FIIs and FPIs turned net sellers last month on the back of a stronger dollar and rising US bond yields. However, going forward, the latest jobs report from the US indicates that the world’s largest economy is slowing and the Fed might not raise rates again. 

This can bring down the US bond yields and the dollar index which can lead to the FPIs turning buyers in India again, according to market analysts.

‘’In the absence of any major event, the performance of the global markets, especially the US, will remain on the radar for cues. Though we have witnessed a decent rebound, we need a decisive close above 35,300 in the Dow Jones Industrial Average (DJIA) for any meaningful recovery,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.

On the global front, macroeconomic data, like the S&P global services PMI, US weekly jobless data, and US ISM services PMI, will provide insights into the Fed’s monetary policy outlook, according to analysts.

Oil Prices:

In the previous session, oil prices opened September by leaping to their highest in over half a year and snapped a two-week losing streak, buoyed by expectations of tightening supplies.

Brent crude settled up $1.66, or 1.9 per cent, at $88.49 a barrel. Earlier it gained to a session high of $88.75 a barrel, the highest since January 27. US West Texas Intermediate crude (WTI) had risen $1.39, roughly 1.7 per cent, to $85.02. It rose earlier to $85.81, the highest since November 16.

Brent rose about 4.8 per cent last week, the most it has increased in a week since late July. WTI advanced by 7.2 per cent in the week, its biggest weekly gain since March, according to Reuters.

Saudi Arabia will likely roll over the voluntary oil cut of 1 million barrels per day (bpd) for a third consecutive month into October amid uncertainty about supplies and as the kingdom targets pulling down global inventories further, according to analysts quoted in a report by Reuters.
 

Corporate Action:

Shares of several companies including IRCON International Ltd, RITES Ltd, Max Healthcare, Macrotech Developers among many others will trade ex-dividend in the coming week, starting from Monday, September 4. Check full list here

Additionally, shares of Vivanta Industries Ltd will trade ex-bonus on September 5. Shares of Shilchar Technologies will trade ex-bonus on September 6. Shares of JTL Industries will trade ex-bonus on September 7. Sunrise Efficient Marketing Ltd shares will trade ex-bonus on September 8.
 

Technical View:

Nifty has managed to hold 19,200 despite multiple attempts of breakdown in the last three weeks and that may help the bulls to reclaim the lost ground ahead. However, it is too early for analysts to say that the trend has reversed until the index decisively crosses and sustain 19,650 levels. There will be no shortage of trading opportunities, on selective buying across sectors and prevailing outperformance by the broader indices, as per analysts.

‘’Among the key indices, we suggest preferring auto, metal and IT for long trades while pharma and FMCG may continue to trade lackluster. Participants should align their positions accordingly and look for stocks that are showing relatively higher strength within the pack,” said Religare Brokings’ Ajit Mishra.

Rupak De, Senior Technical Analyst at LKP Securities observed that the index has moved above the 21EMA for the first time in several days, which suggests the potential for a bullish reversal. It has broken out of a falling channel, further indicating increasing bullish sentiment. 

‘’Looking at the higher end of the spectrum, there is now a resistance level at 19,530 points. If the Nifty manages to breach this resistance, it could signal a continuation of the uptrend. On the lower end, there is strong support at 19,340 points,” said De.

Technically, Nifty is trying to create a base around the 19,200 level, but it has to cross the 19,600 resistance level to resume its bullish momentum.

‘’The index had been experiencing a downtrend after reaching its all-time high in July, however, there was a positive turn in prices in the week ended September 1 due to increasing buying from domestic investors which bought around ₹9,570 crore in the cash segment,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

On the other hand, Bank Nifty closed the week with a 0.46 per cent gain, concluding above the previous week’s closing price. Analysts observed that the index seems to have established a strong demand zone as bulls regained strength and defended the range of 43,600-43,800.

‘’The next immediate hurdle for the index is positioned at 44,500. A successful breakout above this level is likely to trigger a fresh upward movement. The overall sentiment and undertone in the Bank Nifty Index remain bullish, as long as the mentioned support levels of 44,000-43,800 are held on a closing basis,” said Kunal Shah, Senior Technical & Derivative analyst at LKP Securities.

Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Updated: 03 Sep 2023, 06:14 AM IST