Week Ahead: Auto sales, IPO action, FII activity, global cues among key market triggers this week

Indian stock markets shattered previous records, closing August on a historic high, buoyed by a strong global market trend and renewed foreign fund inflows as expectations for a US rate cut gained traction. As markets step into the new month, investors will closely monitor key triggers such as domestic and global macroeconomic data, monthly auto sales figures, foreign fund inflows, crude oil prices, and other global cues.

Domestic equity benchmarks extended their winning streak for the third consecutive week, reaching fresh record highs driven by positive market sentiment. Although August began with uncertainty, it ended on a strong note, with the primary catalyst being the growing anticipation of a US Fed rate cut.

Last week, benchmark indices kicked off with solid gains, supported by favourable global trends. However, a mixed performance among heavyweight stocks led to some mid-week consolidation. Optimism returned in the final sessions, pushing the Nifty and Sensex up by nearly 1.5% each.

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Extending its rally for the ninth consecutive session, the 30-share BSE Sensex climbed 231.16 points, or 0.28%, to close at an all-time high of 82,365.77. During the final session, it surged 502.42 points, or 0.61%, reaching a record intra-day peak of 82,637.03.

In its best winning streak since its launch in 1996, the NSE Nifty 50 rose 83.95 points or 0.33% to hit a new lifetime closing high of 25,235.90. This took its victorious run to the 12th consecutive session on Friday, its longest-ever rally —a streak not seen in 31 years. During the final session on Friday, it surged 116.4 points or 0.46% to hit a new record intra-day peak of 25,268.35.

On the last trading day of the month, Nifty 50 closed well above the 25,000 mark for the first time as both frontline indices notched their fresh closing highs. On the weekly front, the BSE benchmark jumped 1,279.56 points or 1.57%, and the Nifty soared 412.75 points or 1.66%. The indices rose about one per cent over August, notching their third straight weekly and monthly gain. 

In nine days of rally, the BSE benchmark surged 1,941.09 points or 2.41%. The Nifty zoomed 1,096.9 points or 4.54% in 12 sessions. Year-to-date, the Nifty 50 is up 16%, while the Sensex has gained 14%. The broader indices also mostly aligned with the benchmarks, gaining over one per cent each.

The biggest effect of an imminent US rate cut was on IT and pharma companies, which gained 4.74% and 6.61%, respectively, in August. Both sectors rely on the US for a significant share of revenue. All the major sectoral indices, except for FMCG, participated in the rally, with IT leading the way, followed by realty and pharma. 

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"Despite a lack of fresh triggers in the domestic economy, the market has showcased a broad-based recovery and breached a new high, driven by domestic inflows and renewed sentiment on the US Fed rate cut in the September meeting,'' said Vinod Nair, Head of Research, Geojit Financial Services.

Consolidation in the US 10-year yield and outperformance in the IT index by four per cent this week pointed to the possibility of higher spending, which is likely to increase the prospects of an earnings upgrade. 

‘’A positive shift in foreign investors' stance towards the domestic market will keep the overall sentiment positive. The progressing monsoon season and increasing reservoir capacity will brighten the prospects of the rural economy and increase discretionary spending,'' added Nair.

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This week, primary markets will witness intense action as some new initial public offerings (IPO) and listings are slated across the mainboard and small and medium enterprises (SME) segments. The week will be critical from the domestic and technical point of view as investors will track global markets and macroeconomic data.

Overall, D-Street experts say the market's sentiment remains positive on improved global cues following Powell's bold rate cut indications. However, sustained participation from the banking sector is needed for Nifty 50 to breach the 25,500 mark. Experts advise traders to remain stock selective and ‘buy on dips’.

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

Macro data, Auto sales

Macroeconomic data such as HSBC India Services PMI (August), HSBC India Manufacturing PMI (August) will be released this week. Auto stocks will also be in focus over the release of the monthly auto sales numbers for August.

5 new IPOs, 10 listings to hit D-Street

In the mainboard segment, Gala Precision Engineering IPO will open for subscription on 2 September. Among the ongoing ones, Baazar Style Retail IPO will close on 3 September. From the SME segment, Jeyyam Global Foods IPO, Mach Conferences and Events IPO, Namo eWaste Management IPO, and My Mudra Fincorp IPO will open for bidding in the coming week.

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Among listings, shares of Premier Energies, ECOS (India) Mobility & Hospitality, and Baazar Style Retail will get listed on BSE, NSE this week. Additionally, shares of Indian Phosphate, Jay Bee Laminations, Vdeal System, Paramatrix Technologies, Aeron Composite, Travels & Rentals, and Boss Packaging Solutions will debut on either BSE SME or NSE SME this week.

FII Activity

Foreign institutional investors (FIIs) were net buyers this week, pumping worth ₹9,217 crore in Indian equities. Domestic Institutional Investors (DIIs) also continued their buying spree, adding ₹1,197.42 crore to their holdings in the cash segment.

"Institutional flows will play a critical role, and if FIIs continue their buying spree, we could see largecap stocks outperforming. However, the market is also witnessing a series of block deals, which are absorbing some of the domestic liquidity,'' said Santosh Meena, Head of Research, Swastika Investmart Ltd.

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Foreign portfolio investors (FPIs) continued their three-month streak in Indian equities, but inflows moderated in August, driven by domestic and global factors. FPIs invested ₹7,320 crore worth of Indian equities, and the net investment stood at ₹25,493 crore as of 30 August, considering debt, hybrid, debt-VRR, and equities. 

The high valuation of the Indian stock market, US Fed rate cuts, and the shift to debt instruments are among the key factors behind the sell-off. The total investment in debt markets stood at ₹17,960 crore in August.

Global Cues

The US market closed the week at (+0.94%) 41,563, led by strong consumer spending and a sharp rise in durable goods orders. The US economy grew by three per cent in the second quarter. The US core PCE price index, the Federal Reserve’s preferred measure for underlying inflation, increased by 0.2% in July, in line with expectations. 

This reinforces the belief that the US Fed may be poised to begin cutting rates. The Euro CPI came at 2.2%, boosting rate-cut opportunities in the near term. US Jobless claims ticked down by 2,000 to 231,000 for the week.

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The next US Fed meeting is scheduled for mid-September, but before that, the market will closely watch upcoming US economic data. Key indicators like manufacturing PMI, non-farm payroll, and unemployment claims will be released next week, which could significantly influence market sentiment. 

PMI data from China and speculation around potential economic stimulus measures will likely keep the commodity space in focus. Beyond these factors, geopolitical developments and the movement of crude oil prices will be other important variables that could sway market trends in the coming weeks.

Oil Prices

International crude oil prices retreated in the previous session as investors weighed expectations of a rise in supply by the Organization of the Petroleum Exporting Countries and allies (OPEC+) starting in October, along with dwindling hopes of a hefty US interest rate cut next month, following data showing strong consumer spending and economic growth.

Brent crude futures for October delivery, which expired on Friday, settled $1.14 lower, or 1.43%, at $78.80 a barrel, marking a decline of 0.3% for the week and 2.4 per cent for the month. US West Texas Intermediate crude futures settled down $2.36, or 3.11 per cent, to $73.55, a drop of 1.7% in the week and a 3.6% decline in August.

Corporate Action

Corporate action will buzz as shares of several major companies and state-owned majors are trading ex-dividend in the coming week starting Monday, 2 September. IRCON International, Karnataka Bank, Shipping Corporation of India, Metro Brands, and Senco Gold, among others, will trade ex-dividends in the coming week. Check full list here

Technical View

According to Ajit Mishra – SVP, Research, Religare Broking Ltd, ‘’Although the market has been on a steady upward trend, momentum has been somewhat lacking, largely due to the underperformance of major banking stocks, which carry substantial weight in the benchmark.'' 

‘’If we see improved participation from the banking sector, Nifty could break past the 25,500 mark and move toward a new milestone of 26,000. We thus suggest continuing with a buy-on-dips approach, with the support zone for Nifty now set at 24,750-25,000. In terms of sectors, while IT still shows promise, traders should concentrate on financials and realty for long trades next week and remain selective with other sectors,'' added Mishra.

Technically, the Nifty has entered a fresh expansion phase after surpassing the psychological barrier of 25,000. ‘’The next target levels to watch are 25,281, 25,600, and 25,921. The zone between 25,000 and 24,850 has become an immediate and strong demand area, while the 20-DMA support is positioned at the 24,600 level,'' said Santosh Meena of Swastika Investmart.

‘’In contrast, the Bank Nifty continues to underperform and needs to break above its 50-DMA at 51,550 to gain momentum. A significant short-covering rally could push it towards the 52,000–52,300 zone if it crosses this key level. On the downside, 50,950 serves as immediate support, with 50,000 being a crucial support level,'' added Meena.

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