Week Ahead: FII inflows, F&O expiry, global cues among key market triggers as Nifty 50 approaches 26K

The Indian stock market registered an exceptional week, achieving historic record highs largely driven by a 50-basis-point (bps) rate cut by the US Federal Reserve, showing no significant concerns about the US economy. In the last week of September, investors will closely monitor key market triggers such as domestic and global macroeconomic data, monthly derivates expiry, foreign fund inflows, crude oil prices, and other global cues.

Domestic equity benchmarks Nifty 50 and Sensex continued their upward momentum for the second consecutive week, hitting all-time highs of 25,849.25 and 84,694.46, respectively. Bulls took control of markets, and the rally was supported by the US Fed's supersized rate cut, its first policy reduction in four years. This whetted investor risk appetite across global markets.

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The 50-basis-points rate cut on Wednesday and data showing smaller-than-expected weekly jobless claims on Thursday sparked hopes of the US economy achieving a soft landing. In this scenario, inflation cools without triggering a recession. Historically, rate cuts in the US have positively impacted emerging markets, with India being a favoured bet among global investors.

Throughout most of the week, the indices traded within a limited range, but a strong rally on Friday helped Nifty and Sensex close at record highs, reaching 25,790.90 and 84,544.31, respectively. The rally was primarily driven by positive sentiment in global markets following the US Fed's decision.

For the week, the NSE Nifty 50 and the 30-share BSE Sensex gained 1.7 per cent and two per cent, respectively, logging their fifth week of gains in six. Among sectoral indices, the construction or realty sector emerged as the top performer, followed by banking and financials, while the pharmaceutical sector ended the week in negative territory. Interestingly, the usually strong IT index underperformed, ending the week with a 2.75 per cent decline. 

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“The apprehension of a slowdown in growth was eased slightly after the lower-than-expected US jobless claim. The data pointed to a soft landing of the US economy at the start of the rate cut cycle. However, the IT index failed to rebound, mainly due to layoffs and the depreciation of USD. Strong monsoon and festive demand cheer the auto index with an outperformance,” said Vinod Nair, Head of Research, Geojit Financial Services

“We have seen a sectorial rotation among investors to large caps, especially in consumption, staples, auto, finance, and realty. In the short term, investors are being cautious about export-oriented sectors like pharma and IT due to depreciation in the dollar,” added Nair.

Bank Nifty, which had lagged, took the lead, gaining 3.5 per cent and finally reaching its all-time high. The broader market indices underperformed, with the domestically focused midcap index posting marginal gains and the smallcap index falling by nearly one per cent.

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"The market displayed clear signs of sector rotation as investors shifted focus to sectors with renewed momentum. As we approach the September F&O expiry, heightened volatility is likely, making it essential for traders to stay vigilant and adapt to market fluctuations," said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Primary markets will create a buzz among investors this week as several new initial public offerings (IPO) and important 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.

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

Macro Data

Market participants will closely track upcoming macroeconomic data releases, including the HSBC Composite PMI Flash, HSBC Manufacturing PMI Flash, and HSBC Services PMI Flash. These indicators will provide insights into the country's economic health and could influence market sentiment. Investors will also monitor trends in foreign fund flows and crude oil price movements, which may impact market direction in the coming week.

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11 new IPOs, 14 listings to hit D-Street

In the mainboard segment, two new issues - Manba Finance IPO and KRN Heat Exchanger IPO will open for subscription this week. In the SME segment, nine new issues will open for bidding between Sept 23-27.

Additionally, shares of Western Carriers (India), Arkade Developers, and Northern Arc Capital will debut on the BSE and NSE this week. Also, shares of 11 companies will be listed on either the BSE SME or the NSE SME.
 

FII Activity

The week's highlight was the aggressive buying by Foreign Institutional Investors (FIIs), who poured in ₹14,000 crore on Friday alone. However, approximately ₹8,000 crore of this was attributed to FTSE rebalancing.

Also Read: FPIs turn aggressive buyers on US Fed verdict, pump ₹33,691 crore in Indian equities; Sept to log highest inflows YTD

On the domestic front, strong foreign inflows further bolstered market sentiment. FIIs were net buyers, injecting ₹11,517.92 crore into the cash segment. Conversely, domestic institutional investors (DIIs) turned net sellers, offloading ₹633.67 crore in the cash segment.

Foreign portfolio investors (FPIs) turned aggressive buyers in September, boosted by the latest supersized 50 bps interest rate cut by the US Federal Reserve. FPIs invested ₹33,691 crore worth of Indian equities, and the net investment stood at ₹63,000 crore as of September 20, taking into account debt, hybrid, debt-VRR, and equities.

This month, the total investment in debt markets is ₹7,361 crore. Regarding equities, September is on track to log the highest FPI inflows year-to-date (YTD), while the total investment is already at a nine-month high.
 

Global Cues

Although the major event of the US Fed’s rate cut is behind us, attention will remain on the US markets for further direction. The US Federal Reserve's move to cut interest rates by half a percentage point, its first reduction in over four years, provided a significant boost to markets. 

Though the global economy went through a rate-cut cycle, the Bank of England (BoE) stuck to a cautious tone and kept the rate unchanged, citing inflation pressure. On the other hand, the Bank of Japan (BoJ) kept its rate unchanged as expected, as the central bank adopted a wait-and-watch approach after raising the interest rate in July.

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According to analysts, no major triggers are expected this week, but upcoming macroeconomic data from the US will be crucial to monitor. While currently, markets seem unfazed by geopolitical risks, these factors could significantly threaten the ongoing bullish momentum.

The Dow Jones Industrial Average (DJIA) surged to a new record high, approaching the upper boundary of its rising channel at 42,300.  “A decisive breakout above this level could trigger fresh momentum and drive further gains. However, if the index fails to break through this resistance, some consolidation may occur in the near term,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.
 

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Oil Prices

International crude oil prices settled lower in the previous session yet registered a second straight weekly gain, garnering support from the supersized 50 bps interest rate cut by the US Federal Reserve and a dip in US supply. Signs of a slowing economy in top commodity consumer China gave prices a ceiling.

Brent futures settled down 39 cents, or 0.52 per cent, at $74.49 a barrel. US WTI crude futures settled down three cents, or 0.4 per cent, to $71.92. Prices have recovered after Brent fell below $69 for the first time in nearly three years on September 10. But for the week, both benchmarks settled up more than four per cent. Back home, crude oil futures settled 0.22 per cent higher at ₹5,976 per barrel on the multi-commodity exchange (MCX).
 

Corporate Action

In the last week of September, shares of several major companies, including Bajaj Healthcare Ltd, Bharat Dynamics Ltd, Ceigall India Ltd, Cochin Shipyard Ltd, Rail Vikas Nigam Ltd, among others will trade ex-dividend. Shares of some companies will also trade ex-bonus and ex-split this week. Check full list here

Technical View

Ajit Mishra of Religare Broking Ltd said, “The Nifty 50 is approaching a significant milestone at 26,000, potentially extending its rally to 26,500. This extension will depend on continued strength in banking and financial heavyweights, leading the market's upward trajectory. Traders are advised to adopt a 'buy on dips' strategy, with key support expected in the 25,150-25,350 zone."

"Apart from banking and financials, the auto and realty sectors also present opportunities for fresh long positions and pick selectively from other sectors. However, given their recent underperformance, traders should also exercise caution in the midcap and smallcap segments," added Mishra.

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Nifty Bank Index reached a fresh all-time high of 54,066.10, forming a strong bullish candle on the weekly charts and closing above previous highs. This signals fresh momentum, primarily driven by private-sector banks. 

“The index will likely continue its upward trajectory toward 55,000, with minor resistance at 54,300. On the downside, immediate support is at 53,200, and a breakdown below this level could push the index toward 52,500,” said Palka Arora Chopra of Master Capital Services Ltd.

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.