Week Ahead: FOMC minutes, macro data, Powell’s Jackson Hole speech, FII activity among key market triggers this week

Indian stock markets rebounded by the end of last week after caution due to the Hindenburg-Adani row and poor factory output data slid the indices into a consolidation phase. Week ahead, investors will eye upcoming domestic and global macroeconomic data, US Federal minutes of the meeting, Fed chief's Jackson Hole speech, foreign fund inflow, crude oil prices, and global cues.

Previously, domestic equity benchmarks Sensex and Nifty 50 experienced volatility as the week began on a subdued note, influenced by mixed signals, and pressure on select heavyweight stocks midweek turned the sentiment negative. 

‘’Throughout the week, the market was under pressure, driven by a "sell on rally" structure due to concerns raised by the Hindenburg report, high valuations, and some disappointing earnings,'' said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Also Read: Q1FY25 Review: Nifty 50 delivers first single-digit EBITDA growth in four years; Auto, banks lead the pack

However, a sharp recovery in the previous session shifted momentum back in favor of the bulls, allowing the benchmark indices to close near the week's highs. Friday's rally reversed all the week's losses, with both the Nifty and Sensex closing with gains of around one per cent.

The frontline indices reversed their downward trend this week, ending a two-week losing streak with the Nifty 50 advancing 0.71 per cent, while the Sensex gained 0.91 per cent, closing at 24,541.15 and 80,436.84, respectively. The NSE benchmark recorded its best session since July 26, while Sensex logged the biggest single-day gain in over two months.

Among the key sectoral indices, IT saw significant gains, followed by realty and auto, while energy and metal sectors ended in the red. The broader indices also managed to recover losses, with the midcap index gaining nearly a per cent and the smallcap index finishing almost flat. The IT index outperformed by five per cent during the week in expectation of a loose monetary policy from the US Fed.

‘’The Q1FY25 results are concluded, which is largely in line with expectations with single-digit PAT growth. However, the weak performance by oil and cement companies may cause a cut in the FY25 Nifty EPS estimate...Investors are advised to remain cautious in the short to medium term. The focus will be on value stocks in sectors like FMCG, IT, pharma, and telecom,'' said Vinod Nair, Head of Research, Geojit Financial Services.

Also Read: Independence Day 2024 | FPIs pumped ₹64,824 crore in Indian equities over 12 months: 5 key reasons behind inflows

Primary markets will remain buzzing this week 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, industry announcements, and macroeconomic data.

Overall, D-Street experts say that the domestic market's sentiment remains positive after breaking out of the consolidation phase. They expect the upward momentum to continue with the Nifty 50 looking to reclaim the 25,000-mark powered by bulls. Experts advise traders to remain stock selective and ‘buying on dips’

 

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

Macro data

Domestically, market participants will be watching institutional flows and upcoming economic data, such as the HSBC India manufacturing PMI and HSBC India Services PMI, for direction. Infrastructure projects or industry-related announcements may induce stock-specific action.

7 new IPOs, 5 listings to hit D-Street

Two new IPOs will open for subscription in the mainboard segment this week - Interarch Building Products IPO and Orient Technologies IPO. In the SME segment, five new issues will open this week - Brace Port Logistics IPO, Forcas Studio IPO, QVC Exports IPO, Ideal Technoplast Industries IPO, and Resourceful Automobile IPO.

Among listings, shares of Saraswati Saree Depot will debut this week on BSE, NSE, while shares of Solve Plastic Products, Broach Lifecare Hospital, Sunlite Recycling Industries, and Positron Energy will get listed on BSE SME or NSE SME.

 Also Read: Interarch Building Products IPO: Steel major mobilises ₹179 crore from anchor investors ahead of subscription
 

FII Activity

Foreign institutional investors (FIIs) were net sellers, offloading ₹8,616 crore in the cash segment last week. Meanwhile, domestic institutional investors (DIIs) maintained their buying momentum, acquiring ₹10,560 crore in the cash segment. 

FIIs turned net sellers in index futures last week. However, Friday's trading session saw significant short-covering, bringing their long-short ratio to an even 50-50.

Foreign portfolio investors (FPIs) snapped their two-month buying streak in Indian equities and turned net sellers in August, driven by domestic and global factors. However, they were consistent buyers in June and July as stability returned to Indian markets. However, FPIs halted their buying streak with the onset of the new fiscal year 2024-25 (FY25).

FPIs sold ₹21,201 crore worth of Indian equities, and the net outflows stood at ₹9,653 crore as of August 16, taking into account debt, hybrid, debt-VRR, and equities, according to the National Securities Depository Ltd (NSDL) data. The total investment in debt markets stood at ₹9,112 crore so far in August.

 Also Read: US Federal Reserve ‘must go big with 50 bps interest rate cut in September’ or risk recession: Experts
 

Global Cues 

Global cues were strong last week. Investors will again shift their attention to global markets for cues, particularly in light of the notable recovery in US markets, which has eased recession fears in the world's largest economy.

‘’The US growth outlook remains a key risk to monitor. Cash would be most at risk from a Fed rate-cutting cycle. The ideal scenario is to lock opportunities in bonds to earn income over a longer period. Gold stands to benefit from reducing interest rates and bond yields,'' said Raj Patel, CMO, MintCFD, a multi - asset trading platform.

Important global economic data, such as Japan's inflation numbers and the minutes from the US Federal Open Market Committee (FOMC) meeting, will be closely watched. The uncertain geopolitical situation remains the primary near-term risk for the market. Traders will also closely monitor institutional flows and crude oil price movements.

‘’The fear of a reversal in the yen carry trade has eased, and robust retail sales figures, along with better-than-expected job data, have reduced concerns about a potential US recession. The market is now fully pricing in a 25 basis point rate cut by the US Federal Reserve in September, further boosting investor confidence,'' said Swastika Investmarts' Santosh Meena.

Analysts said that the global market sparkled due to better US retail sales data and the decline in weekly jobless claims. Further, the moderation in US CPI inflation and drop in US 10-year yield helped the truncated week to close on a positive note.

‘’The week ahead, the market will keenly watch the Fed chair Jerome Powell's speech in Jackson Hole and FOMC minutes; an ease in economic slowdown may influence the chair to add more light on rates trajectory. Sentiment improvements in Yen carry trade is likely to reduce the market volatility in the near term,'' said Geojit's Vinod Nair.
 

Oil Prices

International crude oil prices settled down nearly two per cent in the previous session, with Brent crude below $80 a barrel, as investors tempered expectations of demand growth from top oil importer China. Crude oil prices were little changed on the week after Wall Street lifted US Fed's interest rate cut bets.

Brent crude futures fell $1.36, or 1.7 per cent, to settle at $79.68 per barrel. US West Texas Intermediate crude futures declined by $1.51, or 1.9 per cent, to $76.65. Last week, Brent crude ended at $79.66 a barrel, and WTI closed at $76.84. Regarding domestic prices, crude oil futures settled 0.6 per cent lower at ₹6,448 per barrel on the multi-commodity exchange (MCX).

Corporate Action

The coming week is filled with a slew of corporate actions as several blue-chip firms and public-sector undertakings (PSU) are trading ex-dividend starting from Monday, August 19. Reliance Industries, IRCTC, ABB India, LIC Housing Finance, IRCTC, Dr Lal Pathlabs, IRFC, Jindal Steel & Power Ltd, Hindustan Aeronautics Ltd (HAL), Pfizer Ltd, Oil and Natural Gas Corp (ONGC), among others are trading ex-dividend next week. Some companies have announced other corporate actions, such as share buybacks, bonus issues, and stock splits. Check full list here
 

Technical View

D-Street experts say the Nifty 50 has broken out of its consolidation phase and reclaimed its short-term moving average, the 20-day EMA, buoyed by the sharp rebound in global indices. 

‘’It appears poised to fill the gap around 24,700 before potentially moving towards its record high i.e. 25,078. In the event of a dip, the 24,300-24,400 zone is expected to provide immediate cushion, with major support still intact at 24,000, near the 50- day EMA,'' said Ajit Mishra – SVP, Research, Religare Broking Ltd.

‘’Given the selective participation in the market, the focus should remain on stock selection, with a preference for IT, FMCG, and select private banking majors while being selective in other sectors,'' added Mishra.

Santosh Meena of Swastika Investmart agreed. ‘’On the technical charts, Nifty has finally broken out of the consolidation range between the 50-DMA and 20-DMA, closing above the 20-DMA. This breakout could lead to further bullish momentum, with the 24,800-25,000 zone as a key resistance area.''

Palka Arora Chopra, Director of Master Capital Services Ltd recommends a buy on-dip strategy. ‘’The Nifty 50 index has been consolidating since August 5 but broke out of its range on Friday, and gave breakout of rising channel on the daily charts. The weekly candle is strong and bullish, indicating that the upward momentum is likely to continue into the coming week. With the index now above 24,600, it could potentially move towards 24,800,'' she said

The Nifty Bank index has reversed from its low of 49,642, forming a double bottom pattern on the daily charts, which provides strong support. A doji candle has formed on the weekly charts, indicating indecision and potential for upward movement. 

‘’A breakout above 50,800 could push the index higher toward 51,300. Strong support is established at 50,200; a breach below this level might lead to a decline toward 49,700. Overall, the market sentiment remains bullish, favouring a buy-on-dips strategy,'' added Chopra.

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. '