Week Ahead: Inflation data, IPO frenzy, crude oil prices, global cues among key market triggers for Nifty 50, Sensex

Indian stock market benchmarks witnessed a surprising decline last week after consolidating at all-time highs for 14 straight sessions dragged by weak global cues. In the second week of September, investors will closely monitor key triggers such as domestic and global macroeconomic data, including inflation in India and the US, foreign fund inflows, crude oil prices, and other global cues.

Domestic equity benchmarks Sensex and Nifty 50 dropped 1.5 per cent last week, snapping a three-week winning streak and easing off record highs hit last Monday. Weak global cues largely impacted the market after the latest US economic data raised fears that the US Fed has perhaps waited too long to lower rates.

The US economic data reignited concerns about a potential recession in the world's largest economy. Despite attempts by the benchmark indices to hold a positive tone for most of the week, a significant decline on Friday shifted the momentum.

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Initially, both indices touched fresh record highs, with the Nifty 50 reaching 25,333.65 and the Sensex hitting 82,725.28. However, by the end of the week, the Nifty 50 dropped by 1.52 per cent to close at 24,852.15, while the Sensex declined by 1.43 per cent, finishing at 81,183.19, near their weekly lows.

On the weekly front, the BSE benchmark dropped 1,181.84 points or 1.43 per cent, while the Nifty declined 383.75 points or 1.52 per cent. Sector-wise, energy, metals, and autos were the biggest losers, reflecting the broader market's pressure. The midcap index also lost over one per cent, while the smallcap index remained relatively flat, showing a mixed performance in the broader indices.

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Worries over a slowdown in the US labour market re-emerged after data showed soft job openings overall and fewer job gains in the private sector, raising expectations of a 50-basis-point rate cut this month.

For the week, state-owned banks, energy, metal and auto stocks were among the top sectoral losers by percentage, dropping between 2.5 per cent and five per cent. The India Volatility Index (VIX), which measures the market's expected volatility, rose this week, closing at (+13.63 per cent) 15.21 level. 

‘’Sharp selling was witnessed as indices were trading in overbought territory, and a rebound in US dollar rates caused a sell-off in the market. Potential regulator changes to raise entry barriers and increase trading costs to curb retail speculation on risky contracts dampened the spirits of investors,'' said Palka Arora Chopra, Director of Master Capital Services Ltd.

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India's weight in the MSCI Emerging Markets index has surpassed China’s, reaching its highest level. This raises the risk of a strategic reduction in weight allocation, especially given India's relatively high valuations.

"Due to lack of new market catalysts and elevated valuations, this muted trend is expected to remain in the short term. Q1 GDP growth has moderated, and corporate earnings have witnessed similar trends. Also, August Indian PMI readings were marginally below July numbers, indicating that caution is in the air,'' said Vinod Nair, Head of Research, Geojit Financial Services.

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Primary markets will witness intense action 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.

Overall, D-Street experts say the Nifty 50's latest decline disrupts the market's sentiment due to a lack of fresh triggers. Defensive stocks like FMCG and pharma are expected to show resilience during the correction. Experts advise traders to average down on loss-making trades during this uncertain phase.

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

Domestic macroeconomic data

On the domestic front, investors will watch key economic indicators, with the release of India's Index of Industrial Production (IIP) and Consumer Price Index (CPI) on September 12. These data points will provide important cues for the market's trajectory, especially amid concerns about global economic headwinds.

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13 new IPOs, 8 listings to hit D-Street

In the mainboard segment, Bajaj Housing Finance IPO, Tolins Tyres IPO, Kross IPO, and P N Gadgil Jewellers IPO will open for subscription this week. Among the ongoing issues, Shree Tirupati Balajee Agro IPO will close on September 9. In the SME segment, nine new issues will open for subscription, while three ongoing issues will close their bidding window. 

Among listings, shares of Gala Precision Engineering and Shree Tirupati Balajee Agro will debut on stock exchanges BSE, NSE. Among SMEs, six new companies will debut on either BSE SME or NSE SME.
 

FII Activity

On the domestic front, foreign institutional investors (FIIs) were net buyers this week, infusing ₹2,430.48 crore into the cash segment. Domestic institutional investors (DIIs) also continued their buying momentum, adding ₹7,442.19 crore to their holdings.

Foreign portfolio investors (FPIs) made a remarkable comeback to Indian markets in September, snapping their three-month moderation, driven by domestic and global factors. FPIs were consistent buyers in June and July after election-related jitters faded and stability returned to Indian markets. 

FPIs invested ₹10,978 crore worth of Indian equities, and the net investment stood at ₹19,087 crore as of September 6, taking into account debt, hybrid, debt-VRR, and equities. The total investment in debt markets moderated to ₹94 crore so far this month.

"SEBI's deadline over FII's disclosure norm created panic among the market participants, leading to a sharp sell-off in the Indian market. This is not expected to impact FII's long-term stance on India,'' said Vinod Nair of Geojit.

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Global Cues

Global market developments will be closely watched, focusing on the US. Traders and investors will initially react to weaker-than-expected US job data, which has reignited discussions about the size of the US Federal Reserve's anticipated interest rate cut.

‘’While markets have largely priced in a 25-basis point rate cut, any adjustment beyond that could provide a positive surprise in the short term,'' said Ajit Mishra – SVP, Research, Religare Broking Ltd.

Additional crucial data, including the US inflation report on September 11 and the Producer Price Index (PPI) on September 14, will offer further insight into the Fed's potential monetary policy moves.

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In the US, the economy added 142,000 jobs in August, an improvement from the revised 89,000 in July but falling short of the market's expectation of 160,000. The manufacturing PMI remained in contraction for the fifth consecutive month. 

"These underwhelming economic indicators are heightening recession fears while increasing the likelihood of US rate cuts by around 50 bps,'' said Palka Arora Chopra of Master Capital Services.

Investors will closely watch the rupee's movement against the US dollar and crude oil prices. Geopolitical developments and shifts in crude oil prices will influence market trends in the coming weeks.

"Globally, the signals were mixed, while the much-anticipated Fed rate cut in September is already factored in. However, warning signals from weak US manufacturing data added concerns regarding a potential slowdown in the US economy. The continuous decline in oil prices to a 14-month low and weak job opening data adds to the fears. Week ahead, US non-farm payroll and US inflation data will be closely monitored,'' said Vinod Nair of Geojit.
 

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Oil Prices

International crude oil prices witnessed a historic crash last week after concerns of an oversupply spooked investors over a possible resolution of the Libyan oil dispute. This compelled the Organisation of Petroleum Exporting Countries and its allies (OPEC+) to pause its planned oil output hike for two months after benchmark Brent crude crashed to a 14-month low. 

OPEC nations will not proceed with the scheduled hike of 180,000 barrels per day (bpd) in October. Crude oil prices settled two per cent lower in the previous session, with a big weekly loss on mixed US jobs data This outweighed price support from a delay to supply increases by OPEC+.

Brent crude futures were last down $1.63, or 2.24 per cent, to $71.06 a barrel, their lowest level since December 2021. US West Texas Intermediate crude futures fell $1.48, or 2.14 per cent, to $67.67, their lowest since June 2023. 

For the week, Brent declined 10 per cent, while US WTI dropped around eight per cent. Oil prices have been on a broader downtrend and crashed nearly 20 per cent in the last 12 months due to a demand-supply imbalance in the market.
 

Corporate Action

A slew of corporate actions are lined up this week as shares of several companies will trade ex-dividend, ex-bonus, and ex-split. Vedanta, Gujarat Gas, Glenmark Pharmaceuticals Ltd, Indraprastha Gas Ltd, General Insurance Corporation of India, among several others will trade ex-dividend this week. Check full list here

Technical View

Technically, the recent decline in Nifty has disrupted the index's upward momentum, pushing it below its short-term 20-day exponential moving average (DEMA). ‘’The next significant support level is around 24,500, aligned with the 50 DEMA. In the event of a recovery, the 25,100-25,350 range is likely to serve as a strong resistance zone,'' said Religare Brokings' Ajit Mishra.

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Sectorally, defensive stocks like FMCG and pharma are expected to show resilience during this correction. In contrast, other sectors, especially PSU stocks, may face continued selling pressure as they exhibit signs of a breakdown from a distribution pattern. Traders are advised to manage their positions carefully on both the long and short sides and avoid averaging down on loss-making trades during this uncertain phase.

According to Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd, Nifty shows early signs of weakness, with a bearish engulfing candlestick pattern forming on the weekly chart. The index closed just above its 20-DMA at 24,850. If it slips below this level, we could see further downside toward the 24,000 mark, with intermediate support in the 24,600-24,450 zone. On the upside, the 25,000-25,200 range now acts as an immediate resistance zone.

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‘’The breakdown of an inverse flag formation signals a potential downside for Bank Nifty. The immediate support lies at the 100-DMA of 50,200, with the next key level at 49,650.  A break below 49,600 could push the index toward its 200-DMA around the 48,600 level. On the upside, the 51,200-51,500 range will act as a key resistance zone,'' added Gour.

According to Palka Arora Chopra of Master Capital Services, Bank Nifty closed below 50,800 after three consecutive positive weekly candles, reflecting strong selling pressure, particularly in PSU banks. The next key support is at 50,500; a breakdown could drive the index down to 49,800. On the upside, sustaining above 51,200 may increase buying momentum toward 51,800.

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.