The Indian equity market exhibited volatility over the past week, ultimately closing marginally lower amid mixed signals. After a subdued start, the Nifty 50 index remained range-bound for most of the week, showing signs of fatigue. Selective buying in key heavyweights across sectors kept the sentiment positive.
In the first week of August, investors will keenly eye the upcoming Monetary Policy Committee (MPC) meeting by the Reserve Bank of India (RBI), the next set of April-June quarter results for fiscal 2024-25 (Q1FY25), Israel-Iran conflict, domestic and global macroeconomic indicators, foreign fund inflow, crude oil prices, and global cues.
Domestic equity benchmarks Sensex and Nifty 50 snapped an eight-week winning run, their longest in 14 years last week, dragged by information technology (IT) and auto stocks, after weaker-than-expected US data triggered a global sell-off.
Nifty 50 briefly surpassed the psychological 25,000 mark and peaked at 25,078.30, while Sensex reached 82,129.49 before relinquishing all gains to close the week at 24,717.70 and 80,981.95, down 0.47 per cent and 0.43 per cent, respectively.
The selloff on Friday led to profit booking, which erased the week's gains, was driven by weak global cues such as disappointing US economic data, including ISM manufacturing, jobless claims, and non-farm payrolls, raising concerns about a potential economic slowdown in the world's largest economy.
‘’Conversely, decreasing interest rates in the US could benefit emerging economies like India, as investors may seek higher returns elsewhere,'' said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
On Friday, the frontline indices logged losses for the first time in six sessions. A mixed trend in sectoral performance kept traders engaged, with energy and pharma edging higher, while realty and IT were among the top losers. The broader indices also traded lackluster, ending with marginal declines.
‘The Indian market is showing signs of fatigue at higher levels, as most positive factors have already been priced in. Subdued Q1FY25 earnings and stretched valuations are not reassuring investors,’' said Vinod Nair, Head of Research, Geojit Financial Services.
‘’The BoJ has resorted to a rate hike, impacting the Japanese market while the US Fed is contemplating a rate cut in September due to weak jobs data. The RBI may also follow suit in the future, but the recent uptick in CPI inflation is a concern. China is experiencing a slowdown in growth, necessitating additional policy measures to restore its economic momentum,'' said Nair.
‘’Going forward, the chances of further consolidation seem elevated due to premium valuations, weak Q1 results, and ongoing global market consolidation. The RBI policy meeting next week could provide some hints towards an outlook on rates, while expectations are to maintain the status quo as of now,'' he added.
Investors will be busy tracking primary markets this week as some major 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 corporate results, India's monetary policies, and macroeconomic data.
Overall, market analysts say that the domestic market's sentiment remains positive, however, weak global cues may lead to further declines. The performance of the banking index will be crucial for any significant recovery. Experts advise traders to remain stock selective, focusing on risk management.
Investors will be busy analyzing corporate earnings in the coming week as the next batch of Q1FY25 results are set to be released. Shares of State Bank of India (SBI), Titan Company, Delhivery, LIC Housing Finance, Britannia Industries, and few others are likely to react on August 5 as these companies announced their Q1FY25 results either on Friday post-market hours or on Saturday.
Starting from Monday, several major companies including Bharti Airtel, Bata India, Lupin, PFC, Tata Power, TVS Motor Company, Biocon, ABB India, MRF, RVNL, SAIL, Eicher Motors, CONCOR, Cochin Shipyard, Apollo Tyre, SJVN, Cummins India, among others will announce their Q1FY25 results this week.
‘’Sector-wise, metals have been affected by weak results and higher imports harming domestic industries. Capital goods and real estate have been impacted by profit-booking, while the auto sector has suffered due to below-expected monthly sales figures,'' said Geojit's Vinod Nair.
The central bank's rate-setting monetary policy panel will begin deliberations for the third policy verdict of the current fiscal 2024-25 this week. Headed by RBI Governor Shaktikanta Das, the six-member MPC will meet for three days - from August 6-8, and the decision will be announced on August 8 at 10 am by the RBI Governor.
The RBI has kept the repo rate unchanged at 6.5 per cent since February 2023. In the run-up to the MPC decision, market volatility may persist and rate-sensitive banking stocks will be in focus throughout the week.
D-Street analysts and economists broadly expect the central bank to continue its current stance to bring India's inflation near its target level, even though the US Federal Reserve has now given a dovish commentary and will likely cut interest rates in September.
Also Read: SBI Q1 Results: Board approves fundraising of up to ₹25,000 crore via tier-1,2 bonds in FY25
In the mainboard segment, two new issues are opening for subscription this week. Brainbees Solutions (Firstcry) IPO and Unicommerce eSolutions IPO will open for bidding on August 6. Among the ongoing issues, Ceigall India IPO will close for subscription on August 5 and Ola Electric IPO will close on August 6.
In the SME segment, Aesthetik Engineers IPO will open for subscription on August 8. Among the ongoing issues, Dhariwalcorp IPO will close for bidding on August 5, while Afcom Holdings IPO and Picture Post Studios IPO will close on August 6.
Among listings, shares of Akums Drugs and Pharmaceuticals IPO will debut on BSE, NSE on August 6. Shares of Ceigall India will get listed on BSE, NSE on August 8 and shares of Ola Electric will debut on August 9.
Additionally, on August 6, shares of Sathlokhar Synergys E&C Global, Bulkcorp, Rajputana Industries, and Ashapura Logistics will debut on NSE SME, while shares of Kizi Apparels IPO will get listed on BSE SME. Shares of Utssav Cz Gold Jewels will debut on BSE SME on August 7.
On August 8, shares of Dhariwalcorp will debut on NSE SME. On August 9, shares of Afcom Holdings will debut on BSE SME and shares of Picture Post Studios will get listed on NSE SME.
Foreign institutional investors (FIIs) sold ₹12,756.26 crore in the cash segment last week, while their monthly buying activity amounted to around ₹5,407.83 crore. Domestic institutional investors (DIIs) continued their buying streak, acquiring about ₹23,486 crore in the cash segment in July, with purchases of ₹17,226 crore in the cash segment this week alone.
Foreign portfolio investors (FPIs) began August on a sour note, snapping their two-month buying streak in Indian equities over global cues. FPIs were consistent buyers for June and July as stability had returned to Indian markets.
FPIs sold ₹1,027 crore worth of Indian equities, and the net investment stood at ₹2,448 crore as of August 3, 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 ₹3,641 crore so far in August.
"FIIs were net buyers in July in the cash market. Post budget, we saw some selling sprees…FII flows into India should increase due to several factors. Firstly, India's economy is performing better than many global peers, making it an attractive destination for investors,'' said Vaibhav Porwal, Co-founder, Dezerv.
‘’Secondly, with the risk-free rate expected to come down in the USA, investors will likely seek better returns elsewhere, including India. Thirdly, the government's robust fiscal discipline could lead to a rating upgrade for India, enhancing its investment appeal,'' added Porwal.
According to the analyst, valuations of large-cap stocks, where FIIs typically invest, are currently at reasonable levels. Lastly, uncertainties like elections and budget announcements are behind us, providing a more stable investment environment.
Analysts said the performance of the US markets following the recent sell-off will be closely watched. ‘’Globally, economic growth is showing signs of weakness, compounded by escalating trade tensions, conflicts in the Middle East, and persistently high inflation,'' said Geojit's Vinod Nair.
The market had already factored in a rate cut in the USA for September, but now fears of a slowdown are unsettling investors after weak economic data and poor guidance from most companies. Concurrently, both China and Europe are exhibiting signs of economic deceleration.
‘’Japan's rate hike has sparked concerns about the unwinding of the Yen carry trade. Consequently, we witnessed a sharp sell-off across global markets on Thursday and Friday. This week, all focus will be on the global markets as the first major signs of weakness are visible after a long period of stability,'' said Santosh Meena, Head of Research, Swastika Investmart Ltd.
The upcoming CPI and PPI data will be critical in assessing the state of the Chinese economy. Continued weak inflation figures could lead to additional monetary policy easing by the PBOC to stimulate growth and counteract economic challenges.
The US ISM Services PMI's anticipated rebound will be closely monitored as a key indicator of the service sector's health and overall economic performance. A return to expansionary territory would alleviate some concerns about an economic slowdown.
‘’The outlook for crude oil and gold will be influenced by global economic conditions and monetary policy expectations. Market sentiment and economic data releases will play a crucial role in driving future movements in these asset classes,'' said Alex Volkov, Market Analyst at VT Markets.
International oil prices dropped significantly in the previous session, settling at their lowest since January 2024. This came after official data showed the US economy added fewer jobs than expected last month, leading to recession worries among investors, and weak Chinese economic data added more pressure.
Brent crude futures settled down $2.71, or 3.41 per cent, to $76.81 a barrel. US West Texas Intermediate crude futures settled down $2.79, or 3.66 per cent, at $73.52. At their session lows, both benchmarks fell by more than $3 per barrel. On the multi-commodity exchange (MCX), crude oil futures plunged nearly five per cent and settled 4.75 per cent lower at ₹6,130 per barrel.
The coming week is brimming with corporate action as several major companies, including Britannia Industries, Eicher Motors, CEAT Ltd, Bharti Airtel, BPCL, Castrol India, Hindalco, among others, will trade ex-dividend starting Monday, August 5, 2024. Some companies have announced other corporate actions, such as share buybacks, bonus issues, and stock splits. Check full list here
Swastika Investmarts' Santosh Meena said that the signs of weakness in global markets will test the strength of the Indian market, which has remained resilient due to strong domestic liquidity and a better macroeconomic outlook despite global headwinds and valuation concerns. Geopolitical tensions are also escalating, but markets are not reacting significantly, which is reflected in the declining crude oil prices.
Analysts say that currently, weak global cues are weighing on sentiment, which could lead to further declines. ‘’A potential retest of the short-term moving average, the 20 DEMA, in the Nifty, which is currently around the 24,550 level, is possible. A decisive break of this level could place bulls on the back foot, with the next support at the 24,200 level,'' said Ajit Mishra – SVP, Research, Religare Broking Ltd.
‘’On the higher side, 25,100 will continue to act as a strong resistance. While various key sectors have contributed to the recent surge, the performance of the banking index will be crucial for any significant recovery. We recommend continuing a stock-specific trading approach amid mixed signals, with a focus on overnight risk management,'' added Mishra.
Santosh Meena added that on the technical charts, the 20-DMA of 24,600 serves as an immediate support level, while the 24,400-24,200 range forms a key demand zone. If the index falls below 24,200, there is a risk of significant profit booking in the market. On the upside, 25,000 remains a critical hurdle.
According to Arvinder Singh Nanda of Master Capital, the Nifty index has formed a negative candle, closing the week in the red, indicating a potential further downside move in the coming week after reaching a fresh all-time high.
‘The next support level is at 24,500, and if this level breaks, we could move towards 24,200. On the resistance side, 24,900 is the immediate level to watch, and if the index moves above this, we could see a rise towards 25,200. The market structure appears weak, suggesting a "sell on rise" approach for Monday,’' said Nanda.
Nanda also said that Bank Nifty has formed a negative candle, ending in red for four consecutive weeks. This consistent downward trend indicates pressure on heavyweight stocks. ‘’The support level is at 51,000, and if this is breached, we could see a decline towards 50,500. On the upside, resistance is at 51,600, and if surpassed, the index could move towards 52,000. Overall, the market sentiment remains weak with a sideways to the bearish outlook,'' said Nanda.
According to Meena, the Bank Nifty is struggling to cross its 20-DMA at the 52,000 level, while the 50-DMA at 51,000 is providing immediate support. The next support level is at 50,500; falling below this could signal further weakness. Conversely, a move above the 20-DMA could trigger substantial short-covering.
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.
