After a difficult weak of bloodbath on D-Street, investors will shift their focus to global cues and central banks around the world in the coming week for anticipated rate cut timelines. Several triggers such foreign capital inflow, crude oil prices, US Federal Reserve policy meeting outcome, and global cues will decide market movement in the third week of March.
The domestic equity benchmarks snapped four-week rally and recorded the worst week since October 2023 with Nifty and Sensex declining 2.09 per cent and 1.99 per cent dragged by broader indices. The move was subdued in the following sessions, tracking mixed cues. Indices rebounded in the final sessions from its intraday lows. The Nifty 50 held steady at 22,000, supported by Bharti and Bajaj Finance.
Small caps and midcaps logged their worst week in 15 months, witnessing a severe decline in the range of 4.7 per cent-5.5 per cent after capital markets regulator Securities and Exchange Board of India (SEBI) raised concerns over stretched valuations. Experts have also flagged concerns over markets being in a bubble zone.
Eventually, both Nifty and Sensex, closed near the week’s low at 22,023.35 and 72,643.40 levels. All the key sectors, barring IT, ended in the red wherein realty, metal and energy were among the top losers. The stress test results of mutual funds indicated a disparity in the durations that funds would take to liquidate their portfolios.
“After touching a new high, the domestic market witnessed a correction due to concerns over the broader market valuation and increase in volatility. The unfavourable risk-reward balance of mid- and small-cap stocks, fuelled by prolonged premium valuations, has aggravated the downfall,” said Vinod Nair, Head of Research, Geojit Financial Services.
‘’We expect bargain opportunities to persist in mid- and small-cap stocks whose valuations are supported by fundamentals. Meanwhile, FMCG and contrarian plays like gold are offering some refuge,” added Nair.
The upcoming week will witness a buzzing primary market with some new initial public offerings (IPO) especially in the small-and-medium enterprises (SME) segment and listings are slated across both mainboard and SME segments.
Overall, analysts expect markets to be volatile this week with Nifty 50’s likely further slide till 21,500. However, if the index holds above 22,500, then there are chances of an up move. Experts also advice that traders should prefer index majors and refrain from loss-making positions in broader markets.
Here are the key triggers for stock markets this week:
US Fed Policy, BoE, BoJ meeting outcomes:
The upcoming week will place a significant focus on monetary policy decisions of central banks, as the US Federal Reserve will begin its two-day policy meeting on March 19. The US Fed will announce its interest rate decision after its two-day policy meeting on March 20, 2024.
According to reports, the US Federal Reserve will leave its benchmark overnight interest rate unchanged. Bank of Japan (BoJ) will announce its interest rate decision on March 19 while the Bank of England (BoE) will likely declare its policy decision on March 21, 2024.
3 new IPOs, 8 listings to hit D-Street:
In the mainboard segment, no new issues are listed to open for subscription so far. Among the ongoing issues, Krystal Integrated Services IPO will close for bidding on March 18.
In the SME segment, Chatha Foods IPO will open for subscription on March 19. Omfurn India FPO will open on March 20 and Vishwas Agri Seeds IPO will open on March 21.
Among listings, shares of Popular Vehicles & Services will get listed on stock exchanges BSE and NSE on March 19. Additionally, shares of Pratham EPC Projects will get listed on NSE SME on March 18. On March 19, shares of Signoria Creation and Royal Sense will get listed on NSE SME and BSE SME respectively.
On March 20, shares of AVP Infracon will get listed on NSE SME. On March 22, shares of KP Green Engineering will get listed on BSE SME, while Enfuse Solutions, and Enser Communications will get listed on NSE SME. According to analysts, the momentum of the IPO is expected to continue this year with bigger deals.
‘’The factors which are likely to keep IPO market robust in 2024 could be rise in domestic capital, governance improvement, flourishing entrepreneurship, favourable government policies with FDI support, diligent institutional investors,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
FII Activity:
Foreign institutional investors (FIIs) turned net sellers on high US bond yields and also on weaker domestic markets. On the other hand, domestic institutional investors (DIIs) were net buyers for four out of five sessions last week.
Even though FIIs were buyers for three out of four sessions this week but the net outflow stands at ₹816.91 crore, while DIIs were buyers for all sessions, with a total investment of ₹14,147.5 crore, according to stock exchange data.
Foreign portfolio investors (FPIs) continued their buying streak in the second week of March, extending the modest streak picked up in April turning steady buyers in Indian markets. Market experts highlighted that FPIs also invested in some bulk deals through the stock exchanges this month.
According to National Securities Depository Ltd (NSDL) data, FPIs have bought ₹40, 710 crore worth of Indian equities and the total inflow stands at ₹50,471 crore as of March 15, taking into account debt, hybrid, debt-VRR, and equities.
Global Cues:
In the coming week, markets will react to important macro-economic data of major countries including S&P Global Manufacturing and services PMI of UK and US. Important cues will also emerge from China such as industrial production, unemployment rate figures, along with Eurozone inflation, trade balance, UK and Japan inflation data, and the above-mentioned central bank policy decisions.
China will announce the loan prime rate for 1-year and 5-year loans on March 20. Other cues such as rude oil inventories, movement of the rupee against the dollar, and US bond yields will also guide market direction this week.
‘’In the coming week, participants will continue to take cues from the global markets, in the absence of any major event on the domestic front. The major index, the Dow Jones Industrial Average (DJIA) is hovering in a narrow range i.e. 38,500-39,300 ahead of the FOMC meet and a decisive break on either side would dictate the short term trend,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
Oil Prices:
Crude oil markets sizzled last week with international crude oil futures hitting a record five month high-mark to $85 per barrel after the International Energy Agency (IEA) raised its demand forecast for 2024, predicting a tighter market. Ukraine’s drone attack on Russia’s oil refinery also supported the uptrend on prices as the ongoing conflict posed fresh supply disruptions.
Oil gained three per cent last week with the benchmark Brent crude settled near the $83 per barrel mark, after rising 4.3 per cent over the previous two sessions and reaching the highest level since November on Thursday. Also, US West Texas Intermediate (WTI) crude was down 17 cents or 0.21 per cent to $81.09.
According to Mohammed Imran, Research Analyst at domestic brokerage firm ShareKhan by BNP Paribas, Brent crude may average between $87-$92 for 2024. He added that oil markets are oversupplied, resulting in weaker prices, as US oil output is more than any other nation. Read full interview here
Corporate Action:
Shares of several state-owned majors such as Oil India, Bharat Electronics Ltd (BEL), and Power Finance Corporation (PFC) will trade ex-dividend in the coming week, along with some private companies such TVS Motor Company, Patanjali Foods, Castrol India, and others. Several stocks such as Tine Agro Ltd and Colab Cloud Platforms Ltd will also trade ex-bonus and ex-split. Check full list here
Technical View:
Indications are in favor of further slide in the Nifty index, after the break of dual support viz. short term moving average i.e. 20 DEMA and a rising trendline on the daily chart, according to analysts.
‘’A breakdown below the previous swing low i.e. 21,850 could result in the next leg of down move to 21,500. The view would be negated if it manages to cross and hold decisively above the 22,250 level,” said Religare Brokings’ Ajit Mishra.
Among the key sectors, IT and FMCG look comparatively stronger while others may continue to trade mixed. ‘’Amid all, we reiterate our preference for index majors and suggest maintaining positions on both sides. Besides, we advise traders to refrain from adding to the loss-making positions, especially in the midcap and smallcap space and wait for some sign of a reversal,” added Mishra.
Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd noted that Nifty 50 formed a bear-engulfing candlestick formation in the weekly time frame. However, it is trying to protect its 50-DMA on the daily chart.
‘’On the upside, 20-DMA of 22,220 is an immediate and strong resistance. Above 20-DMA, we can expect a short covering move towards 22,440/22,525 levels.,” he added.
Bank Nifty is trading near the 46,300–46,000 demand zone, which coincides with the 100-DMA. ‘’On the upside, 47,000–47,400 is a strong resistance zone; above this, we can expect a sharp move towards the 48,000–48,300 zone. 200-DMA of 45,300 will be key support for any further weakness,” said Gour.
Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities added that a decisive break could propel the index higher towards the 47,500 mark. ‘’On the flip side, the lower end support is positioned at 46,500-46,300, where bulls are currently attempting to defend. However, a breach below this level may intensify selling pressure in the market,” said Shah.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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