Analysts say the underlying trend of Nifty remains positive and the market is facing stiff resistance around 23,500-23,600 levels. “A decisive move above this hurdle could open further upside towards 24,000 levels in the near term. Immediate support is placed at 23,300 levels,” said Nagaraj Shetti of HDFC Securities.
Key factors that will shape the market direction this week:
1) Budget reaction
Even though the markets closed flat, the impact of Budget announcements will still be there during the week. Analysts say this will play out in sectoral and stock specific action. By doing away with tax on income up to Rs 12 lakh under the new tax regime, the government is looking to give a bump to consumption, which will be positive for FMCG, auto and few other sectors.
“FIIs participation was very minimal. Hence, the actual reaction is likely to be witnessed on Monday and hence, we need to wait for a day or two to understand whether the market has really discounted the Budget factor or not,” said Osho Krishnan, Sr. Analyst, Technical & Derivatives of – Angel One.
2) RBI policy
The rate-setting panel of the Reserve Bank of India (RBI) will meet later this week (Feb 5-7) and analysts widely believe the central bank is expected to usher in rate cuts, which will be the first in over four years.The central bank has injected massive liquidity into the banking system in recent days, which some economists take to mean a rate cut is imminent, despite relatively high inflation.According to a Reuters poll, over 70% of respondents forecast the RBI would cut its key repo rate by 25 basis points to 6.25% at the conclusion of its February meeting,
This will be the first monetary policy meeting chaired by Governor Sanjay Malhotra, a former civil servant appointed late last year.
3) Q3 earnings
As many as 748 companies will announce their quarterly earnings this week. Key results to watch out include from Asian Paints, Titan, Airtel, Power Grid, Divi’s Labs, Tata Power, Torrent Power, Info Edge, Swiggy, SBI, ITC, Trent, Britannia, LIC, M&M, NHPC, Oil India among others.
4) FII/DII activity
Foreign investors’ action will continue to be monitored by market participants as they have sold equity worth over Rs 70,000 crore in January.
5) Rupee, dollar movement
The rupee closed January on a flattish note as the support from positive domestic equities was negated by unabated foreign fund outflows and month-end dollar demand.
Analysts expect the rupee to trade with negative bias on strength in the US dollar and persistent FII outflows. “Uncertainty over tariffs by the US administration could pressure the rupee, but any central bank intervention may support the currency,” Choudhary said.
6) Global markets
US stocks closed lower on Friday as the S&P 500 dropped 4% in the last week, marking its biggest drop in four months. Big losses for chipmakers like Nvidia, Micron Technology and Broadcom weighed down the index.
Global investors will keep a close eye on the tariff chat from Donald Trump after the White House reaffirmed plans to introduce new tariffs against Mexico, Canada and China.
Analysts said the tariff talk in the afternoon injected a new wave of uncertainty. “We think it just kind of proved to be a bit of a trigger for people to take some money off the table going into the weekend.”
7) Technical levels
The Nifty has witnessed a roller-coaster ride during the Budget session. On the daily chart, analysts say a small-bodied candle has formed, indicating indecision.
“Nifty has support at 23,280, and as long as it remains above this level, the trend might stay positive. On the higher end, the index could move towards 23,700–24,000 in the short term. However, a fall below 23,280 might trigger panic in the market,” said Rupak De, Senior Technical Analyst at LKP Securities.
8) Crude Oil
Oil prices closed with losses last week as investors await the outcome of Trump’s tariff threats. President Donald Trump has threatened to impose a 25% tariff on Canadian and Mexican exports to the United States if those two countries do not clamp down on shipments of fentanyl and on illegal migration across US borders.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
