In the week gone by too, volatility saw benchmark indices swing between gains and losses, but eventually ended flat. The Nifty 50 settled at 19,653 points and Sensex at 65,995 points.
The risk-off sentiment in equities of late was triggered by the rising bond yields and firming dollar.
Therefore, movement in the bond yields will be closely monitored by investors in the week ahead.
Besides this, the quarterly earnings, inflation data in the US and India, crude oil price movements, and FOMC meeting minutes will be on the investors’ radar.
Global Cues
Last week, yield on US benchmark 10-year bonds surged to a 16-year high, and those in India saw their steepest rise in six months.
The expectations of higher for longer interest rates pushed yields higher, and this prompted foreign investors to pull out money from risky assets such as equities and park it in the bond market.
“As long as US dollar and bond yields show no signs of moderation, there could be foreign fund outflows from emerging economies, including India,” said Shrikant Chouhan, Head of Research (Retail) at Kotak Securities.
Sharp intra-day gyration is likely to continue due to weak global factors and foreign fund outflows from the domestic market, he said.
Q2 Earnings
The second quarter earnings season will officially kickstart on Wednesday, when IT major TCS will release its numbers. The company is also set to announce a share buyback. Following TCS is Infosys and HCL Technologies on Thursday.
Besides the IT companies, Angel One, HDFC Asset Management, and HDFC Life Insurance are the other major ones reporting their quarterly earnings.
Fund Flows
Eventhough India remains the most favourable emerging market in the global context, FPIs chose to book profits and sold shares worth Rs 9,412 crore in the first four trading sessions of October.
“In the context of an elevated dollar and US bond yields, FPIs are unlikely to turn buyers in the market soon,” said V K Vijayakumar, chief market strategist, Geojit Financial Services.
Macro Data
Both India and the US will release CPI inflation for September on Thursday. These two will be closely tracked by investors.
In his monetary policy statement, Reserve Bank of India Governor Shaktikanta Das said that inflation will likely ease further in September.
FOMC Minutes
The market will also track minutes of the US Federal Reserve’s last meeting to get indications on the central bank officials’ assessment of the economy. The Fed had left policy rates unchanged in its last meeting, but kept the door open for one more rate hike in 2023 as inflation remains well above the target.
Crude Oil
Crude oil prices have been quite volatile in the recent sessions. They traded with a negative bias in the past six sessions, correcting almost 8% in the domestic market.
Concerns of a slowdown in demand and OPEC’s decision to maintain their output cut targets has weighed on prices.
Therefore, its movement will be closely monitored by investors in the coming week.
IPO Watch
After witnessing several busy weeks, the primary market is likely to take a backseat in the week ahead. There aren’t any main board IPOs opening for subscription, while on the SME front, there’s just one to look forward to.
In the SME segment, Committed Cargo’s issue will be watched. The IPO opened for subscription on October 6 and will close on October 10.
Technical Indicators
Despite volatility, the short-term trend of Nifty 50 has turned positive, as per technical indicators.
The overall charts indicate next overhead resistance for the 50-stock index at around 19800 levels for the coming week. Any dip towards 19550-19500 levels could be a buying opportunity, said Nagaraj Shetti of HDFC Securities.
Currently, Nifty 50 is trading near the 50-day SMA (Simple Moving Average), and as long as the index is trading above the 50-day SMA or 19575 level, Amol Athawale of Kotak Securities expects the positive sentiment to continue.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
