PremiumLed by sharp volatility, Indian markets ended the last week on a bearish note with Sensex dropping to below the 61,400 mark and Nifty 50 slipping under 18,300 levels. Although, easing in inflation data provided some comfort to the equities, however, major central banks' continuation of hawkish stance going ahead dampened the sentiments globally which led to bears also dragging domestic equities. The rupee dropped for the second week straight, while foreign funds (FIIs) pulled back. In the coming week ahead, 10 key factors may play a role in driving sentiment in Sensex and Nifty 50.
On Friday, Sensex finished at 61,337.81 lower by 461.22 points or 0.75%. Nifty 50 ended at 18,269 below 145.90 points or 0.79%. Midcap and small-cap indices dropped more than 1%. A broad-based selloff was seen across sectoral indices with IT, healthcare, auto, banking, capital goods, and consumer durables stocks being the worst hit.
In the week that ended on December 16, Sensex shed by at least 1.4%, while Nifty 50 declined by over 1.2%.
Talking about weekly performance, Vinod Nair, Head of Research at Geojit Financial Services said, "Volatility in the market this week was dictated by the release of favourable inflation numbers, which were offset by major global central bank’s aggressive decisions. US CPI inflation eased to 7.1% in November, while India’s retail inflation eased sharply to 5.88%, which was within the RBI’s tolerance band."
He added, however, the Fed startled the market by maintaining its hawkish tone, as investors were expecting a softer approach after the release of better-than-expected inflation numbers. Following the Fed, BOE and ECB raised their interest rate by 50bps while maintaining their hawkish stance in combating inflation. While the selloffs were broad-based, IT stocks dragged in the domestic market as recession fears boomed in the global economies.
"Lack of major triggers will push the domestic market to follow its global peers, in the coming week," Nair said.
1. Nifty 50
Apurva Sheth, Head of Market Perspectives, Samco Securities said, Nifty has formed a lower top lower bottom on the daily chart, which is a bearish sign for the short term. Index on the daily chart has closed below its 9 & 21 – day exponential moving average and RSI on the other hand has drifted below 50 levels with a bearish crossover.
Sheth added, on the technical ground, the support for the Nifty is placed near 18100 and any move below the same will extend the fall till 17900 levels. Similarly, on the higher side, 18500 will be the immediate resistance and followed by 18650 levels.
ICICI Direct expects Nifty to extend its corrective phase with strong support placed at 17900 levels while the past two-week high of 18700 would act as key resistance.
According to Ajit Mishra, VP - of Technical Research, Religare Broking, apart from the feeble global cues, continued profit-taking in the banking index may result in further decline and Nifty could test the 18,000-18,100 zone soon. On the higher side, 18,500-18,750 would act as hurdles. Since all the sectors are largely trading in tandem with the benchmark, participants should plan their exits in profitable trades and stay selective for fresh positions.
On Friday, Nifty 50 closed at 18,269 lower by 145.90 points or 0.79%. Its weekly drop is over 1.2%.
2. Bank Nifty:
On Bank Nifty, Kunal Shah, Senior Technical Analyst at LKP Securities said, the BANK NIFTY index witnessed heaving profit booking at a higher level as the global markets witness a fresh sell-off after the fed event. The index remains in a sell-on-rise mode with resistance visible at the 43,600-43,800 zone. The index to resume its uptrend needs to surpass the level of 44,000 where the highest open interest is built up on the call side. The index's immediate support on the downside is at the 43,000-42,800 zone and if breached will lead to further selling pressure.
Bank Nifty shed 278.70 points or 0.64% to close at 43,219.50 on Friday. Its weekly drop is over 0.4%.
3. Rupee:
Indian currency closed lower for the second straight week against the US dollar due to demand pick up in the greenback from oil and other importers. Except for Wednesday when the rupee felt support after better-than-expected US inflation data, the local unit tumbled for the entire week between December 12-16.
On Friday, the rupee closed at 82.87 per dollar against the previous day's print of 82.76 per dollar. Overall, this week, the domestic currency dipped to 0.7% against the greenback.
For the week ahead, ICICI Direct in its report stated that the rupee is likely to face a strong resistance near 83.30 levels in the coming week and may regain its strength till 82.30 levels amid weakness in the dollar and softening of crude oil prices. The Dollar Index may face a strong resistance near 105.30 levels and slip back to 103 levels as Fed slowed down its pace of rate hike and downgraded its growth outlook sharply for 2023.
It added, "the Fed raised its benchmark rate by 50 bps as expected but signaled plans to lift rates next year. We expect Fed funds rate to peak at 5% in the first quarter as it takes time for the full effects of those increases to ripple through the economy."
4. FPIs/FIIs:
From December 12-16, FIIs were net sellers with an outflow of ₹1,832.61 crore from equities.
As per ICICI Direct, FIIs stayed largely on the sidelines last week as well and no major flows were observed after MSCI-related flows were seen in the last week of November. For December, FIIs have been net sellers so far and sold nearly ₹3,500 crore till now as the Nifty took a breather from its lifetime highs. Domestic institutions also remained largely on the sidelines and bought almost ₹2,400 crore worth of equities.
However, as per NSDL data, by end of December 16, FPIs have pumped in ₹10,555 crore in the equities market last week.
5. Listing:
Sula Vineyards is expected to list on December 22 after its ₹960.35 IPO that was launched from December 12-14. Sula is seen to be a first-of-its-kind listing in the wine market. The IPO was fully subscribed by 2.33 times on the last day with strong demand from QIBs whose portion subscribed by 4.13 times followed by retail investors' portion subscribing 1.65 times and NIIs portion subscribing by 1.51 times.
The price band for the IPO was fixed at ₹340 per equity share and ₹357 per equity share.
6. Upcoming IPOs:
Two companies are set to raise ₹1,975 crore from their initial public offering in the week ahead. These two companies are Elin Electronics and KFin Technologies.
KFintech IPO: The public offer is worth around ₹1,500 crore and will open on December 19. The IPO will end on December 21st. The technology-driven financial services company has fixed KFintech IPO price band at ₹347 to ₹366 per equity share. The issue is purely an offer for sale in nature.
Elin Electronics IPO: The company is looking to raise ₹475 crore from its IPO which will launch on December 20 and will continue till December 22nd. The IPO is a mixture of a fresh issue worth ₹175 crore and an offer for sale of ₹300 crore. The company has fixed a price band of ₹234-247 per share for the IPO.
7. Derivatives:
Nifty 50:
On the options front, ICICI Direct stated that a sharp decline post the Fed meeting resulted in heavy Call writing at ATM and OTM strike. While the Put base is at ATM 18300 strike, Call bases are much stronger at 18400 and higher strikes. Hence, a move above 18400 should be looked for fresh longs in the index.
They expect Nifty levels near 18000-18200 to act as immediate support and expect a recovery toward fresh highs in the coming week.
Bank Nifty 50:
ICICI Direct's note said, the banking index took a breather after six consecutive weeks of gains and came under pressure along with the rest of the markets. After making fresh lifetime highs, the Bank Nifty gave away sharply in the last two sessions and closed the week with near 1% losses. Profit booking was especially observed among PSU banks after they tested their lifetime highs. On the other hand, most private sector banks have remained largely flat.
On the options front, significant option writing is visible at 43000 Put and 43500 Call strikes. The stock brokerage expects fresh positive bias to be formed if the Bank Nifty sustains above 43500 levels.
8. Corporate actions:
December 19:
Narmada Gelatines will turn ex-dividend on December 19 for its special dividend of ₹100 per share.
December 20:
Sarthak Industries and Sheela Foam will turn ex-bonus for their bonus issues in the ratio of 1:3 and 1:1 respectively.
December 22:
Kama Holdings, Triveni Turbine, and Triveni Engineering will be in focus for their buyback shares. The stocks will turn ex-date for this corporate action on Thursday.
Precision Wires India and Zim Laboratories will turn ex-bonus for their bonus issues of 1:2 and 2:1 respectively.
Also, Quint Digital Media will turn ex-date for their rights issue of equity shares.
9. Crude Oil:
On the global front, crude oil prices dipped by at least $2 per barrel on Friday after major central banks in Europe and the US continued to maintain a hawkish stance for their monetary policy indicating that the fight to tame inflation is not over yet even when the consumer price index has cooled down sharply in the past few months.
On Friday, Brent crude oil closed at $79.26 down by $1.95 per barrel or 2.40%. While the US WTI dropped by $1.61 or 2.12% to end at 74.50.
10. Economic data:
On December 19, the UK will announce its PPI input for November, while Germany will announce its Ifo Business Climate Index for December. Further, on December 20, Germany's PPI for November data, along with US building permits and housing starts for November will be presented. On December 21, GfK German Consumer Climate (Jan), while the US existing home sales data for November and also its CB Consumer Confidence for December will be announced.
The US is also set to announce its GDP data for Q3 on December 22 which will be keenly watched. On the coming Friday, the US is set to announce data on durable goods orders, personal spending, PCE price index, new home sales for November month, and also Michigan consumer sentiment for December.
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