MUMBAI: Domestic equities kicked off December on a high note, with the benchmark Nifty 50 scaling fresh lifetime highs, as foreign investors were buoyed by the robust GDP data and upbeat global markets.
On Friday, the Nifty 50 ended at 20267.90 points, clocking more than 2% weekly gains. The Sensex too, clocked more than 2% gains, and ended 67481.19 points.
The strong momentum seen last week has led to the hope of the momentum continuing in the week ahead. However, sustenance of the momentum depends on the outcome of certain crucial events such as the outcome of the assembly elections that took place in 5 states, the outcome of which will be out on Sunday.
Further, the coming week will see the three-day monetary policy meeting of the Reserve Bank of India taking place.
“We are eyeing the 20500-20750 zone in the Nifty, and expect the index to hold the 19850-20050 zone, in case of any profit taking,” said Ajit Mishra, SVP – technical research, Religare Broking. Let’s take a look at the major factors that will hog Dalal Street in the week ahead.
Assembly Election Verdict
The counting of votes for assembly elections in Chhattisgarh, Madhya Pradesh, Rajasthan, and Telangana will take place on Sunday, and this will have a bearing on the market when trade resumes on Monday.
The exit polls are leaning in favour of the Bharatiya Janata Party (BJP) for the key Hindi belts of Rajasthan and MP, while Chhattisgarh and Telangana are seen as a tight race to top for the Congress.
“While this news adds more fuel to the market, the exit polls are not definitive, nor are state results a perfect proxy for national results. Nonetheless, a decisive BJP win will reinforce the consensus view that the party is on the front-foot for the 2024 general elections,” Emkay Global’s Economist Madhavi Arora said.
This is likely to add another leg of rally to the markets, as policy continuity will be viewed as positive growth-shock in the medium term, she said.
However, one must keep in mind that exit polls are not definitive, and the actual election results may vary.
RBI Policy Action
The next on investors’ radar will be the 5th monetary policy meeting of the RBI in the current fiscal year ending March 2024, scheduled on December 6-8. The data points to assess the state of the domestic economy that the central bank will take into consideration during the meeting are the CPI inflation for October and the GDP growth for the September quarter.
Consumer price inflation in October eased further to 4.87% from 5.02% in September, and was closer to the level seen in June. However, this was largely due to a statistical effect of a high base.
Meanwhile, the GDP data for the second quarter took everyone to a surprise as growth came in sharply higher at 7.6% and not only beat economists’ expectations but also massively surpassed RBI’s projection of a 6.5% growth.
Further, inflation conditions have eased globally too, with the US seeing a softer than expected rise in inflation in October.
In the backdrop of the prevailing domestic and global factors, it is widely expected that the RBI will stay put on rates and retail its monetary policy stance.
Macroeconomic Data
Among the macro data points that will be tracked by investors are the services and composite Purchasing Manager’s index for November by S&P Global for India, Italy, France, Germany, EU, UK, and the US on Tuesday.
The US will release the employment report for the private sector for November on Wednesday, and the weekly jobless claims on Thursday.
Global Markets
One of the factors that has aided the current rally in the domestic market is the strong momentum in global markets. Benchmark indices in the US and Europe clocked 0.4-2.4% weekly gains, while major markets in Asia ended in the red. However, India was an outlier.
If momentum in global markets continues, that will further fuel the rally in the domestic market, believe experts.
FII Flows
The strong rebound in the market was also a result of the comeback by foreign institutional investors amid easing bond yields and the flush of mega IPOs which attracted a lot of interest across the investor fraternity.
FPIs net invested a little over $1 billion into domestic equities in November after being net sellers in the preceding two months.
“Going forward, FPI response will be crucially determined by the market trend, which, in turn, will be influenced by the state election results,” says V K Vijayakumar, chief iInvestment strategist at Geojit Financial Services.
If the state election results turn out to be favourable for the ruling dispensation, the market will stage a rally, and FPIs are unlikely to miss that rally by big selling, he said.
However, Vijayakumar added that since the overall market valuations have reached high levels, FPIs may turn sellers at higher levels.
Corporate Action
Tata Consultancy Services’ share buyback offer that opened on December 1, will be tracked, as the window to tender shares in the offer will remain open till December 7.
As of December 1, nearly 70% of the tender offer was booked. About 2.86 crore shares were tendered in the offer. The company has proposed to buy back 40.96 crore shares from the public shareholders at not more than Rs 4,150 a share.
Further, in the week ahead, Dolphin Offshore Enterprises has scheduled a board meeting on December 7 to consider and approve subdivision of shares.
Technical Indicators
After the strong weekly gains, the short-term trend of Nifty 50 continues to be positive, and one may expect further upside in the coming week, say technical chartists.
“As long as the index holds 20000, marching towards 20500 looks likely in the coming days despite intermittent consolidation. With the hurdles placed at 20350-20400, 20000 will act as an immediate support,” said Arvinder Singh Nanda, senior vice president, Master Capital Services.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
