A stupendous run during the last week of 2023 saw benchmark indices giving a strong breakout on the upside and clocking nearly 2% gains.
If one looks at the weekly pattern of Nifty 50, barring the week ended December 18, the index has given positive returns for eight weeks since the start of November.
This non-stop run has pushed the market into the overbought zone and indicates that some profit booking may be on the cards.
“We may see some consolidation in Nifty in initial sessions next week, after gaining 8% in December. However, it has the potential to inch gradually towards the 22150 zone next so traders should use the consolidation phase to add quality names on dips,” said Ajit Mishra, SVP – technical research at Religare Broking.
Major events starting with the December quarter results of companies, will kick in from the second week of January. Therefore, investors would cash in profits and wait for the events to play out.
In the coming week, analysts see strong support for the Nifty 50 at 21500-21550 zone. If the index manages to stay above this level, then one can look at 21900-22000 levels on the upside, said Sudeep Shah of SBI Securities.
In case the index breaks 21530 on the downside, that will trigger a trend reversal and take the index towards 21430-21380 levels, Shah said.
Let’s look at some factors that will influence markets this week.
Automobile Sales
Auto stocks are expected to be in focus as companies will begin releasing their December sales figures on Monday. These sales figures will provide valuable insights into consumer demand and the health of the industry, potentially impacting the performance of the stocks.
Companies saw strong growth in sales during the festival period, and the momentum sustained even after that, suggesting a recovery in demand.
Global Markets
For global markets, the first week of 2024 will be a truncated one, as major equities across US, Europe, and Asian regions are closed on Monday for New Year’s eve.
Nevertheless, domestic equities for the rest of the week will take cues from global trend in the absence of any significant domestic triggers.
Rupee/Oil Movement
The movement of the rupee against the dollar and crude oil prices will be closely watched by investors next week, as any adverse movement can impact foreign inflows.
In the week gone by, the rupee remained largely steady against the greenback, while crude oil prices corrected sharply by 3%.
FPI Flows
Foreign capital inflows saw a sharp uptick in December, with FPIs buying equities worth a whopping $6.9 billion, the highest monthly purchase in a month in 2023.
“The steady decline in US bond yields have caused this sudden change in the strategy of FPIs,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
In December, FPIs were big buyers in financial services which explains the resilience of this segment. FPIs also bought in sectors like automobiles, capital goods and telecom.
Since it is expected that interest rates in the US will decline in 2024, FPIs are likely to increase their purchases, particularly in the early months in the run up to the general elections, Vijayakumar said.
Market Regulation
The rollout of the Application Supported by Blocked Amount or ASBA-like facility for trading in the secondary market will be done from Monday. The new facility is being initially rolled out for the equity cash segment. Trading through a block mechanism in the secondary market was proposed by the Securities and Exchange Board of India (SEBI) in March 2023.
Further, the new guidelines for small and medium enterprises looking to migrate from the SME platform to the main board on stock exchanges will come into effect from January 1. In November, BSE had put in place fresh guidelines regarding the same.
IPO Watch
After a busy December, the primary market will take a breather with no new issues in the week ahead. However, 7 SME companies will debut on the exchanges.
The SME segment will see listings of Balaji Valve Components, Sameer Agro and Infra, AIK Pipes, Akanksha Power, HRH Next Services, Manoj Ceramic and Kay Cee Energy on the SME platforms of both exchanges.
Bank Nifty Movement
A strong up move in the Nifty Bank has also contributed to the rally in Nifty 50 last week. The banking index slightly outperformed Nifty 50 in the December series, and analysts expect this to continue in January as well.
“Bank Nifty is consolidating, where 48500-48800 is an immediate resistance area; above this, 49500–50000 will be the next target zone,” said Pravesh Gour, senior technical analyst at Swastika Investmart.
Technical Indicators
Following the strong breakout given last week, Nifty 50 shows continued bullish momentum.
However, 21800–22000 could be a profit-booking zone, says Gour, after the strong rally last month.
On the downside, 21500 will be the immediate and strong support level for the 50 stock index. Above 22000, 22220 will be the next target level, he said.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
