Week Ahead: Inflation data, US Fed policy, global cues among key market triggers as Nifty 50 eyes 23,500 this week

Jun 9, 2024

9 min read 09 Jun 2024, 06:07 AM IST Trade Now

Nikita Prasad

Market analysts expect that election-related volatility is over, and Nifty 50 may now move towards 23,400-23,500 levels on the upside if 23,000 is not broken.

Nifty 50 eyes the next record high mark above 23,500 amid a heavy data-related week ahead. (Image: Pixabay)Premium
Nifty 50 eyes the next record high mark above 23,500 amid a heavy data-related week ahead. (Image: Pixabay)

Indian stock markets witnessed a roller coaster ride with the onset of June 2024 as frontline indices swung sharply in both directions due to the exit polls predictions and the surprise outcome of the Lok Sabha election results 2024.

Domestic equity benchmarks recorded the biggest weekly gain of 2024 after a volatile week. The indices began the week hitting all-time highs and rose 3.25 per cent on optimism of a memorable win for the ongoing government. The surprise poll outcome, with the ruling Bharatiya Janata Party (BJP) failing to get an absolute majority on its own, saw markets crash around seven per cent on the counting day of June 4.

Also Read: Food inflation bites Indian economy: RBI sees uptick in vegetable prices; monsoon key determinant of relief

However, bulls were back with a bang as soon as clarity emerged regarding PM-elect Modi and his allies coming to power again, forming a coalition government. The recovery rally on Wednesday and Thursday came as domestic buying overpowered foreign sales leading to benchmark indices closing the week near all-time highs. The Nifty 50 logged its best week since early December, while the Sensex recorded its best week in nearly two years.

The Reserve Bank of India’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.5 per cent in its first meeting since Lok Sabha Elections 2024. The rate-setting panel decided to hold the key policy rate for the eighth consecutive time in its June 2024 meeting, but slightly raised the FY24 growth  projection.

Nifty added 3.4 per cent this week, while the Sensex rose 3.7 per cent, recouping all losses made on Tuesday. All major sectors participated in the rally, with IT, FMCG, and Auto leading the way. The broader indices also saw significant interest, each gaining around three per cent. Analysts believe volatility is likely to decrease now that major events are behind us, with the focus shifting to domestic macroeconomic data and the Union Budget.

Moving to the second week of June, investors will keenly eye the ongoing Lok Sabha election developments, the upcoming US Fed interest rate decision, domestic and global macroeconomic indicators, foreign fund inflow, crude oil prices, and global cues.

Also Read: HDFC Securities initiates ‘high conviction’ buy on Jyothy Labs, eyes 15% returns at 575 target price; 5 key reasons

In the coming week, primary markets will witness a few new initial public offerings (IPO) and listings which are slated across the mainboard and small-and-medium enterprises (SME) segment. The week will be critical from the domestic and technical point of view as investors will global indicators and the monetary policy.

Overall, market analysts expect that election-related volatility is over, and Nifty 50 may now move towards 23,400-23,500 levels on the upside if the 23,000 level is not broken. Experts advise traders to remain cautious and focus on stocks moving in line with the benchmark.

Here are the key triggers for stock markets in the coming week:

Domestic macroeconomic data

Domestically, India’s economic calendar is also marked with key releases. On June 12, 2024, both India’s industrial production data and inflation rate data will be unveiled. These figures are crucial indicators of the country’s economic health and can likely influence market sentiment and policy decisions.

On June 14, 2024, India’s balance of trade data will be released, providing insights into the nation’s trade dynamics and external sector performance. This data is closely watched by investors and policymakers for its implications on currency movements, export-import trends, and overall economic stability.


Also Read: Technical stock picks: Vaishali Parekh recommends THESE stocks to buy, eyes over 15% potential upside on TP

US Fed Policy

The upcoming week will also place a significant focus on monetary policy decisions of central banks, as the US Federal Reserve will begin its two-day policy meeting on June 11. The US Fed will announce its interest rate decision after its two-day policy meeting on Wednesday, June 12, 2024.

Analysts noted that the US economic landscape has shown signs of moderation in recent months. The core personal consumption expenditures (PCE) inflation, a key measure watched by the US Fed, slowed to an annualised rate of 3.5 percent in April.

‘’This decrease indicates that inflationary pressures are easing, which is a positive development for the economy. At the same time, the job market has shown signs of rebalancing. Payroll growth in April was 175,000, down from an average of 269,000 in the first quarter of the year,” said Alex Volkov, Market Analyst at VT Markets.

Also Read: Hawkish US Fed policy stance emerges main trigger for global markets; ICICI Bank sees rate cuts from September

Despite these developments, the US Fed remains cautious. Fed officials need more evidence of sustained progress in controlling inflation before they begin reducing the federal funds target range. Market participants expect no rate changes at the upcoming June meeting, but there is potential for a rate cut in the fourth quarter of this year. 

‘’The post-meeting statement is anticipated to include updates to reflect lower run-off caps for Treasury securities and acknowledge recent data suggesting a reduced threat of price re-acceleration. Despite this, the statement will continue to describe inflation as “elevated,” underscoring ongoing concerns,” added Volkov.

The upcoming June policy decisions and subsequent data releases, particularly the May employment report, will be imperative in shaping the US central bank’s monetary policy direction for the remainder of the year.

2 new IPOs, 4 listings to hit D-Street

From the mainboard segment, ixigo IPO will open for subscription from June 10, and from the SME segment, United Cotfab IPO will open for bidding on June 13. Among listings, shares of Kronox Lab Sciences will debut on June 12. Also, shares of 3C IT, Magenta Lifecare, and Sattrix will get listed on BSE SME on June 12.

FII Activity

Foreign portfolio investors (FPIs) have extended their selling streak in Indian markets and offloaded shares worth 14,794 crore in the first seven days of June. The total debt inflows stand at 4,008 crore so far this month. This comes after FPIs offloaded 25,586 crore worth of Indian equities in May. 

Uncertainty over the outcome of the Lok Sabha elections 2024, high US bond yields, high Indian market valuations, and the outperformance of Chinese stocks weighed on sentiments. Foreign institutional investors (FIIs) remained net sellers last week, offloading 13,718 crore in the cash segment. Domestic institutional investors (DIIs) continued their buying spree with net purchases amounting to nearly 5,579 crore in the cash segment.

Also Read: FPIs dump 10,355 crore in Indian markets as selling streak extends to June; Inflows diverted to THIS market instead

On June 7, Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “In the near term, the market is likely to be weighed down by huge FII selling, which has touched 24,960 crore cumulatively during the last three days. Largecaps in sectors like financials and IT, where FIIs have huge assets under management, may underperform.”

‘’This trend will change when FIIs turn buyers, which is inevitable. Meanwhile long-term investors can accumulate these high quality largecaps were margin of safety is high in an otherwise highly valued market. There is excessive speculative activity in stocks where the floating stock is very low. Retail investors venturing into these speculative activities is highly risky,” added Dr. V K Vijayakumar.

Global Cues

Major global events are scheduled for June 12, 2024. These include the announcement of US core and consumer price inflation figures, alongside the US Federal Reserve’s interest rate decision and economic projections. These releases will likely notably impact Indian and global markets, particularly the monetary policy outlook and inflation expectations.

On June 14, the Bank of Japan will announce its interest rate decision. Despite flagging potential inflation risks, the Bank anticipates maintaining accommodative financial conditions, as outlined in its April policy meeting summary. This will be closely monitored for its implications on the Japanese economy and global market sentiment.

Apart from the above, the outlook for the market will be guided by the major global economic data this week, such as China CPI Inflation, UK GDP data, US PPI data. The movement of US bond yields and US dollar will be closely tracked.

Oil Prices

International oil prices continued to extend losses and reported a third straight weekly loss as investors weighed the reassurances given by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) against the latest US jobs data which lowered expectations that the US Federal Reserve will cut interest rates soon.

Brent crude futures last settled 25 cents lower at $79.62 a barrel, while US West Texas Intermediate crude (WTI) dropped two cents to $75.53. Crude fell rates for a third straight week on demand concerns, with Brent down 2.5 per cent and WTI off 1.9 per cent. Back home, crude oil futures last settled 0.08 per cent lower at 6,321 per barrel on the multi-commodity exchange (MCX).

Corporate Action

The upcoming week is brimming with corporate action movement as shares several important companies will trade ex-dividend, while some have declared bonus issues, buybacks and stock splits. To name a few, Tata Motors, Asian Paints, Bajaj Auto, Adani Enterprises, Canara Bank, Adani Ports, Happiest Minds Technologies, Ambuja Cements, ACC Ltd, Tata Technologies, Hindustan Unilever Ltd (HUL), among others. Check full list here

Technical View

Nifty is nearing its all-time high of 23,338, which acts as immediate resistance. A break above this level could propel the index towards 23,500 and even 23,800, according to Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd. On the downside, the 23,000-22,800 zone offers immediate support, with the crucial 20-DMA around 22,600 acting as a stronger floor.

‘’As we assess the near-term outlook, it appears probable that the index will continue to adhere to this range-bound behaviour,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd. In Nifty, he added, following the emergence of a bullish candlestick pattern on the daily timeframe, the index has maintained its upward trajectory. 

‘’We recommend maintaining a positive outlook unless the Nifty decisively breaks below 22,600, with an upside target in the 23,800-24,000 range. The renewed participation of sectors like IT and FMCG -previously on the sidelines, supports our confidence. However, traders should remain cautious and focus on stocks that are moving in line with the benchmark,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.

Mishra also suggests maintaining a “buy on dips” strategy as long as the Nifty holds above the 22,600 level. Rupak De, Senior Technical Analyst, LKP Securities suggested that on the lower end, profit booking might occur only below 23,000.

Bank Nifty also mirrored Nifty’s recovery, successfully breaching its key moving averages. The psychological level of 50,000 presents the first hurdle. If Bank Nifty overcomes this barrier, it could target 51,300 and even 52,000, according to Pravesh Gour. The 48,700-48,350 zone provides nearby support, while the 100-DMA around 47,400 remains a critical support level.

Arvinder Singh Nanda explained that the market appears to be consolidating, with 50,200 serving as an immediate resistance and 49,200 as a nearby support level. Moreover, the prices are currently trading above the 55-day EMA, indicating a continuation of bullish sentiment in the short term.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.

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Published: 09 Jun 2024, 06:07 AM IST

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