Dalal Street Outlook: Key Factors to Watch Next Week

Benchmark indices of India rebounded sharply in the global market, despite conflicting signals on inflation fears. The market broke the two-week consolidation trend by rising over 2% to remain in the present uptrend. However, economists broadly believe that the market would largely remain sideways next week due to a lack of any key buying or selling triggers. Let us now turn to the drivers of the market, key events to watch out for, and sectoral movements that could unfold over the next few days.

Market Performance Recap

Indian stock markets remained quite resilient during the week gone by, as benchmark indices—Sensex and Nifty—posted gains of more than 2%. This comes as a sequel to the two-week-long consolidation phase, underlining that the strong, underlying sentiment at play among investors is bullish.

Drivers of the Market

The global inflation fears are given the maximum consideration, as one of the most influential in movements. Mixed signals from several global economic indicators generated an unpredictable environment which made investors play safe.

Anticipated Market Trend

The market, according to the experts’ view, is likely to trade sideways in the coming week. The absence of firm buying and selling cues would be compelling investors to hold on to a ‘wait-and-watch’ approach.

Key Parameters to Watch:

• Monsoon development: The progress of the monsoon season would be keenly watched ever since it impacts the output of agri-products and, thereby, confidence in the minds of investors.
• GST Meeting: The slated GST meeting could lead to a change in the rates across segments, thus impacting the market trend.

Global Economic Impact

The global market has its own set of issues. An increase in US jobless claims, along with disappointing housing data, has bolstered expectations of a rate cut by the Federal Reserve in September. These developments will be crucial to offshore investors and could have an impact on market sentiment.

Economic Data Releases

This would include key statistics, due to be released next week, on the economy, such as manufacturing PMI data of the US and India, apart from a speech from Federal Reserve Chair. Such data might keep the market quite volatile.

Sector outlook

• Car Sector: The focus will be entirely on the car sector as soon as the OEMs come out with their monthly auto sales figures. The market will look at how certain segments play out as the current economic conditions play out.

Intrinsic Dynamics of the Domestic Market

• FII and DII Fund Flows: We would be eyeing the fund flows of both the FIIs and DIIs. With respect to the intensity of the recent FII outflows, strong buying by the latter has kept the market momentum on.
• Crude Oil Price: A change in the crude oil price due to their direct impact on inflation and corporate earnings will be observed.

Technical Analysis of the Market Indices.

Benchmark indices ended down on the back of volatility in the previous session. At the close, the Sensex was down 210.45 points or 0.27 per cent at 79032.73, and the Nifty down 33.90 points or 0.14 per cent at 24,010.60.

Automotive Sales Outlook

Market players would be eyeing the monthly vehicle sales number for June, to be declared on July 1. Automobile wholesale volumes across segments are likely to be a mixed bag, with increase in two-wheelers and passenger vehicles. That apart, the commercial vehicle market is expected to witness flat sales growth this month, while tractor sales will continue a decline seen last month. According to Nuvama Institutional Equities, two-wheeler and tractor volumes would rise in high single digits versus low single digits for PV from FY24 to FY26.

Domestic Economic Data Releases

Next week, a slew of domestic economic data indicators will be released, including HSBC Manufacturing PMI Final for June on July 1, HSBC Services and Composite PMI Final for June on July 3, and foreign exchange reserves for the week ended June 28 on July 5.

US Economic Events

The events around the world would revolve around the FOMC Minutes, which are due on July 3, and the address to the parliament by Federal Reserve Chair, Jerome Powell, on July 2, 2024. Apart from these, non-farm payrolls, unemployment rate, JOLTs job opportunities, and monthly factory orders would also be some of the non-farm payrolls to be watched by investors.

IPO Market Activity

The primary market is geared for yet another blockbuster week, as three firms line up IPOs of over Rs 2,700 crore. Emcure Pharmaceuticals, Bansal Wire, and Ambey Laboratories filed the IPOs. The investors will witness up to 11 listings apart from the above-mentioned three public offerings on the bourses, as Allied Blenders and Vraj Iron and Steel also attracted good investor response to their public issues a fortnight ago.

Volatility and F&O indicators

The volatility was below the 15-day and 200-day EMA, Exponential Moving Average, and hence did not pose any threat to the bulls. The India VIX or the fear index slipped 2.47 percent to 13.8 levels on Friday but has risen 4.72 percent this week.

Conclusion

To sum up, the Indian market has been resilient in the wake of global inflation fears and mixed signals. The increases this week reflect underlying positive sentiment. The market is likely to swing sideways next week in the absence of any major buying or selling signals. The monsoon’s development, the upcoming GST meeting, and big global economic data releases would be some key indicators to track. Sector-specific changes, particularly in the automotive sector, and swings in FII and DII fund flows will also turn out vital in deciding the direction of the market.

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