Key market triggers for the upcoming week include Q2 results, inflation data, and global cues

 Key market triggers for the upcoming week include Q2 results, inflation data, and global cues

The second week of October will be watched closely by investors because it is packed with important events that will determine the direction of the market, such as the results of the July-September fiscal 2023–24 (Q2FY24) quarter, macroeconomic data, foreign fund inflow, crude oil prices, and global signals.

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) maintained the same position both repo rates and policy stance, in line with Street forecasts, while the domestic stock benchmarks Sensex and Nifty settled higher in the previous session.

Five of the six MPC members voted in favor of the central bank's continued "withdrawal of accommodation" policy position. Additionally, by the end of the erratic week, confidence was reinforced by good macroeconomic figures and the tenacity of local investors.

On Friday, October 6, the Nifty 50 closed at 19,653.50, an increase of 108 points or 0.55 percent, and the Sensex closed at 65,995.63, an increase of 364 points or 0.55 percent. The BSE Smallcap index finished 0.56 percent higher while the BSE Midcap index increased by 0.66 percent.

Following a break in the sell-off in the bond market, international signs were also encouraging. When the Sensex closed on Friday, the 10-year US bond yields were close to 4.74. The dollar was stable and appeared poised to close the week up.

The Nifty 50 gained 0.08 percent, while the Sensex increased by 0.25 percent for the week. The BSE Midcap index, on the other hand, decreased by 0.81 percent this week, while the smallcap index increased by 0.79 percent.

Following the governor of the RBI's announcement that the agency will conduct open market operations (OMO) through auctions to control liquidity, India's 10-year bond yield increased to its highest level in 17 months and was at 7.32 percent.

The market has been further impacted by the RBI's hawkish posture, particularly in its management of liquidity to contain inflationary threats, which has increased the yield on India's 10-year bond. Vinod Nair, Head of Research at Geojit Financial Services, however, noted that the market "found a few suggestions from strong domestic PMI data and updates in crude oil prices, which have helped it filled the weak trend observed in the previous three weeks."

The primary market is in for a busy week ahead with a number of fresh listings planned for the mainboard and small-and-medium businesses (SME) categories. Investors' attention has switched to the Q2FY24 reports, starting with IT and banks, thus this week will be critical from a domestic and technical perspective. 

Despite the easing of the US 10-year bond rate and a steep decline in the price of crude oil, economists predict the market to remain range-bound with some volatility as long as global unrest persists.

The following are the major catalysts for the financial markets this next week:

Q2 outcomes

All eyes will be on the start of company performance for the second quarter of the current fiscal year (Q2 FY24), which runs from July to September, in the next week commencing on Monday, October 9.

The biggest software services provider in India, Tata Consultancy Services (TCS), is scheduled to release its Q2 results on October 11, 2023, with HCL Technologies and Infosys following on October 12. This is causing particularly high expectation among investors. The TCS board's meeting on Wednesday is anticipated to include discussion of a share buyback.

IIP Data, WPI, and CPI-based Inflation

On the macroeconomic front, significant data releases that will influence market direction are planned for the upcoming week. Investors anticipate the release of manufacturing and industrial production data for August on October 12. The consumer pricing index (CPI) based inflation rate for September will also be revealed at the same time. 

Last but not least, on October 13 the wholesale pricing index (WPI) data for September is scheduled for release. Collectively, these macro indicators help to provide a more comprehensive insight of India's economic environment during that time.

14 new listings will debut on D-Street as 1 IPO opens.

The SME IPO Arvind And Company Shipping IPO, one of the initial public offerings (IPO), will commence on Thursday, October 12, and will be open for bidding until October 16, 2023.

In addition to the IPO, up to 14 firms from the mainboard and SME divisions will list in the upcoming week. On October 13, Plaza Wires will list on the BSE and NSE. In the upcoming week, Arabian Petroleum, City Crops Agro, Sunita Tools, and ten more SME companies will be listed. See complete list here.

Outflow of FII

The first week of October saw a continuation of the selling by foreign portfolio investors (FPIs) that began last month due to record-high US bond yields and a stronger US dollar. As of October 6, FPIs sold Indian shares worth 7,998 crore and offloaded a total of 6,024 crore, including debt, hybrid, debt-VRR, and equities, according to statistics from the National Securities Depository Ltd (NSDL).

In September, foreign institutional investors (FIIs) sold 25,000 crore worth of securities in cash markets, and they carried on selling in the first week of October. notwithstanding the decline in crude price to $84 per barrel. Analysts predict that despite Q2 momentum, FPIs and FIIs may not stop selling due to high US bond yields and a higher US dollar.

World cues

On the international front, the US 10-year bond yield reached a 16-year high of 4.78 percent after employers' data revealed that the country generated 336,000 jobs in September, far more than forecast, demonstrating the employment market's resiliency.

The US manufacturing PMI rose to 49.8 in September, while new orders fell for the sixth consecutive month. US unemployment claims nearly reached recent lows for the week ending September 30 at 2,07,000.

According to Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services Inc., "markets on Monday would react to critical US non-farm payroll and unemployment data because these numbers could provide a projection for future US Fed policy stance." 

On the same front, Vinod Nair of Geojits stated that the US's strong job market has prompted worries about a future rate hike by the Fed, with the surge in US bond yields serving as a sign that rates may soon rise.

The dollar index and US bond yields continue to dominate the attention of global markets. These variables will be keenly watched since they have the potential to affect FII activity, crude oil inventories, rupee movement against the dollar, and gold prices, as well as market mood.

Major international events like US inflation, Eurozone inflation data, US first unemployment claims, crude oil, OPEC report, UK GDP, Trade balance, and China CPI will provide additional market cues.

Technicals: ''Even if we have seen a slight improvement, sentiment is remains negative on the worldwide front. The Dow Jones Industrial Average (DJIA), the US's benchmark index and one of the most important markets, has breached the critical support level of 33,200, according to Ajit Mishra, SVP of Technical Research at Religare Broking.

We believe that oversold signals may trigger a rebound in the interim, although the presence of a barrier in the 33,700–34,000 range would limit the upside. It would be challenging for our markets to maintain the recovery tone without help from the global indices, Mishra noted.

Price of oil

Even though oil prices increased in the previous session, they experienced their biggest weekly losses since March as macroeconomic headwinds and another partial relaxation of Russia's fuel export embargo added to demand concerns.

Brent futures ended the trading day on Friday at $84.58 a barrel, up 51 cents. US West Texas Intermediate crude futures closed at $82.79 with a 48 cent gain. According to news agency Reuters, WTI saw a dip of more than 8% and a decline of almost 11% in Brent for the week.

Oil prices may attempt to find support around $80 per barrel, given the continued supply crunch. According to Ravindra V. Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities Ltd., investors should exercise caution ahead of the US Non Farm Payrolls data later today, which could offer additional hints about the Fed's policy trajectory.

Company Initiative

No stocks will trade ex-dividend in the upcoming week, according to BSE statistics. In the forthcoming week, beginning on October 9, shares of a select companies, including Sigachi Industries and MRP Agro Ltd, among others, will trade either ex-split or ex-bonus. See complete list here.

The Technical View

According to observers, Nifty is once again circling the short-term moving average (20 EMA) after recently failing to cross it. The index experienced a big decline before recovering from the 19,333 level. 

The 20-DMA at 19,800, which also happens to be in a region with a lot of open interest, is the actual problem. According to Pravesh Gour, Senior Technical Analyst, Swastika Investmart, breaking through this level at 19,800 would indicate the conclusion of the downturn and Nifty might next go for the 20,000–20,200 region.

However, a crucial support zone exists between 19,300 and 19,250. The Nifty could continue to decline toward 19,000 and 18,800 if it drops below this area. As a result, it's crucial to pay great attention to the 19,300–19,800 area since it indicates where the Nifty is trading at the moment,'' continued Gour.

According to Religare's Ajit Mishra, the rise in certain IT majors ahead of their earnings is undoubtedly promising, while others are still not giving off any strong indications. Additionally, the broader indices, particularly the midcap index, are beginning to exhibit early signs of weariness. In light of everything, traders should maintain their attention on stock selection and favor index majors over others,'' Mishra noted.

Regarding Bank Nifty, analysts identify the 44,000 level as a critical support zone, thus it is important to pay close attention to it. A rally towards the area of 44,800 to 45,000 is possible if Bank Nifty is able to maintain its position above this level. 

However, it's crucial to remember that the present rise in the index may be threatened if Bank Nifty drops below the 44,000 to 43,800 level. To make informed trading decisions in the banking industry, market participants should regularly monitor these levels, according to Arvinder Singh Nanda, senior vice president of Master Capital Services.