Dalal Street Week Ahead: Things to Keep an Eye on: COVID-19 cases, oil prices, and the Red Sea catastrophe

 Dalal Street Week Ahead: Things to Keep an Eye on: COVID-19 cases, oil prices, and the Red Sea catastrophe

Dalal Street Week Ahead: Things to Keep an Eye on: COVID-19 cases, oil prices, and the Red Sea catastrophe

Experts predict that during the last week of 2023, the market will stay inside a narrow range.

The market can rise the next week to eclipse the prior record high.

As the year draws to a close, Indian markets will have to contend with decreased trade activity over the next holiday week, the possibility of a spike in COVID-19 cases, and growing unease in the Red Sea. Its effect is already apparent, as Indian benchmarks finished lower last week, ending a seven-week winning run.

The BSE Sensex dropped 376.79 points, or 0.52 percent, to settle at 71,106.96 last week, while the Nifty 50 dropped 107.25 points, or 0.49 percent, to 21,349.40. The Nifty and Sensex hit fresh highs of 21,593 and 71,913.07, respectively, on December 20.

The Nifty PSU Bank index dropped 3%, the Nifty Media index dropped 2%, the Nifty Auto index dropped 1.4%, and the Nifty Metal index down 1% among sectors. However, the Nifty Pharma and FMCG indexes also saw increases of more than 1%. The Nifty Smallcap 100 concluded 0.27 percent down while the Nifty Midcap 100 closed 1% lower.

Analysts surmise that investors were motivated throughout the negative week by the 'buy on dip' technique. Vinod Nair, head of research at Geojit Financial Services, said, "We can expect a range-bound trading scenario with limited data points heading into the festive season and year-end."

On December 25, the market will be closed in observance of the Christmas holiday.

In the next short week, traders will be occupied with the following factors:

crisis in the Red Sea

Due to their stated backing for Hamas in the Israel-Gaza conflict, Houthi rebels are directing their attacks at commercial ships that are passing through the Red Sea. Due to the fact that many businesses have either ceased operations or diverted ships, lengthier routes and lower volume have resulted in higher freight prices.

According to CNBC, as of December 21, 158 ships carrying more than 2.1 million cargo containers have been rerouted away from the Rii Sea. This shipment is believed to be worth 105 billion dollars.

According to Moneycontrol, Varun Gogia, Assistant Vice President and Sector Head, Corporate Ratings, ICRA Ltd., total logistics costs are expected to rise, making it challenging for Indian importers and exporters to pass along these costs to final consumers. The Red Sea war has the potential to worsen inflationary pressures if it continues or intensifies.

Covid instances

The federal government of India has advised states to conduct continuous monitoring and report any influenza-like and severe acute respiratory diseases due to the increasing number of cases of the novel COVID-19 JN.1 strain. Additionally, states have been asked to maintain the appropriate proportion of RT-PCR and antigen tests and to provide sufficient testing in all districts in accordance with the COVID-19 testing recommendations. Future developments might impact the market if the situation becomes worse.

oil costs

In anticipation of Angola's potential to boost production after exiting OPEC, oil prices dropped on Friday ahead of the extended Christmas holiday weekend. However, Reuters noted that favorable US economic data and Houthi ship strikes kept supply costs high. Due to worries during the course of the week, oil prices increased.

U.S. West Texas Intermediate (WTI) crude dropped 33 cents, or 0.5 percent, to $73.56 while Brent futures declined 32 cents, or 0.4 percent, to $79.07 a barrel. Following a rise of less than 1 percent the week before, both benchmarks saw an increase of almost 3 percent last week.

FII influx

Foreign institutional investors dumped stocks worth Rs 6,300 crore in the last week as geopolitical worries returned. Additionally, some experts have attributed the selling to the standard profit-booking procedure. In the meanwhile, during the course of the last week, domestic institutional investors purchased stocks for Rs 8,900 crore. In contrast, FIIs have purchased more cash this month than DIIs have.

View the whole FII flow statement here.

"FPI inflows, which had been declining during the previous three months, abruptly turned positive in December. FPI inflows from December 22 to the present total Rs 57,313 crore, which includes purchases made via primary markets and stock exchanges. Financial Services FPI Big purchasers were there, and they also purchased products in the telecom, capital goods, and automotive industries, according to Dr. VK Vijayakumar, chief investment strategist at Geojit Financial Services.

"Since US interest rates are expected to see further decline in 2024, FPIs are likely to increase their purchases in 2024 as well," he said.

domestically released data

Following the market closure on December 29, traders and investors will be watching statistics on bank loan growth, deposit growth, foreign exchange reserves, and infrastructure production.

technological methodology

SBI Securities says that Nifty would close at 21,050-21 next week.

Right now, 100 is a crucial support. "To maintain the positive momentum, Nifty needs to cross 21,430 m to 21,650-21,700," the local trading company said.

According to Ajit Mishra, SVP of Technical Research at Religare Broking, a period of time spent by the Nifty index at its present levels would indicate a good consolidation.

Speaking about Bank Nifty, Director of Progressive Shares Aditya Gaggar said that there is still a long way to go since the breakout of the Descending Broadening Wedge pattern targets 50,250. Samco Securities states that the Bank Nifty's current support is still around 46,600, while resistance is at 48,220.

Listing and IPO

The last week of 2023 will see activity in the primary market, mostly for the SME sector rather than the mainboard segment because there won't be any fresh releases from the latter. All of the public offerings that concluded last week will be listed on the stock market in the next week, with the exception of the Rs 570 crore Innova Captab IPO, which closes on December 26.

On December 26, shares from Muthoot Microfin, Motions Jewelers, and Suraj Estate Developers will be listed; on December 27, shares from Happy Forgings, RBZ Jewelers, and Credo Brands Marketing will be listed.

On December 28th, Azad Engineering will list its equity shares on the stock market, and on December 29th, Innova Captab.

In the SME sector, investors can subscribe to the initial public offerings (IPOs) of AIK Pipes and Polymers from December 26–28, and the IPOs of Shree Balaji Valve Components, Manoj Ceramics, HRH Next Services, and Akanksha Power & Infrastructure from December 27–29. The final IPO of the year will open on December 28 and close on January 2.

The public offerings of Sameera Agro and Infra will conclude on December 27, while the initial public offerings (IPOs) of Trident Techlabs, Supreme Power Equipment, and Infra will finish on December 26.

Regarding listing, on December 26 Sahara Maritime and on December 27 Shanti Spintex & Electro Force (India) will go live, and on December 29 Trident Techlabs, Supreme Power Equipment, and Indifra will list their shares.

Signals from F&O and India VIX

Monthly options data indicates that Nifty 50 will likely encounter resistance around 21,500–21,600, with 21,200–21,000 probably serving as major support and 20,800 levels likely to follow. According to the data as a whole, the index may stay in the general area of 20,800–21,600 in the next days.

The highest call open interest was seen at 22,000 strikes, then 22,000 and 21,800 strikes; substantial call writing was observed at 22,500 strikes, then 22,000 and 21,800 strikes. The highest put open interest was observed at 21,000 strikes, then 21,200 strikes. the strike and 20,800 strike, with writing placed at the strike, followed by the strike at 21,200 and 21,400.

Analysts noted that the India VIX, sometimes referred to as the "fear gauge," is still above the 13.5 mark, suggesting that volatility may soon rise. Holiday week low volume might also lead to increased volatility.

According to SBI Securities, "India VIX crossing and holding above the 13.5–14 level after 8 months suggests a shift in the volatility regime for the upcoming few months." When overleveraged holdings are progressively reduced, it is advised to purchase during a moderate fall.