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Dalal Street Week Ahead | 10 key factors that will keep traders busy – Moneycontrol

Jubilant Pharmova: Jubilant Pharmova’s facility at Roorkee gets six observations from USFDA. The USFDA has issued six observations to the company’s solid dosage manufacturing facility at Roorkee plant after the completion of audit. The USFDA has recently concluded audit of this facility at Roorkee, India of Jubilant Generics, a subsidiary of its wholly owned subsidiary Jubilant Pharma.

The market continued to rise for the fifth straight week ended August 19, but closed up just third of a percent as corrections on Friday trimmed the weekly gains amid profit-booking and caution due to rising US dollar index.

The BSE Sensex reclaimed the psychological 60,000 mark last week, rising 183 points to close at 59,646, and the Nifty50 moved closer to 18,000, up 60 points at 17,758, while the Nifty Midcap 100 and Smallcap 100 indices gained 0.6 percent and 0.4 percent.

FMCG, infrastructure, energy, and realty indices gained more than 1 percent each, whereas pharma, oil and gas, and banks closed in the red.

As we have an expiry in the coming week and rally through the past five weeks, consolidation and volatility are expected to continue with focus more on global cues, including Jackson Hole Economic Symposium, due to lack of domestic cues, experts said.

“Markets may witness consolidation after five weeks of successive rise and it would be healthy. We hardly saw any major decline in the index in the recent phases of consolidation, however, a lot would depend on the performance of the US indices next week where we still see room for further upside,” Ajit Mishra, VP – Research at Religare Broking, said.

It’s prudent to focus more on risk management as correction/consolidation in the index usually derails the momentum even in the top-performing sectors, the expert advised.

Let’s take a look at the 10 key factors that will keep traders busy next week:

1. FII Funds Flow

Foreign Institutional Investors (FIIs) remained consistent buyers this month, barring one day when they were looking net sellers may be due to stake sale in Sona Comstar by Blackstone on August 18. They have bought nearly Rs 18,000 crore worth of shares in the current month, whereas DIIs have taken that strong market mood opportunity to book some profits by selling more than Rs 6,000 crore worth of shares during the month.

Hence, the market will watch closely the mood at the FII desk as experts feel any reversal in their trend could give a temporary pause to the market rally.

2. US Dollar Index

The movement in US dollar index, which measures the value of US dollar against a basket of world’s leading currencies, will also be important to focus on, especially after recent recovery in the DXY.

After its recent bottom, the US dollar index resumed rally again, rising 2.86 percent in last more than a week period to close at 108.10 on Friday as the possibility for another 75 bps hike in September policy meeting seems to be increasing.

In mid-July, the index hit 20-year high of 109.29 levels and then corrected by 3.84 percent to 105.09 levels on August 10. In fact, it saw the biggest weekly gains since April 2020.

As a result, the rupee returned to the psychological level of 80 to a dollar on Friday, though it recovered and settled at 79.92. The currency depreciated consistently through the last four days.

3. Jackson Hole Economic Symposium

Globally, the key event to watch out for would be the annual Jackson Hole Economic Symposium, which would be held during August 25-27. The participants will closely look for cues from the global central banks about their monetary policies especially the speech by Federal Reserve Chair Jerome Powell.

Also read – Fed’s Jerome Powell could use Jackson Hole to flesh out QT thinking

In the recent policy minutes, Federal Reserve has maintained its hawkish stance with focus on bringing inflation back to its 2 percent target. In July, US inflation fell to 8.5 percent, from 40-year high of 9.1 percent in June.

Even the expectations for another 75 bps rate hike by Fed may be rising given the clear view of central bank to bring inflation to its target. Last week, as per Reuters report, St. Louis Fed President James Bullard supported for 75 bps rate hike in September policy meeting given the strength of economy, while 50-75 bps hike in rates in next meeting (September 20-21) looks reasonable for San Francisco Fed President Mary Daly. Current Fed’s policy rate is 2.25-2.50 percent.

Also read – Jerome Powell will face a tough audience in Jackson Hole

4. Global Data Points

Here are key global data points to watch out for next week:

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5. Oil Prices

With the concerns over demand outlook amid rising fears of recession in the US and Europe, Brent crude prices have gradually been declining and trading around six-month low. Hence, the oil price movement will be closely watched by the street in coming weeks.

Also read – Next major trigger for commodities may come from Fed comments in Jackson Hole Symposium

International benchmark Brent crude futures closed at $96.72 a barrel last week, down 1.5 percent on week-on-week, while the prices corrected nearly 22 percent in last more than two months period.

In fact, the falling and stability in oil prices is one of key reasons for equity market rally.

6. Technical View

The Nifty50 has seen formation of bearish Engulfing pattern on the daily charts as it engulfed gains of last three days, snapping eight-day winning streak. It was down more than a percent compared to previous day amid profit taking after crossing the long downward sloping resistance trend line adjoining previous swing highs which experts were indicating overbought levels.

On the weekly scale, there was small bodied bearish candle formation, after four bullish candles in previous four straight weeks.

In coming sessions, the low of Friday’s candle (17,710) could act as an immediate support for the market, followed by 17,500 and 17,300, while 17,992 could be near term resistance for the Nifty50, experts said.

“A negative reversal type candle pattern was formed on the weekly chart that has resulted in a failure of upside breakout of the significant down trend line. This is not a good sign for bulls and one may expect further weakness in the short term,” Nagaraj Shetti, Technical Research Analyst at HDFC Securities said.

As per the indications of smaller to larger chart pattern, one may expect Nifty to slide down to 17,300 levels (23.6 percent Fibonacci retracement of June bottom to Friday’s high) in the next 1-2 weeks, the expert said, adding an immediate resistance is placed around 17,850 levels.

7. Monthly F&O Expiry Week

We have monthly expiry of August futures & options contracts on coming Thursday as market participants will close their current month positions and rollover the positions to next month. Hence there could be some kind of volatility can’t be ruled out in the coming week, and 17,000, which have maximum Put open interest, could act as a crucial support, while 18,000, which have maximum Call open interest, may be crucial resistance for the Nifty, experts said.

On the Option front, we have seen maximum Call open interest at 18,000 strike, followed by 17,900 strike, with Call writing at 18,000 strike, then 18,600 and 17,900 strikes. The maximum Put open interest was seen at 17,000 strike, followed by 17,500 strike, with Put writing at 17,300 strike, then 17,200 and 17,500 strikes, and Put unwinding at 17,900 strike, then 18,000 and 17,800 strikes.

“Going ahead, while data points remained positive, a round of consolidation can be expected near psychological levels of 18000 for the Nifty and focus may shift towards midcap, small cap indices,” ICICI Direct said.

The brokerage further said Nifty futures open interest increased sharply over last week and current open interest was the highest seen over in a month. “While FIIs have liquidated some longs, retail participants increased their long positions. We believe strong hands have booked some profits after a strong move was seen during the series in anticipation of some consolidation.”

On the other side, the volatility index India VIX increased by 3.86 percent during the week to 18.29 levels, which made bulls uncomfortable. The volatility needs to trade below 18 levels for stability in the market, experts said.

8. Economic Data Points

The Reserve Bank of India on coming Friday is going to release the deposit and loan growth data for fortnight ended August 12, while foreign exchange reserves for week ended August 19 will also be released on the same day.

In the earlier week ended August 12, India’s foreign exchange reserves had fallen by $2.238 billion to $570.74 billion due to decline in foreign currency assets.

9. Primary Market Action

The primary market will remain active in the coming week as well. Airport service aggregator platform Dreamfolks Services will open its maiden public issue during August 24-26. Its price band will be announced by the company on Monday. It is completely an offer for sale of 1.72 crore equity shares by selling shareholders.

Syrma SGS Technology will finalise its public issue share allotment by August 23, and the trading in its equity shares will commence with effect from August 26.

10. Corporate Action

Stocks like HPCL, Forbes & Company, HEG, Deepak Fertilisers etc will start trading ex-dividend, while Rama Steel Tubes and PDS will go for ex-split next week.

Here are key corporate actions taking place in the coming week:

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Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.