Market ahead: Q3 results, Red Sea crisis, inflation, FII activity among key market triggers to watch next week by StuffsEarth

On Friday, Key equity indices the Sensex and the Nifty 50 ended with gains for the second consecutive session. Sensex finally closed the day 179 points, or 0.25 per cent, higher at 72,026.15. Meanwhile, Nifty50 settled at 21,710.80, up 52 points, or 0.24 per cent.

Also read: Weekend Wrap: From Vodafone Idea to Yes Bank, top news and market movers this week

The broader market continued to demonstrate strong performance for the second consecutive week, with the Nifty Midcap 100 recording a gain of 2.5 percent and the Nifty Smallcap 100 showing a 1.9 percent increase. Nevertheless, analysts caution investors to exercise prudence in light of the upcoming results season and ongoing uncertainties in the Red Sea region.

“The market ended on a flat note, tracking weak global cues, with the US 10-year yield edging higher ahead of the release of US payroll data later today, which may shape the expectation for the Fed policy. Investors are also staying cautious ahead of eurozone inflation data today. On the domestic front, the market is moving towards the results season, and we expect the exuberance of the broader index may be tested if the December quarter earnings do not justify the valuation,” said Vinod Nair, Head of Research, Geojit Financial Services.

Also read: Bajaj Auto, Chambal Fertilisers to consider buyback of shares next week

Here are key market triggers for stock market in the coming week –

Q3 result season

As per the BSE earnings calendar, approximately 65 companies are scheduled to unveil their results from January 8 to January 13. Among the Nifty 50 companies, TCS (January 11), Infosys (January 11), HCL Tech (January 12), Wipro (January 12), and HDFC Life Insurance (January 12) are set to announce their financial results for the end of December.

Also read: Tata Steel Q3 update: Crude steel production stood at 5.32 million tons, up 6%

Analysts at Elara Securities anticipate subdued performances from the IT firms, projecting an average constant currency (CC) growth of 1.4-1.6 percent in dollar terms. This muted sequential growth in the December quarter is attributed to prolonged higher inflation, delays in discretionary projects, and overall sluggish growth. The October-December period is traditionally a slower quarter, influenced by the holiday season in the US and European countries, which serve as the major markets for Indian IT firms.

Red Sea crisis

The crisis persists unabated, with Houthi rebels persistently targeting commercial ships in the Red Sea amid the escalating Israel-Hamas conflict. Maersk, a shipping giant, has already announced the rerouting of all vessels away from the Red Sea for the foreseeable future, cautioning customers about potential disruptions.

As the Red Sea crisis intensifies, there are concerns about its impact on trade. A report from the economic think tank GTRI on January 6 suggested that it could lead to a potential increase of up to 60 percent in shipping costs and a 20 percent rise in insurance premiums. In response to this escalating situation, Indian government officials convened with shipping companies last week to evaluate the potential implications.

IPOs next week

Jyoti CNC Automation will be the first mainboard initial public offering (IPO) to hit Dalal Street in 2024. The issue will open for subscription on January 9 and close on January 11.

Also read: Jyoti CNC Automation IPO opens next week. GMP, price, other details of upcoming IPO

Meanwhile, activities in the SME IPO arena are ongoing. Keep an eye on the listing of Kaushalya Logistics on January 8, as well as the upcoming IPOs of IBL Finance, New Swan Multitech, and Australian Premium Solar.

“CY2023 turned out to be an eventful year for the Indian primary market. Although the start to the year was a bit bumpy, a lift in secondary market sentiments resulted in a pick-up in fund raising activity from Q2CY23 onwards. Market is likely to gain further momentum as more companies are now queuing up, the estimated raise is a cumulative amount of at least ₹1 lakh crore, which is more than double the amount raised in 2023. Reports suggest that, as on date, as many as 28 companies have already received a green signal from SEBI for their IPOs, aimed at raising over ₹30,000 crore. Meanwhile, 36 other companies have submitted their draft red herring prospectuses (DRHP) with SEBI for approval. These companies plan to raise a cumulative amount of ₹50,000 crore,” said Mahavir Lunawat, Managing Director, Pantomath Capital Advisors Pvt. Ltd.

Also read: BLS E-Services raises ₹13.75 crore in pre-IPO phase. Revises issue size of upcoming IPO

FII Activity

During the initial trading week of the year, foreign institutional investors took on the role of buyers, contrasting with their domestic counterparts who assumed the position of sellers. In the week under review, FIIs exhibited a positive stance by purchasing equities amounting to ₹3,290.23 crore, while DIIs were net sellers, offloading equities worth ₹7,296.50 crore.

This FII inflow aligns with the pattern observed in the last two months of 2023, where foreign investors re-entered the market, propelled by the substantial drop in US bond yields and the weakening dollar.

Also read: FII-backed penny stock under ₹10 hits 52-week high. Gives 85% return in six months

“The sharp up move in the market in December coincided with the surge in FPI inflows during the month which stood at ₹58372 crores. Including the investment through the primary market and others, the December FPI inflows stood at ₹66134 crores. The last two months of 2023 has witnessed big investment by FPIs thanks to the sharp decline in US bond yields and declining dollar. FPI inflows which were negative in the 3 months before December have sharply turned positive in December. The total FPI flows for 2023 stood at ₹171106 crores,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

He further added, “In December, FPIs were big buyers in financial services and also in IT. FPIs also bought in sectors like autos, capital goods, oil and gas and telecom. Since 2024 is expected to witness further declines in U.S. interest rates, FPIs are likely to increase their purchases in 2024 too, particularly in the early months of 2024 in the run up to the General elections. FPI inflows into debt will also see acceleration in 2024. FPI inflows can help accelerate the uptrend in the main benchmark indices since the bulk of the FPI flows will be into large-caps.”

Oil prices

Oil prices experienced an upward surge on Friday, propelled by U.S. Secretary of State Antony Blinken’s week-long diplomatic efforts in the Middle East to ease tensions arising from the Israel-Hamas conflict.

Brent crude futures closed with a gain of $1.17, or 1.51%, reaching $78.76 per barrel. Meanwhile, U.S. West Texas Intermediate crude futures concluded the day up $1.62, or 2.24%, at $73.81.

The rebound in crude prices followed Thursday’s losses, which were triggered by significant increases in U.S. gasoline and distillate stocks. Both benchmarks closed the first week of the year with overall gains.

“With the tensions in the Middle East, the geopolitical trading premium has to get pushed higher,” John Kilduff, partner at Again Capital LLC was quoted as saying by StuffsEarth.

Also read: Nomura predicts 12% increase in Nifty this year; what will drive the rally?

Global and domestic economic data

The Bureau of Labor Statistics is scheduled to release the US Consumer Price Index (CPI) on January 11. Projections indicate a 0.3 percent month-on-month increase in the headline CPI for December. Similarly, the core CPI, excluding fluctuations in food and energy prices, is expected to show a comparable 0.33 percent monthly uptick. The trajectory of inflation will play a crucial role in determining how long the US Federal Reserve maintains elevated interest rates, although it has signaled the possibility of three rate cuts in the upcoming year.

On the home front, all eyes are on the upcoming release of the Consumer Price Index (CPI) inflation data for December, scheduled for January 12. Anticipated by most experts, there is an expectation of a 10-20 basis points uptick from the 5.5 percent reported in November, primarily attributed to a potential rise in food inflation. Concurrently, there is an outlook for core inflation to experience a slight moderation from the 4.05 percent recorded in November.

In addition to the CPI figures, key economic indicators set for release on January 12 include industrial production data for November, foreign exchange reserves (for the week ending January 5), and statistics on bank loan and deposit growth (for the fortnight ending December 29).

Also read: Buy or sell: Sumeet Bagadia recommends three stocks to buy on Monday

Technical view

According to rvinder Singh Nanda, Senior Vice President of Master Capital Services, Nifty is consistently establishing higher highs in its daily chart, with recognized support levels at 21,500 and 21,400. He further pointed out that immediate resistance is expected at 21,800 and 21,900. 

Meanwhile, Pravesh Gour, senior technical analyst at Swastika Investmart, suggested that should Nifty successfully maintain levels above 21,800, the next target levels would be 22,000 and 22,200.

“Bank Nifty is respecting its 20-DMA around the 47,800 mark. On the upside, 48,500–48,800 is acting as an immediate supply zone; above this, we can expect a move towards the 49,500–50,000 level. If it slips below 20-DMA, then 47,000 will be the key support level,” Gour said.

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Published: 07 Jan 2024, 09:32 AM IST