Market Outlook: Will Monday see highs or profit booking?

As the market enters a new week, attention turns to how it will open on Monday. This marks the fifth week of bullish momentum out of the last six, with the real estate sector leading the charge, followed by the banking and financial sectors. In contrast, the pharma sector experienced a downturn. Notably, the IT index, typically robust, closed down 2.75% due to concerns over layoffs in the US and a weakening dollar.

The Indian stock market reached new heights this week, surprising many with its rapid rise. Both indices closed at historic highs of 25,849.25 and 84,694.46, respectively. This surge followed the US Federal Reserve's interest rate cuts and the dismissal of recession fears after positive unemployment data. Foreign investors were key players in this rally, injecting record amounts of capital.

The Bank Nifty saw the most significant gains, rising 3.5% to reach an all-time high. The mid-cap index showed modest gains, while the small-cap index dropped nearly 1%.

Primary Market Activity

The primary market will remain active this week, with several new IPOs and significant listings in the small and medium (SME) segment. Noteworthy IPOs include Manba Finance and KRN Heat Exchange.

Key Economic Data

Investors will also focus on key macroeconomic indicators, such as HSBC Composite PMI Flash, Manufacturing PMI Flash, and Services PMI Flash, along with trends in foreign fund flows and crude oil prices.

Foreign and Domestic Investor Trends

During the week, foreign institutional investors (FIIs) made aggressive purchases, investing Rs 14,000 crore on Friday alone, with approximately Rs 8,000 crore attributed to FTSE rebalancing. On a net basis, FIIs invested Rs 11,517.92 crore in the cash segment, while domestic institutional investors (DIIs) were net sellers, offloading Rs 633.67 crore.

Global Indicators and Outlook

Despite significant rate cuts by the US Fed, global markets remain cautious. The Bank of England (BoE) maintained stable rates amid inflationary pressures. At the same time, the Bank of Japan (BoJ) has adopted a "wait-and-watch" policy following its interest rate hike in July.

Prashanth Tapse Sr VP Research analyst at Mehta Equities said, ''US GDP growth numbers and Fed Chairman Powell's speech will be critical for market direction this week, with investors seeking clarity on potential rate cuts. Domestically, PMI data and foreign exchange reserves will shape sentiment, while Nifty's technical setup remains bullish. Key support is at 25,251, with resistance near 26,000. Expect Nifty to trade within 24,700-26,000, with positive bias. A preferred trade is buying Nifty between 25,677-25,701 for targets up to 26,351, with a stop at 25,422."

This week, no major triggers are expected, but U.S. macroeconomic data will be crucial for market direction. The ongoing Israel-Lebanon conflict is unlikely to impact markets, and there appear to be no immediate threats to Israel from Iran.