Sensex, Nifty this week: From IIP data to US inflation to Q4 earnings, factors that may drive Dalal Street

Market participants would be looking at US inflation numbers, industrial production data and key quarterly results that are likely to drive Sensex and Nifty this week. The IIP (Index of Industrial Production) numbers are scheduled to be released on May 12. India's industrial production growth accelerated to 5.6 per cent year-on-year in February 2023, up from an upwardly revised 5.5 per cent the month before and above market expectations of 5.1 per cent. 

On the same day, Consumer Price Index (CPI) for April is also to be released. Annual consumer inflation in India eased to 5.66 per cent in March of 2023, the lowest since December of 2021 from 6.44 per cent in February, and slightly below market forecasts of 5.8 per cent.

Major Results this week: Traders will be eyeing the earnings of prominent companies, such as Bank of India, Union Bank of India, Canara Bank, CG Power and Industrial Solutions, Exide Industries, HFCL, Kalpataru Power Transmission, Pidilite Industries, UPL, and Apollo Tyres. Pharma firms Lupin, Cipla and Dr. Reddy's Laboratories will also release their results this week. Besides these, JM Financial, Raymond, BOSCH, Escorts Kubota, Godrej Consumer Products, Larsen & Toubro, Asian Paints, Eicher Motors, Intellect Design Arena, Siemens, South Indian Bank, HPCL, Hindustan Aeronautics, Indian Overseas Bank, Manappuram Finance, Polycab India, Tata Motors, and Avenue Supermarts will come out with their results.

What to expect this week: Market watcher Vinod Nair, Head of Research at Geojit Financial Services, said: "The domestic market continued to be positive at the beginning of the week, aided by strong FII inflow and favourable domestic macroeconomic data. The manufacturing PMI and the GST collection in April were better due to an increase in new business, a strong pickup in consumer demand, and improved supply chain conditions. As of today, half of the Nifty 50 companies announced their results, and the earnings growth of those stocks was below estimates, mainly due to weak performance by IT, metal, and cement stocks. While the results for banks, financials, and auto were better than estimates.”

However, he said, volatility emerged in the global market due to the Fed's concerns over elevated inflation despite softening its language on future rate hikes and the ECB's hawkish policy action. "We expect continued foreign inflows and favourable domestic macroeconomic conditions to protect the downside. The Q4FY23 earnings estimate of the Nifty is at 11 per cent YoY; therefore, the next set of results is likely to be better and will support investor sentiment. In the week ahead, the release of US and Indian CPI inflation data will be keenly watched by the market to get a direction."

 US market data: On the global front, investors would be eyeing a few economic data from the US, starting from Redbook, IBD/TIPP Economic Optimism Index on May 9 followed by Inflation Rate on May 10, Jobless Claims, Core producer prices on May 11 and finally Michigan consumer sentiment, Baker Hughes Total Rig Count on May 12.

 Technical Outlook for Nifty: Rupak De, Senior Technical Analyst at LKP Securities, said: “The bears returned to the market, as the benchmark Nifty ended the last day of the week with a loss of 1 per cent. Over the week, the Nifty remained volatile before closing flat for the week. A profit booking around 18,200 led to Friday's fall, which took Nifty back to the previous week's close." 

"The short-term trend will, however, remain positive as long as the index remains above 18,000. A fall below 18,000 may take the Nifty into the consolidation zone of 17500–18000. On the other hand, a rejection from the 18,000 level may reintroduce a buying spree, which may take the Nifty back to above 18,200; again, a decisive move above 18,200 may take it towards 18,500–19,000," he said.

Bank Nifty: Kunal Shah, Senior Technical & Derivatives Analyst at LKP Securities, said: “The Bank Nifty bears took over the control and the index fell by more than 2 per cent breaking the support of the 43,000-42,800 zone. The index if sustained below 43,000 will witness further correction towards the 42,500-42,300 zone where the next demand area is visible. The upside resistance of 43,000 if taken out decisively will lead to further short covering toward 43,300 levels."

 Market wrap Market veteran Deepak Jasani, Head of Retail Research at HDFC Securities, said "Nifty fell on May 5 after a sharp up-move on the previous day. MSCI’s clarification on the inclusion of HDFC Bank to MSCI Global Standard Indices led to a sell-off in financials. At close, Nifty was down 1.02 per cent or 186.8 points at 18069. Volumes on the NSE were on the higher side. Broad market indices fell less than the Nifty although the advance-decline ratio fell below 1:1."

"Nifty hesitated to build on the gains on May 05 and fell, ending the week just 0.02 per cent higher. In the process, it formed a bearish shooting star formation on weekly charts. A breach of 18042 on the downside could take the Nifty towards 17863 and later 17550. On up moves, 18180 could provide resistance,” he said.