Sensex, Nifty: Key factors that may influence Dalal Street this week

The coming week is going to be crucial as investors will be eyeing Services PMI to be out on December 05. The S&P Global India Services PMI was up to 55.1 in October 2022 from September's six-month low of 54.3. Also, the traders would be awaiting the Reserve Bank of India (RBI) interest rate decision, which will be announced on December 07. There are expectations that the RBI may increase the repo rate. Traders will also be looking for Foreign Exchange Reserves data scheduled to be released on December 09.

Besides, the Finance Ministry has called a meeting of chief executive officers (CEOs) of banks, including the top six private sector lenders, on December 5 to discuss ways to promote cross-border trade in the rupee instead of the US dollar. Meanwhile, after the first phase of the Gujarat legislative assembly election, the second phase of the election to 93 seats will be held on December 5, with results for both phases due on December 8.

Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: "FPIs turned strong buyers in November consistently buying financials, IT, autos, FMCG, capital goods and telecom. They were sellers in financials in October but were buyers in November. There is no consistency in their sectoral selling strategy. In the short run, the most important factor determining FPI strategy is the movement in the dollar index.”

“When the dollar index moves up and is expected to trend up, they sell. Conversely, when the dollar index declines and is expected to trend down, they buy. Going forward, India will get its fair share of FPI money. But the high valuation in India will be a deterrent," he added.

On the global front, from the US traders will first be eyeing the Factory Orders, S&P Global Composite PMI, S&P Global Services PMI and ISM Non-Manufacturing PMI on December 05, Exports & Imports data and Redbook on December 06, API Crude Oil Stock Change and EIA Crude Oil Stocks Change on December 07, Initial Jobless Claims on December 08, Producer Price Index, Wholesale Inventories, Fed Quarterly Financial Accounts and Baker Hughes Oil Rig Count on December 09.

Market Veteran Deepak Jasani, Head of Retail Research at HDFC Securities, said: " Global stocks were cautious on Friday, after recent sharp gains as traders awaited the monthly US jobs report for clues on the Federal Reserve’s next policy steps and worries about economic growth resurfaced in Europe. Gains over the past few days are being digested and markets are looking at fresh data points to decide the further direction. Realty stocks performed well in India due to a broker upgrade. Auto stocks came under profit taking post the monthly sales numbers. Over the week, Nifty gained 0.99%. Nifty could face resistance in the 18758-18888 band while 18462-18529 band could offer support in the near term" he said.

Sumit Pokharna, vice president - Fundamental research at Kotak Securities Ltd, said: "Given lower crude oil prices, expectation of inflation peaking and expectation of slowing down of monetary tightening, we are positive on equity markets but given the higher valuation, a further rise may be muted. We can see multiple triggers like lower crude oil prices, lower fiscal deficit, higher government expenditure, pick-up in private capex, reformist budget and housing market revival which can support markets in the medium to long term.”

“In the recent rally, Mid-cap and small-cap indices, however, underperformed large-cap indices. So one can look at mid-cap companies having strong management pedigree, business moat, strong cash flow, but due to short term headwinds valuations have improved. At this juncture, investors should focus on a stock specific approach rather than just focusing on Nifty. Focus on quality companies in various sectors which have strong growth potential and valuations are reasonable. Just to highlight, IT valuations have become more palatable." Pokharna added.