Sensex, Nifty week ahead: FOMC minutes, FII flow and other factors that may drive Dalal Street

Indian equity markets ended in green for a third straight week with data showing that the retail inflation based on the Consumer Price Index (CPI) eased for the second consecutive month to a four-month low of 4.87 per cent in October 2023, in line with cooling global inflation. This week, investors will be eyeing key events such as Foreign Exchange Reserves data, FII investments, the Global Services PMI, and the FOMC minutes in the US that will keep the markets buzzing.

Economic data: On the economic front, investors would be eyeing the foreign exchange reserves data to be out on November 24 for further cues. Foreign exchange reserves in India increased to $590.78 billion on November 3 from $586.11 billion in the previous week. Meanwhile, the trend in investment by foreign institutional investors and the movement of the rupee against the dollar will also be closely watched by investors.

US market data: On the global front, investors would be eyeing important economic data from the United States (US), starting with the Chicago Fed National Activity Index, Redbook on November 21, FOMC Minutes, Initial Jobless Claims, and Michigan Consumer Sentiment, on November 22, S&P Global Composite PMI, S&P Global Manufacturing PMI, and S&P Global Services PMI on November 24.

Foreign investments: V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said: "An important trend in the market is the increasing clout of DIIs, HNIs, and retail investors and the diminishing influence of FPIs. During August, September October and November till 15th FPIs cumulatively sold stocks for Rs 83,422 crore through the exchanges. During this period, DIIs alone bought stocks worth Rs 77,995 crore. FPI selling is completely neutralised by DII and individual investor buying. This is the reason why Nifty is around 19700, the same level that it was in early August."

He added that the resilience of the market and strong upmoves on favourable days have forced a rethinking in FPI strategy. That’s why they turned buyers on the 15th and 16th of this month after sustained selling in the first two weeks of November. “The sharp decline in the US 10-year bond yield to 4.45 per cent has turned out to be an inflection point for the mother market and thereby to the global stock markets. Markets now believe that the Fed is done with rate hikes and will slowly start discounting rate cuts in 2024. If the declining trend in US inflation persists the Fed may cut rates by mid-2024. This can facilitate FPI inflows into EMs like India" Vijayakumar said.

Trend in global markets: Deepak Jasani, Head of Retail Research at HDFC Securities said, “The RBI's action to raise risk weights for unsecured loans dampened banking and NBFC stocks while Insurance and AMC stocks benefitted out of rotational buying within the BFSI sector." Asian stocks mostly fell on Friday, as investor sentiment cooled following recent gains driven by hopes that US interest rates had peaked. European shares opened higher as fresh signs of an economic slowdown prompted investors to raise bets on interest-rate cuts next year.

Technical outlook: Nifty ended lower on November 17 after swinging between gains and losses. At close, Nifty was down 0.17 per cent or 33.4 points at 19.731.8. Volumes on the NSE rose to near-term highs. Broad market indices ended minorly in the positive even as the advance-decline ratio, though positive at 1.16:1, dipped over the previous day. “Nifty formed two back-to-back candles with high upper shadows. This denotes selling pressure on rises. Nifty could hence find it difficult to move and stay above 19850 in the near term while the 19464-19547 band could offer support,” Jasani said.

Bank Nifty: Kunal Shah, Senior Technical Analyst at LKP Securities, said that following the RBI's announcement of tightening provisions for consumer loans, the Bank Nifty opened with a gap down and sustained below the 44,000 mark. The index's next support is situated at the 43,300-43,250 zone, serving as a crucial line of defense for the bulls. “If this level holds, it could pave the way for a potential recovery towards the 44,000 mark. However, a breach of the mentioned support may intensify selling pressure, leading the index further down towards the 42,700 level on the downside", Shah said.

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