Week Ahead: Auto sales, Q3 updates, US Fed minutes among key triggers; Nifty 50 eyes record highs as markets enter 2024
- Analysts expect that the euphoria in markets is expected to continue on account of strong macro factors and positive global cues. However, some consolidation can be expected in the initial sessions after Nifty 50 surged almost eight per cent in December.
Investors will eye a host of triggers as stock markets enter 2024 amid record high levels, after ranking among the top-performing stock indices globally in 2023. The bull-run in Indian financial markets is likely to continue in 2024 as foreign interest remains robust, with heavy buying expected in both equity and debt markets, said several analysts and industry watchers.
The key stock market triggers in the first week of 2024 include domestic cues, macroeconomic indicators, auto sales figures, October-December quarter (Q3FY24) updates, foreign capital inflow, and global cues.
Domestic equity benchmarks Nifty 50 and BSE Sensex rose around 20 per cent in 2023, logging their second-best year since 2017. D-Street investors added a significant ₹81.90 lakh crore to their wealth in 2023 powered by a stellar rally in stocks.
The bull run was supported by sustained domestic mutual fund inflows, foreign capital inflows, better-than-expected economic growth, and robust corporate earnings. Nifty 50 marked the eighth consecutive year of positive returns.
Also Read: From Tata Motors to Infosys, here are the top 10 Nifty 50 stocks that moved the most in 2023
India became a stock market superpower with market capitalisation surpassing the $4 trillion mark securing fifth position after the US, China, Japan and Hong Kong. In 2023, the BSE benchmark jumped 11,399.52 points or 18.73 per cent, and the Nifty climbed 3,626.1 points or 20 per cent.
The broader small- and mid-caps gained about 55.62 per cent and 46.57 per cent in 2023, far outperforming the blue-chip indexes despite valuation concerns. The BSE smallcap gauge jumped 13,746.97 points or 47.52 per cent this year while the midcap index climbed 11,524.72 points or 45.52 per cent.
On the last trading session of 2023, the Nifty 50 settled at 21,731.40 and Sensex closed at 72,240.26, snapping their five-day winning streak, on profit-booking in select heavyweights even as the mid and smallcap indices ended with healthy gains. The BSE midcap and smallcap indices hit their fresh record highs of 36,889.87 and 42,728.21 respectively during the session.
In the last five trading sessions, the BSE benchmark rallied 1,904.07 points or 2.70 per cent, and the Nifty climbed 628.55 points or 2.97 per cent. Nifty 50 surged more than seven per cent in December alone.
Vinod Nair, Head of Research at Geojit Financial Services said, ‘’Despite a slight profit booking on the last trading day of the year, the domestic market experienced a gradual rally, riding on the positive global market trend. The optimism is fuelled by expectations of rate cuts by the US Fed and a cooling global inflation scenario.''
The anticipation of political stability in the upcoming national poll in 2024 and a positive market outlook are supportive factors. Sector-wise, auto and FMCG outperformed in expectation of a revival in demand, while the IT sector underperformed due to profit booking, according to Nair.
‘’The euphoria is expected to continue during the start of the next year on account of the exuberance of rate cuts and the drop in bond yields. We expect a modest return of 10 to 12 per cent on the main market in CY24,'' added Nair.
Going forward, a busy week awaits the primary market as some new initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segments. The upcoming week will be crucial from the domestic and technical point of view as investors will closely eye corporate announcements along with and macroeconomic and global cues.
Overall, analysts expect markets to see consolidation in the initial sessions this week after Nifty 50 surged almost eight per cent in December, but still expect the benchmark to test the 22,150-mark over the bullish sentiment. The ongoing positive momentum is likely to continue in the near term driven by healthy macros, foreign capital inflow and declining US bond yields.
Here are the key triggers for stock markets in the coming week:
Q2 Updates, Auto Sales:
Investors will be busy analyzing corporate earning estimates/updates announced by several companies in the coming week as the first batch of Q3FY24 results are set to be released from January 11 - starting with tech majors Tata Consultancy Services (TCS) and Infosys.
On the macroeconomic front, market participants will be closely observe key numbers such as forex reserves, surprise announcements on commercial cooking gas rates or petrol and diesel prices, and auto sales figures.
Auto stocks are expected to remain in focus as major automakers will begin releasing their December sales figures starting from January 1. ‘’These sales figures will provide valuable insights into consumer demand and the health of the auto industry, potentially impacting the performance of related stocks,'' said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.
One ongoing IPO, 7 listings to hit D-Street:
In the SME segment, Kaushalya Logistics IPO will close for subscription on January 3. Among listings, shares of Sameera Agro will get listed on NSE SME on January 1. Shares of AIK Pipes And Polymers will get listed on BSE SME on January 2.
Shares of Balaji Valve Components, Manoj Ceramic Limited will get listed on BSE SME, while shares of HRH Next Services and Akanksha Power and Infrastructure will get listed on NSE SME on January 3. Also, shares of Kay Cee Energy & Infra will get debut on NSE SME on January 5.
FII Activity:
Foreign institutional investors (FIIs) were net buyers in Indian equities for three out of four days last week, infusing ₹8,648.96 crore, while domestic investors invested lower, but also bought for three sessions.
Foreign portfolio investors (FPIs) were net buyers in the Indian stock market this year with a sharp uptick in December after having reversed their three-month selling streak in November. The inflow intensified this month on strong global cues after the US Federal Reserve signalled the end of its tightening cycle and raised expectations of a rate cut in March 2024. This led to a crash in US bond yields and triggered foreign fund inflows into emerging markets like India.
FPIs have bought ₹66,135 crore worth of Indian equities and the total inflow stands at ₹84,537 crore as of December 29, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. FPIs heavily bought stocks in financial services, according to analysts.
For the entire calendar year 2023, FPIs bought ₹1.71 lakh crore in Indian equities and the total inflow stands at ₹2.37 lakh crore taking into account debt, hybrid, debt-VRR, and equities, according to NSDL data. FPIs' net investment in Indian debt market stands at ₹68,663 crore during 2023.
Global Cues:
Analysts say that global cues remain sparse ahead of a New Year there will be no trading in the US, or most of the European and Asian Markets on January 1. The movement of the rupee against the dollar and US bond yields will be closely watched by investors next week, as they are likely to dictate the overall trend on the bourses.
On the macroeconomic front, the US Federal Reserve will release the Minutes of the Federal Open Market Committee (FOMC) meeting on January 4, which was held in December 2023. The US nonfarm payrolls data for December will be announced on January 5, 2024.
‘’The performance of global indices will remain in focus for cues. Apart from a steady performance from the US markets, we are seeing participation from other world indices also. We are eyeing a new milestone of “39,000” in the Dow Jones Industrial Average (DJIA) and expect the 36,500-37,100 zone to act as a cushion in case of any dip,'' said Ajit Mishra, SVP - Technical Research, Religare Broking Ltd.
Oil Prices:
Crude futures lost over 10 per cent in 2023 in a volatile year of trading and reported their biggest annual drop since 2020, marked by geopolitical conflict in the Middle East and concerns about the oil output levels of major producers around the world.
The Organisation of Petroleum Exporting Countries and its allies (OPEC+) is currently cutting output by around six million barrels per day, representing about six per cent of global supply.
The geopolitical tensions in the Middle East escalated on the last day of 2023 as Israel intensified its attacks in southern Gaza, putting upward pressure on prices. Brent crude on Friday, the last trading day of the year, settled at $77.04 a barrel, down 11 cents or 0.14 per cent.
US West Texas Intermediate crude settled at $71.65 a barrel, down 12 cents or 0.17 per cent. Both contracts slipped more than 10 per cent in 2023 to close out the year at their lowest year-end levels since 2020.
Corporate Action:
Shares of some companies, including Nestle India and few others will trade ex-split in the coming week, starting from Monday, January 1, 2024. Some other companies will also trade ex-dividend and ex-bonus, while some have announced a buy back of shares next week. Only one stock, i.e, Akshar Spintex Ltd will trade ex-dividend next week. Check full list here
Technical View:
After some initial consolidation, Nifty 50 has the potential to inch gradually towards the 22,150 zone next so traders should use the consolidation phase to add quality names on dips. ‘’On the downside, we expect Nifty to hold the 21,150-21,500 zone,'' said Religare Brokings' Ajit Mishra.
‘’All sectors are contributing to up move on a rotational basis so maintain focus on stock selection and prefer counters that are attracting consistent interest. Besides, certain themes like chemicals, paint and fertiliser, etc are also gaining noticeable traction so plan your trades accordingly,'' added Mishra.
Geojit Financials' Vinod Nair advises to diversify the investment pattern to multi-assets. It is suitable to be diverse when equities are trading above the long-term average for a prolonged period.
‘’We presume CY24 to be a year of reversal in sector and category wise. We like large caps compared to mid and small caps. Generally, it will be a stock- and sector-specific year. Sectors we like are Banks, Manufacturing, Pharma, Chemical and IT. A correction in the consumer sector should be capitalised in CY24,'' added Nair.
Bank Nifty slipped lower, forming a small red-bodied candle on the daily chart. Resistance is situated at 48,300 on the higher end. ‘’As long as the index stays below 48,300, the trend could lean towards favoring the bears. Moreover, a decisive drop below 48,000 might drive the index below 47,500. Conversely, a decisive move above 48,300 could propel the index towards 48,800-49,000 on the higher end,'' said Rupak De, Senior Technical Analyst at LKP Securities.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions
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