Indian stock markets started July with a bang, registering their longest winning streak since December 2023 amid a relentless bull run buoyed by the return of foreign funds and stabilizing investor sentiment with the coming of the Modi 3.0 government. The bulls appear to be tightening the screws on Indian markets ahead of the Union Budget 2024 to be presented later this month.
The second week of July will be a focus for investors as any Union Budget related or government policy announcements may lead to stock market movement. Financial results for the April-June quarter of fiscal year 2024-25 (Q1FY25), domestic and global macroeconomic data, corporate announcements, foreign fund inflows, crude oil prices, and global indices will drive market movements this week.
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Domestic equity indexes Sensex and Nifty 50 hit fresh all-time highs last week, supported by favourable global cues and cyclical buying in key sectors.The 30-stock BSE index hit historic 80,000-point levels in a record 58 trading sessions in its fastest ever 10,000-point bull run.
India’s blue-chip Nifty 50 index again hit a record high in yesterday’s trade, registering its longest winning streak this year at five weeks, led by key sectors such as IT, pharma and energy. The broader index outperformed the benchmark, registering gains in the range of 2.4-3.4 per cent.
“A possible rate cut by the US Federal Reserve, a pick-up in foreign fund inflows and strong gains in large private sector bank stocks are driving the bull run in the Nifty 50. Recovery in IT stocks is also supporting the upside,” said Arvinder Singh Nanda, senior vice president at Master Capital Services.
The NSE Nifty 50 closed at 24,323.85, up 0.09 per cent on the day, surging to its fourth all-time high this week, led by gains in energy stocks. The S&P BSE Sensex closed down 0.07 per cent at 79,996.6 points, but still reflected a 1.2 per cent rise in the Nifty for the week and its fifth consecutive weekly gain.
“Domestic markets maintained their upward momentum supported by progressing monsoon and expectations of Union Budget announcements. Globally, decline in US PCE inflation has raised expectations of a Fed rate cut in September. Decreasing US inflationary pressures and sharp decline in US 10-year Treasury yields helped defensive sectors such as IT and pharma perform well,” said Vinod Nair, head of research at Geojit Financial Services.
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Next week will see activity in major markets with several Initial Public Offerings (IPOs) and listings scheduled across the main board and Small and Medium Enterprises (SME) segments. This will be a crucial week from a domestic and technology perspective as investors track corporate performance, budget-related updates, and macroeconomic data.
“Any disappointing results could dampen the ongoing market rally in the short term,” Nair added. Market analysts overall expect the market to consolidate at the higher zone, but the underlying tone is likely to remain positive. The Nifty 50 finds support at 24,100, while a move above 24,500 could signal the next bullish phase. Experts have advised traders to keep in mind the possibility of increased volatility and focus on stock selection.
Here are the key catalysts for the stock market over the next week.
First quarter results, fiscal 2024 budget update
Investors will be busy analysing corporate earnings next week as the first batch of Q1FY25 results are set to be announced. IT majors Tata Consultancy Services (TCS) and HCL Technologies will kick off the Q1 earnings announcement season from July 11 and 12. Some of the major companies announcing their Q1FY25 results next week include Delta Corp, Tata Elxsi, TCS, Nelco, HCL Tech and IREDA.
“As the market enters the earnings season, expectations are high for improved performance, starting with IT bellwether TCS. Investors will be closely watching management commentary to get an idea of the industry outlook,” said Vinod Nair, director of Geogitz.
Finance Minister Nirmala Sitharaman will present the much-awaited first Union Budget of Modi 3.0 on July 23, 2024. President Drupadi Murmu on Saturday approved the proposal to convene both Houses of Parliament between July 22 and August 12 for the Budget session. This will be the first budget presented by PM Modi’s government since he was re-elected for a record third term in June.
“India’s Union Budget in July is a key event and with pro-growth policies and hopes on how the monsoon season will play out, it will also be a key focus for investors and traders,” said Pravesh Gaur, senior technical analyst at Swastika Investmart.
Domestic Macroeconomic Data
India also has some important releases scheduled on the economic calendar. India’s industrial production and inflation data will be released on July 12, 2024. These figures are key indicators of the country’s economic health and can influence market sentiment and policy decisions.
1 new IPO, 5 listings on D Street
No main board IPOs will open for subscription this week, according to stock exchange data so far. The Sahaj Solar IPO under the MSME segment will open for bidding on July 11. Among the ongoing deals, Ambey Laboratories IPO will close on July 8, while Effwa Infra and Research IPO and Ganesh Green Bharat IPO will close on July 9.
Of the listed stocks, shares of Emcure Pharmaceuticals and Bansal Wire Ltd will be listed on the BSE and NSE stock exchanges on July 10. Further, shares of Ambey Laboratories will be listed on the NSE SME on July 11. Shares of Effwa Infra and Research and Ganesh Green Bharat will be listed on the NSE SME on July 12.
FII Activities
Foreign institutional investors (FIIs) stepped up purchases this week, buying shares worth Rs 6,875 crore. Meanwhile, domestic institutional investors (DIIs) sold shares worth Rs 385 crore. Foreign portfolio investors (FPIs) ended two consecutive months of selling and turned net buyers in June after stability returned to Indian markets with a fall in the ‘VIX’ volatility index. FPIs had stopped buying with the start of the new financial year.
FPIs invested Rs 7,962 crore worth of Indian equities, taking into account debt, hybrid, debt-VRR and equity, taking net investments to Rs 14,128 crore as of July 5. According to data from the National Securities Depository Center (NSDL), FPIs invested Rs 26,565 crore in Indian equities in June, while debt inflows stood at Rs 14,955 crore. Total investments in June stood at Rs 41,757 crore.
“FIIs have been net cash buyers of Rs 5,633.33 crore so far in July 2024. The market is optimistic that the government will provide strong support to the economy, especially the manufacturing sector, in the upcoming budget. Market optimism continues to grow, with IT services in the spotlight ahead of the Q1FY25 earnings season. FPI fund flows are expected to remain volatile,” said Shrikant Chouhan, head of equity research at Kotak Securities.
Global Queue
Analysts said the strong performance of the US market will also be in the spotlight. Next week will be crucial as important data will be released from China, Germany and the US. Thursday’s US inflation report will be in focus and could influence the Fed’s interest rate decision and market sentiment. Traders should be prepared for increased volatility, especially around the important data releases.
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From a global macroeconomic perspective, most market analysts believe that a weakening US labor market and slowing economy could lead the Federal Reserve to consider cutting interest rates in September. Federal Reserve Chairman Powell’s testimony is scheduled for July 9, 2024. UK GDP data, US core CPI inflation, unemployment claims and US producer price index data will also influence market sentiment.
“The market’s expectation remains that the Federal Reserve will cut rates twice this year. Although the Fed has outlined new guidance for monetary policy, including a rate cut in 2024, the market still expects the first rate cut in September and the next in November,” said Alex Volkov, market analyst at VT Markets.
The next Fed meeting is scheduled for later this month, and Fed Chairman Jerome Powell has stressed that interest rate decisions will depend on upcoming macroeconomic data and inflation trends.
Oil prices
International oil prices hit a two-month high last week due to a drawdown in U.S. crude oil inventories, but prices halted their weekly gains and fell in yesterday’s trading as ceasefire talks in the Middle East (Gaza) outweighed rising summer fuel demand and potential supply disruptions from hurricanes in the Gulf of Mexico.
Brent crude futures closed down 89 cents, or 1.02%, at $86.54 a barrel after hitting their highest since April early in the session. U.S. West Texas Intermediate (WTI) crude futures closed down 72 cents, or 0.9%, at $83.16 a barrel. Brent crude rose 0.4% this week, while WTI futures rose 2.1%, according to Reuters.
Corporate Behavior
This week is packed with corporate action as shares of several major companies and banks will trade ex-dividend, stock split and ex-bonus. Stocks like Petronet LNG, JSW Steel, Ujjivan Small Finance Bank, AU Small Finance Bank, DCM Shriram, Sun Pharmaceutical, Indian Oil Corporation (IOC), Axis Bank etc will trade with stock splits by July 12. Raymond will be spun off. See the full list here.
Technical View
After the recent rally, the index is expected to consolidate and is expected to find strong support around 23,700-24,000. A clear breakout above 24,500 could signal the next bullish phase. According to Ajit Mishra, SVP, Research, Religare Broking Ltd, investors are advised to focus on selective stock picking and prioritise sectors like energy, FMCG and pharma for long positions while remaining selective in other sectors.
Given the continued outperformance of broader indices, traders need to adopt a disciplined approach, favour stocks with sound fundamentals and have an exit strategy ready. Analysts say the Nifty is rallying nicely and there are no signs of weakness.
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According to Pravesh Gour of Swastika Investmarts, there are several momentum indicators pointing to overbought territory with 24,300-24,500 being the immediate resistance zone, above which 24,725-25,000 are the next target levels.
On the upside, the index will encounter strong resistance around 24,400, close to its historic high. A close above 24,450 could push the Nifty towards 24,600 levels. According to Arvinder Singh Nanda of Master Capital Services, sustaining above 24,250 will be crucial for further rise towards 24,500 and 24,600 levels.
Moreover, the Bank Nifty index broke out of the ascending channel pattern two weeks ago and since then, it has exhibited consecutive bullish weekly candles and is holding well above the current breakout level.
On the upside, the index will encounter strong resistance near the historic high of 53,200, while 52,000 will act as an immediate support zone. A close above 53,200 could generate further buying momentum and push the index towards the key resistance level at 53,800, according to Nanda.
Disclaimer: The views and recommendations provided in this analysis are those of the individual analysts or brokerage firms and not those of Mint. As market conditions change rapidly and individual circumstances may differ, investors are strongly advised to consult with a qualified professional before making any investment decisions.
