The benchmark indices nosedived sharply by more than 2 percent in the week ended January 10, while the broader markets were also not spared, in fact falling far more than the frontline indices after the downward revision in full year GDP growth estimates, rising oil prices, and consistent selling by FIIs.
Increasing US bond yields and strengthening US dollar index also weighed on the sentiment. Also there is some uncertainty in the market with respect to the likely policy actions by Donald Trump who will take charge as the US President on January 20.
After the sharp correction, the market is expected to consolidate next week starting from January 13, focussing on Q3 earnings, monthly inflation data (by India, US and Europe), China’s quarterly growth numbers, and oil prices. The stock-specific action will also be seen due to pick up in the corporate earnings season.
The Nifty 50 plunged 573 points (2.39 percent) to 23,432, the lowest level since June 2024, and the BSE Sensex tanked 1,844 points (2.33 percent) to 77,379, while the Nifty Midcap 100 and Smallcap 100 indices were down 5.77 percent and 7.3 percent, respectively. All sectors, barring IT, were under pressure.
Overall, “market volatility is expected to remain as investors react to a mix of earnings, macroeconomic data, and global cues,” Vinod Nair, Head of Research at Geojit Financial Services said.
On the global front, according to him, updates on the US economy, particularly labour market data and inflation trends, may impact FII flows, while a spike in crude oil prices will add inflationary pressure.
Here are 10 key factors to watch:
Corporate earnings will be in the spotlight, with major companies – Reliance Industries, Infosys, HCL Technologies, Tech Mahindra, Wipro, Kotak Mahindra Bank, HDFC Life Insurance Company, Axis Bank, SBI Life Insurance – which own 31.56 percent weightage in the Nifty 50, releasing their Q3FY25 results. TCS has made a good start for quarterly earnings season, signalling positivity for other IT giants announcing numbers next week.
Among others, HDFC AMC, LTIMindtree, L&T Technology Services, Jio Financial Services, RBL Bank, Indian Hotels, Anand Rathi Wealth, Angel One, Delta Corp, Network18 Media & Investments, Shoppers Stop, CEAT, Bank of Maharashtra, Havells India, Mastek, Metro Brands, Sterling and Wilson Renewable Energy, Aether Industries, Concord Enviro Systems, and ICICI Lombard General Insurance Company will also release Q3 earnings.
CPI Inflation
On the macroeconomic front, the focus would be on the inflation rate for December (scheduled on January 13) which will also play a crucial role in shaping market direction and important ahead of RBI policy meeting in February. Most economists expect further decline in inflation print for the last month of 2024, from 5.48 percent seen in November.
The market participants will also keep an eye on the WPI inflation scheduled next week on January 14, which according to experts, may increase in December from 1.89 percent in the previous month. Further, balance of trade data for December will be announced on January 15, while the bank loan & deposit growth numbers for fortnight ended January 3, and foreign exchange reserves for week ended January 10 will be released on January 17. There has been persistent decline in forex reserves since September 2024 (when it reached to all-time high of $704.89 billion), falling by $5.69 billion during the previous week to $634.590 billion.
US Inflation
On the global front, all eyes will be on the US inflation numbers, one of the key factors behind making the interest rate decision by the Federal Reserve. Strong US jobs data last week already hinted for a pause in interest rate cycle in the upcoming policy meeting. Global economists see a moderate increase in December inflation print, from 2.7 percent seen in the previous month, while the core inflation rate is expected to remain steady at 3.3 percent.
Additionally, PPI, retail sales, housing starts, and industrial production numbers for December, and weekly jobs data will also be watched.
China GDP & Other Global Economic Data
The participants will also keep an eye on China’s GDP numbers for October-December quarter of 2024, which analysts believe is likely to be around 5 percent. In the previous quarter, it was 4.6 percent, falling from 4.7 percent in Q2-2024.
Furthermore, inflation numbers from Europe and United Kingdom, and vehicle and retail sales data from China will also be watched.
FII Flow and Rupee
Further, the focus will also be on the institutional activity as foreign institutional investors (FIIs) remained net sellers last week (to the tune Rs 16,854 crore in the cash segment on provisional basis) amid further increase in US bond yields. Their current month’s outflow was Rs 21,357 crore due to high valuation.
However, the domestic institutional investors (DIIs) fully compensated the FII outflow, net buying Rs 21,683 crore worth shares last week, and Rs 24,216 crore in January so far. In fact, they are strong buyers in every market dip.
The US 10-year Treasury yield rallied again, after a break in the previous week, rising 3.5 percent for the last week to finish at 4.763 percent, the highest closing level since October 2023, while the US dollar index, which measures the Greenback’s value against world’s six major currencies, extended upward journey for sixth consecutive session, rising 0.66 percent to 109.64, the highest level since November 2022, following strong jobs data which may pause the rate cut cycle.
On other side, the Indian rupee hit a new low of 86.1450 (which was also a closing level) against the US dollar, weakening by 0.47 percent during the week due to correction in the domestic markets, FIIs selling, strong US dollar, and rising oil prices. The currency has been declining for 10th consecutive week and experts expect the weakness to persist due to above reasons.
Oil Prices
Global investors will also focus on the oil prices that maintained upward trend for third straight week, following the announcement of sanctions by the US on Russian oil industry. Colder weather in the US and Europe, and expectations of stronger Chinese oil consumption during the Lunar New Year also boosted prices. Experts expect oil prices to remain supported in the near term as markets worry that tighter US sanctions on Russia may impact its crude exports to Asia.
Brent crude futures, the international benchmark for oil prices, rallied 4.25 percent during the week to near $80 mark, at $79.76 a barrel. Technically, the prices surpassed 50 and 200-week EMA, with positive crossover in the momentum indicator RSI, signalling positive trend.
The primary market schedule will remain busy next week with investors seeing five new initial public offerings and eight listings. Laxmi Dental will be the only IPO (worth Rs 698 crore) from the mainboard segment opening on January 13, while others will be from the SME segment with Kabra Jewels as well as Rikhav Securities’ IPOs opening on January 15. Further, the initial share sale of Landmark Immigration Consultants will hit Dalal Street on January 16, and that of EMA Partners India on January 17.
Further, Sat Kartar Shopping as well as Barflex Polyfilms will close subscription for their public issues on January 14.
In the mainboard segment, Standard Glass Lining Technology will make its debut on the bourses on January 13, followed by Quadrant Future Tek, and Capital Infra Trust InvIT on January 14. Further, from the SME segment, Indobell Insulation, BR Goyal Infrastructure, Delta Autocorp, Avax Apparels and Ornaments, and Sat Kartar Shopping will also list their shares next week.
Technical View
Technically, the bearish sentiment prevails in the market with the Nifty last week reaching to the lowest level since June 2024, forming long bearish candlestick pattern. The index closed tad below 50-week EMA (23,442) as well as dropped below the long upward sloping support trendline, with negative bias in momentum indicators RSI and MACD, signalling weakness. If the index sustains below 50-week EMA, it may reach to the first target of 23,263 (November low), followed by 22,800 being the next target on the downside, however, in case of recovery, the index may face hurdle at 23,700 (200-day EMA) going ahead, experts said.
F&O Cues
The weekly derivative data indicated that the Nifty may remain in the range of 23,000-24,000 in the short term.
On the Call side, the 24,500 strike holds the maximum open interest, followed by the 24,000 and 23,800 strikes, with maximum writing at the 24,000 strike, and then the 23,800 and 23,500 strikes. On the Put side, the maximum open interest was seen at the 22,500 strike, followed by the 23,000 and 23,500 strikes, with maximum writing at the 23,400 strike, and then the 23,000 and 22,500 strikes.
Meanwhile, the India VIX, which measures the expected volatility of the market, increased sharply by 10.16 percent during the week to 14.92 level, keeping the bulls cautious.
Corporate Action
Here are key corporate actions taking place in the coming week:
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