The previous week was a roller coaster ride, with frontline indices experiencing sharp swings due to the unexpected outcomes of the Lok Sabha elections. The initial optimism about a decisive victory for the ruling BJP sent the markets soaring to all-time highs, only to be followed by a dramatic plunge when the BJP fell short of an absolute majority.
The market’s resilience was on full display as it quickly rebounded with the news of PM-elect Modi forming a coalition government. This recovery rally propelled both the Nifty 50 and Sensex to their best weekly gains of the year, closing the week near record highs.
Domestic Macroeconomic Data
Industrial Production Data ( This data point provides insight into the performance of the manufacturing, mining, and utilities sectors. A strong industrial production number can signal robust economic activity and potentially drive market optimism. )& Inflation Rate Data will be released on 12th June.
The balance of trade data, set to be released on June 14, 2024, will further provide insights into India’s external sector performance, influencing currency movements and overall economic stability.
US Federal Reserve Policy
The upcoming week will be closely watched for developments from the US Federal Reserve, as it prepares to announce its latest interest rate decision following its two-day policy meeting starting on June 11, 2024. The Federal Reserve’s stance on monetary policy has far-reaching implications, not just for the US economy but also for global markets, including India.
Past Economic Data and Current Expectations – Recent US economic indicators have shown signs of moderation. The core personal consumption expenditures inflation, a key metric for the Fed, slowed to an annualized rate of 3.5% in April, indicating easing inflationary pressures. Additionally, payroll growth in April dropped to 175,000, down from an average of 269,000 in the first quarter of the year.
Market Anticipation – Despite the moderation in economic data, the Fed has maintained a cautious approach. Market participants largely expect the Fed to keep the federal funds target range unchanged in the upcoming meeting. However, there is speculation about potential rate cuts in the fourth quarter of this year if economic conditions continue to show signs of slowing.
Impact on Global and Indian Markets – The Fed’s policy decisions are critical for global liquidity and capital flows. A pause in rate hikes could be positive for emerging markets like India, potentially leading to increased foreign investment. Conversely, any unexpected hawkish signals from the Fed could lead to market volatility, affecting investor sentiment worldwide.
Key Sectors to Watch
IT – The IT sector has shown robust performance in the past week, benefiting from strong earnings reports and positive global cues. With continued demand for digital transformation and cloud services, IT stocks are likely to remain attractive. Investors will also be watching global tech trends and earnings announcements from major IT firms.
FMCG – FMCG stocks have been strong performers, driven by steady domestic consumption and favourable rural demand. FMCG companies could see improved margins as inflationary pressures ease and the monsoon season progresses. The upcoming inflation data will be crucial in assessing the cost pressures on this sector.
Auto – The auto sector has gained momentum, supported by strong sales figures and new model launches. With the festive season approaching and potential policy support from the government, the auto sector is expected to maintain its upward trajectory. Investors will keep an eye on industrial production data for signs of sustained demand in the sector.
Banking and Financial Services – Banking stocks have been volatile, influenced by the election results and foreign investment trends. The sector’s performance will be closely tied to the RBI’s monetary policy stance and macroeconomic indicators. The stability in the coalition government and positive growth projections by the RBI may bolster confidence in financial stocks.
Pharmaceuticals – Pharma stocks have seen mixed performance, with some companies reporting strong earnings while others face regulatory challenges. The focus will be on global health trends and domestic policy changes impacting drug pricing and approvals. The sector’s defensive nature makes it a safe bet amidst market volatility.
Infrastructure and Real Estate – Infrastructure and real estate sectors have shown resilience, driven by government spending and urban development projects. With ongoing urbanization and infrastructure development initiatives, these sectors are poised for growth. Investors will look for policy announcements and macroeconomic data supporting continued investment in these areas.
Foreign and Domestic Investment Trends
The investment landscape in India has been dynamic, influenced by both foreign and domestic players. The first week of June 2024 witnessed significant activity from Foreign Portfolio Investors and DIIs, shaping the market’s movements.
Foreign Portfolio Investors – FPIs have extended their selling streak, offloading shares worth ₹14,794 crore in the first seven days of June. This follows a substantial sell-off in May, where FPIs offloaded ₹25,586 crore worth of Indian equities.
The uncertainty surrounding the Lok Sabha election outcomes, high US bond yields, elevated Indian market valuations, and the relative outperformance of Chinese stocks have contributed to the bearish sentiment among FPIs.
As the political scenario stabilizes with the formation of a coalition government, there may be a shift in FPI behavior. However, global cues, such as the US Federal Reserve’s monetary policy and macroeconomic data, will continue to play a critical role. A potential stabilization or reversal in FPI trends could significantly impact market sentiment.
Domestic Institutional Investors (DIIs) – In contrast to FPIs, DIIs have maintained a bullish stance, with net purchases amounting to nearly ₹5,579 crore in the cash segment during the first week of June.
DIIs have provided a crucial support to the market amidst FPI outflows, helping to stabilize and drive the indices back towards all-time highs. Their consistent buying has been a key factor in mitigating the volatility caused by political uncertainties.
With a clearer political landscape and positive economic projections, DIIs are likely to continue their buying momentum. Their focus may remain on sectors showing strong domestic demand and favorable growth prospects, such as FMCG and IT.
Impact on Market Dynamics
The tug-of-war between FPI outflows and DII inflows has contributed to the market’s volatility. The coming week is expected to see a reduction in election-related volatility, with investors shifting their focus to macroeconomic data and global cues.
Sectors heavily influenced by foreign investment, such as financials and IT, may experience continued fluctuations based on FPI activities. Meanwhile, sectors with strong domestic consumption themes, like FMCG and Auto, could benefit from sustained DII interest.
Investors should remain cautious of the high levels of FPI outflows, which could weigh on certain sectors. However, this also presents opportunities to accumulate quality stocks at attractive valuations, particularly those favored by DIIs.
With macroeconomic data releases and the US Fed’s policy decisions on the horizon, investors are advised to focus on fundamentally strong stocks with robust growth prospects. Sectors aligned with domestic growth themes are likely to offer better resilience against global market fluctuations.
IPOs and Listings
Mainboard Segment
ixigo IPO – The much-anticipated IPO of travel platform ixigo is set to open for subscription on June 10. Known for its user-friendly interface and comprehensive travel solutions, ixigo aims to raise substantial capital to fuel its expansion plans. The market will be closely watching investor response, as it reflects the appetite for tech-based consumer services in the Indian market.
Small-and-Medium Enterprises (SME) Segment
United Cotfab IPO – Opening for bidding on June 13, this IPO is set to attract attention within the textile sector. United Cotfab, a company known for its quality fabric production, is expected to utilize the proceeds for capacity expansion and working capital needs.
Kronox Lab Sciences – Shares of Kronox Lab Sciences will debut on June 12. As a player in the pharmaceutical sector, its listing is anticipated to garner interest from investors looking to tap into the growing healthcare market.
Other SME Listings
3C IT – Specializes in IT solutions and services, catering to the rising demand for digital transformation.
Magenta Lifecare – Focuses on healthcare products, capitalizing on the increasing awareness and need for medical supplies.
Sattrix – A player in the technology space, known for its innovative solutions in cybersecurity and IT infrastructure.
Global Cues
US Federal Reserve Policy Decision – The US Federal Reserve’s two-day policy meeting concludes on June 12, 2024, with the announcement of its interest rate decision. Given recent moderation in US economic data, the market largely expects the Fed to maintain the current rates. However, any unexpected signals about future rate cuts or hikes could significantly impact global markets.
The Fed’s updated economic projections will be scrutinized for insights into the US economic outlook, inflation expectations, and potential policy shifts. Investors will pay close attention to any changes in language regarding inflation and economic growth.
US Inflation Data – On June 12, the US will release its core and consumer price inflation data. These figures are crucial for understanding the inflationary pressures in the US economy and will influence the Fed’s monetary policy stance. A lower-than-expected inflation rate could bolster market sentiment, while higher numbers might lead to concerns about further tightening.
China Economic Data – China will announce its Consumer Price Index (CPI) data, providing insights into the inflationary trends in the world’s second-largest economy. Given China’s significant role in global trade, any major surprises in these figures could impact global supply chains and commodity prices.
Additionally, China’s trade balance data will offer a view of its export-import dynamics, with potential implications for global trade flows and economic stability.
UK Economic Data – The United Kingdom’s GDP data, scheduled for release, will be another critical indicator. As a major global economy, the health of the UK economy can influence global investor sentiment. Strong GDP growth could signal robust economic conditions, while weaker data might raise concerns about global economic slowdown.
Bank of Japan Policy Decision – The Bank of Japan will announce its interest rate decision on June 14. Despite inflation risks, the BoJ is expected to maintain its accommodative monetary policy. Any deviation from this expectation could have significant ramifications for global financial markets, especially in terms of currency movements and bond yields.
Crude Oil Prices – International oil prices continue to be volatile, influenced by global economic data and geopolitical developments. Brent crude and US West Texas Intermediate have reported losses for three consecutive weeks due to demand concerns. The direction of crude prices will be critical, impacting inflation and economic activities globally.
Market participants will also be watching for any new statements or actions from the Organization of Petroleum Exporting Countries and its allies (OPEC+) regarding production levels and market stability.
US Bond Yields and Dollar Movements – The movement of US bond yields will be closely monitored, as it influences global capital flows. Higher yields could attract funds to the US, leading to outflows from emerging markets like India.
The strength of the US dollar against other currencies, particularly emerging market currencies, will be another key factor. A strong dollar can lead to capital outflows from emerging markets, impacting their equity and bond markets.
Technical Analysis
Nifty 50
The Nifty 50 is nearing its all-time high of 23,338, which serves as an immediate resistance level.
Resistance and Targets – A breakout above 23,338 could propel the index towards higher targets of 23,500 and 23,800. Analysts believe that sustained buying momentum could push the index into these upper levels if global and domestic cues remain favorable.
Support Levels – On the downside, the 23,000-22,800 zone offers immediate support. The crucial 20-day moving average (20-DMA) around 22,600 acts as a stronger floor. A breach below this level might trigger further downside pressure.
Market Sentiment -The formation of bullish candlestick patterns on the daily charts indicates a continuation of the upward trajectory. The index’s ability to recover quickly from the election-induced volatility demonstrates strong underlying market strength.
Experts recommend maintaining a positive outlook as long as the Nifty holds above the 22,600 level. They suggest a “buy on dips” strategy, taking advantage of any short-term corrections to accumulate quality stocks.
Bank Nifty
Bank Nifty has mirrored the recovery seen in the broader market, successfully breaching key moving averages.
Resistance and Targets – The psychological level of 50,000 presents the first hurdle. If Bank Nifty surpasses this barrier, it could target 51,300 and even 52,000, according to technical analysts.
Support Levels – Nearby support lies in the 48,700-48,350 zone, with the 100-day moving average (100-DMA) around 47,400 providing a critical support level.
The technical analysis suggests that the Indian stock market is well-positioned for potential gains in the upcoming week, provided it maintains key support levels and breaks through resistance points. Investors should stay informed about global and domestic cues, and adopt a strategic approach to capitalize on market movements.
Disclaimer – The views and predictions provided in this analysis are those of individual analysts and market experts, not representative of any investment advisory firm. Investors are strongly advised to conduct their own research and consult with certified financial advisors before making any investment decisions. Market conditions can change rapidly, and individual investment goals and risk tolerance levels must be considered. This article is for informational purposes only and should not be construed as financial advice.
