The recent rally in the market, spurred by strong macroeconomic fundamentals and a surge in foreign fund inflows, has seen the Nifty 50 and Sensex soar to new heights. This bullish momentum is underpinned by a mix of domestic and global factors, creating a perfect storm of optimism and anticipation.
With the high-stakes Lok Sabha election results due on June 4, 2024, the markets are bracing for significant moves. In the final week of May, investors will scrutinize the last batch of Q4FY24 earnings reports, monitor voter turnout, and keep a close eye on domestic and global macroeconomic data.
Foreign fund inflow, crude oil prices, and global cues will be pivotal in shaping market sentiment. As the election rally grips the pulse of D-Street, the stage is set for a week of intense market activity and potential volatility.
Market Recap
The Indian stock markets have been on an upward trajectory, breaking out of a prolonged period of sideways consolidation and entering a broader bull run. Robust macroeconomic fundamentals and foreign funds have primarily driven this renewed vigour. Over the past two weeks, the domestic equity benchmark indices have recorded their most significant winning streak in the last five months.
The Nifty 50 and Sensex have reclaimed their record highs, each gaining around two percent this past week, marking their best performance in three months. The Nifty 50 reached a new milestone of 23,000, while the Sensex closed near the week’s high at 75,410.3. Solid performances across major sectors have bolstered this impressive rally, with metal, energy, and auto leading the charge.
A key driver of this bullish sentiment was the substantial buying in select heavyweight stocks, particularly on Thursday, which significantly boosted market confidence. The Reserve Bank of India announced a ₹2.11 lakh crore record dividend payout to the government for FY24, which further fueled the optimism, surpassing market expectations and enhancing investor sentiment.
Midcaps managed to gain about one percent, while small-caps ended the week in the red. This divergence underscores the market’s selective strength, with investors favoring more extensive, stable stocks.
Key Triggers for the Upcoming Week
Q4FY24 Earnings Reports
The final batch of Q4FY24 earnings reports is set to be released next week, and all eyes will be on some of the market heavyweights. Companies like Tata Steel, PTC India, Reliance Capital, and Apollo Hospitals are scheduled to announce their financial results.
Positive earnings reports further bolster the market’s bullish momentum, while any unexpected disappointments might introduce some volatility. Investors will be particularly interested in these companies’ performance metrics and forward guidance, as they provide critical insights into the economic health and future prospects of various sectors.
Lok Sabha Election Updates
As the nation approaches the high-stakes Lok Sabha election results on June 4, 2024, political developments will significantly drive market sentiment. Analysts are optimistic about the prospects of a BJP-led alliance winning a third term, which is expected to ensure political stability and continued economic growth.
The voter turnout and any early indications of the election outcome will be closely monitored. A decisive victory for the incumbent party could further fuel market optimism. At the same time, any signs of political uncertainty might trigger caution among investors.
IPO Activity
The primary markets are expected to see some action, with the launch of five new IPOs and two listings slated for the coming week. In the mainboard segment, Awfis Space Solutions’ IPO is set to close for bidding on May 27, with its shares debuting on May 30.
The SME segment will witness the opening of IPOs from Vilas Transcore, Beacon Trusteeship, Ztech India, Aimtron Electronics, and TBI Corn, each expected to attract varied levels of investor interest. These IPOs and listings could inject fresh excitement into the market, offering new investment opportunities and influencing market liquidity.
FII and DII Activity
FIIs have shown a shift in sentiment, recording a net inflow of ₹1,165.54 crore last week despite a general selling trend. DIIs have been consistently net buyers, with a total investment of ₹6,977.71 crore. The outcome of the Lok Sabha elections will likely be a critical factor in determining FII flows post-June 4. A favorable election result could boost foreign investor confidence, potentially increasing FII inflows. Conversely, any political uncertainty might see a reversal in FII sentiment.
Global Market Influences
Several global economic data releases are set to impact market sentiment next week. Key among them are the US personal consumption expenditures index and the Eurozone consumer price index, which will provide insights into inflation trends and potential monetary policy moves by the US Federal Reserve and the European Central Bank.
Movements in US bond yields, commodity prices (including crude oil, gold, and silver), and economic data from Japan and the US will be closely watched. The upcoming OPEC+ meeting on June 2 will also be a focal point, as decisions on oil production cuts could influence global crude prices and, by extension, market dynamics.
Technical Analysis and Predictions
Nifty 50
The Nifty 50 has surpassed the significant milestone of 23,000, and technical analysts expect it to move toward the 23,150-23,400 range soon. The formation of a long bullish candle on the weekly charts, coupled with breakout patterns on both daily and weekly charts, indicates sustained positive momentum.
In the event of a dip, the 22,550-22,800 zone is expected to provide vital support, making these levels critical for maintaining the bullish trend. Analysts recommend a buy-on-dip approach, where 22,780 serves as the first support level, followed by 22,500.
Sensex
The Sensex has mirrored Nifty’s strong performance, closing near its weekly high at 75,410.3. The index’s resilience suggests continuing the positive trend, with immediate resistance levels around 75,500. A breakout above this level could propel the Sensex toward new highs, with the following significant resistance at 76,000. Support levels are identified at 74,800 and 74,500, crucial for maintaining the current bullish sentiment.
Nifty Bank
The banking sector has shown considerable strength, particularly with heavyweights like HDFC Bank driving the momentum. Bank Nifty is expected to remain strong as long as it stays above 48,500. Any dips toward this level attract buying interest, with immediate resistance at 49,000 and further upside potential towards 49,500.
Sector-Specific Analysis
IT -The IT sector also holds significant upside potential. Strong performances from major IT companies could push the sector higher, contributing positively to the overall market sentiment.
Metal, Energy, and Auto – These sectors have led the recent rally and are expected to continue their strong performance. Investors should monitor stock-specific movements within these sectors for potential trading opportunities.
Trading Strategy Recommendations
Given the current market structure, a stock-specific trading approach is advisable. Investors should focus on large-cap and large mid-cap stocks for short-term trades, as these segments have shown resilience and are likely to continue their strong performance. Maintaining a buy-on-dip strategy will allow investors to capitalize on temporary market corrections, ensuring a balanced approach amid potential volatility.
The Indian stock markets are expected to continue bullish momentum, with key technical levels providing a roadmap for investors. The upcoming week holds significant potential, driven by domestic earnings reports, political developments, and global economic data. Staying informed and agile will be crucial for navigating the expected market movements and making informed investment decisions.
The information provided in this article is for informational purposes only and should not be considered as financial or investment advice. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses or damages incurred based on the information provided in this article.
