Dalal Street Action Next Week: From CPI Inflation Data To Global Cues; What Are The Key Market Tiggers?

The Indian stock market benchmarks experienced a significant downturn last week, snapping a three-week winning streak and tumbling from all-time highs. After consolidating at record levels for 14 consecutive sessions, both the Sensex and Nifty 50 were dragged down by weak global cues, causing concern among investors. As the markets enter the second week of September, all eyes are on critical macroeconomic data-both domestic and global-that will determine market sentiment and direction. Key triggers include inflation reports in India and the US, foreign fund inflows, and oil prices, alongside other crucial global indicators.

The market witnessed a clear reversal last week, with both indices facing a decline of 1.5%. Despite efforts to maintain momentum, weak global cues and concerns about the US economy weighed heavily on market sentiment. The Nifty 50 initially surged to a fresh record of 25,333.65, while the Sensex hit a peak of 82,725.28. However, by the end of the week, the Nifty 50 dropped 1.52% to close at 24,852.15, and the Sensex declined 1.43%, finishing at 81,183.19.

This reversal followed an extended period of consolidation, during which the benchmarks sustained record highs. However, a sudden shift on Friday saw sharp losses as negative global factors outweighed any positive domestic news. On a weekly basis, the BSE benchmark dropped 1,181.84 points, or 1.43%, while the Nifty shed 383.75 points, or 1.52%. Weakness across sectors like energy, metals, and autos played a pivotal role in this decline. Meanwhile, the broader indices saw mixed performance, with the midcap index losing over 1%, while the smallcap index remained relatively flat.

Global Cues

The market's retreat can largely be attributed to negative global cues, particularly from the US. Last week's US economic data raised alarm about the possibility that the US Federal Reserve had delayed its rate cuts for too long, potentially risking a recession in the world's largest economy. Concerns resurfaced about the US labour market, as data showed weaker-than-expected job openings and fewer private-sector job gains. This heightened speculation about a potential 50-basis-point rate cut by the Fed this month.

For many analysts, the US economic data was the tipping point. Despite attempts to maintain a positive tone earlier in the week, concerns over a recession in the US intensified towards the end, with global markets reacting accordingly. The impact was felt worldwide, and the Indian markets were no exception.

Additionally, foreign portfolio investors (FPIs) played a crucial role, as their net inflows were affected by these global uncertainties. Despite strong FPI inflows in June and July, which helped Indian markets recover from election-related jitters, the turbulence in global markets, driven by the US economy, hampered investor confidence. Nonetheless, foreign institutional investors (FIIs) remained net buyers this week, adding Rs 2,430.48 crore in the cash segment.

Domestic Data

From a domestic perspective, the upcoming week will be pivotal. Investors will closely monitor key economic data, including the Index of Industrial Production (IIP) and the Consumer Price Index (CPI), both set to be released on September 12. These indicators will offer critical insights into the health of the Indian economy, especially amid global uncertainties. The CPI, in particular, is expected to reflect inflationary pressures in the country, which will likely play a significant role in the Reserve Bank of India's (RBI) future monetary policy decisions.

The domestic market also faces a slew of corporate actions, with several companies set to trade ex-dividend, ex-bonus, and ex-split. Companies such as Vedanta, Gujarat Gas, Glenmark Pharmaceuticals, and General Insurance Corporation of India are among the major players to watch in this regard.

IPO Frenzy

The primary market will be buzzing with activity this week as a flurry of initial public offerings (IPOs) hits the market. Among the most prominent names are Bajaj Housing Finance, Tolins Tyres, Kross, and P N Gadgil Jewellers in the mainboard segment, while Shree Tirupati Balajee Agro will close its IPO subscription on September 9. In total, 13 new IPOs are set to open this week, along with eight listings, adding more excitement to the markets. In the SME segment, nine new issues are expected, with several companies making their debut.

Amid the flurry of IPOs, investors will also assess the market's broader sectoral performance. Last week, sectors such as state-owned banks, energy, metals, and auto stocks were the biggest losers, with percentage declines ranging between 2.5% and 5%. This sectoral weakness reflected broader market sentiment, as fears of a global economic slowdown spilled over into key industries. Defensive sectors like FMCG and pharma are expected to show resilience during the ongoing correction, offering a safe haven for investors amid the volatility.

India VIX

The India Volatility Index (VIX), which measures market expectations of near-term volatility, surged 13.63% last week, closing at 15.21. This reflects the market's growing concern over domestic and international uncertainties. Market experts believe that while the correction provides an opportunity for long-term investors to average down on loss-making trades, caution is advised due to the lack of fresh triggers.

Oil Prices

A significant factor influencing global market sentiment last week was the sharp decline in crude oil prices. Concerns over an oversupply in the oil market, particularly due to a potential resolution of the Libyan oil dispute, led to a historic crash in crude oil prices. As a result, Brent crude prices plummeted to a 14-month low, compelling the Organization of Petroleum Exporting Countries (OPEC) to pause its planned oil output hike for the next two months.

By the end of the week, Brent crude futures had dropped 2.24%, settling at $71.06 per barrel, while US West Texas Intermediate (WTI) futures fell 2.14% to $67.67 per barrel. The overall decline was even steeper on a weekly basis, with Brent and WTI prices falling around 10% and 8%, respectively. The broader downtrend in oil prices has now extended for nearly a year, with a 20% decline recorded over the last 12 months due to the ongoing demand-supply imbalance.

Global Data

Looking ahead, global markets will keep a close eye on key US economic data, including the US inflation report on September 11 and the Producer Price Index (PPI) on September 14. These reports are expected to offer further clues regarding the US Federal Reserve's next steps on interest rates. In August, the US economy added 1,42,000 jobs, up from 89,000 in July but still below the market's expectation of 1,60,000.

Additionally, investors will watch the Rupee's movement against the US Dollar and geopolitical developments that could impact oil prices. Any shifts in these areas could create ripple effects in the Indian markets.