Dalal Street Action Next Week: From Q1 GDP Data To Cues From US Fed; What Are The Key Market Tiggers?

As the Indian stock markets edged closer to record highs by the end of last week, optimism was tempered by caution ahead of significant global and domestic economic data releases. The last week of August is set to be critical for investors, with attention sharply focused on India's upcoming economic growth numbers, foreign fund flows, crude oil prices, and global cues, particularly from the US and Japan.

The Indian stock market benchmarks, the Nifty 50 and Sensex, ended the week on a high note, marking their seventh consecutive session of gains on Friday. This rally, the longest of the year, reflects a buoyant market mood, largely driven by positive global cues and sustained domestic inflows. However, the pace of gains slowed as investors turned cautious ahead of US Federal Reserve Chair Jerome Powell's much-anticipated speech at the Jackson Hole Economic Symposium.

In Friday's trading, the 30-share BSE Sensex index climbed 33.02 points or 0.04% to close at 81,086.21, while the NSE Nifty 50 rose 11.65 points or 0.05% to finish at 24,823.15. This was the second consecutive week of gains for the frontline indices, which have collectively gained about 3% over the past seven sessions. However, the broader markets underperformed, with market breadth favouring declines, signalling that the rally's momentum was concentrated in select heavyweight stocks.

The improving global market sentiment played a crucial role in boosting Indian markets. Better-than-expected US economic data earlier in the week alleviated recession fears, prompting a surge in global equities. However, the gains were capped as investors awaited further clarity on the Fed's monetary policy stance. Powell's speech at Jackson Hole hinted at a potential rate cut in September, further fueling optimism in the markets.

All major sectors, barring real estate, participated in the rally, with metals, FMCG, and financial services stocks leading the gains. Despite this broad-based participation, the mixed performance among heavyweight stocks limited the overall upside for the indices.

Looking ahead, several critical factors are expected to influence market sentiment in the coming week

Domestic Macroeconomic Data

Investors will be closely watching India's gross domestic product (GDP) data for the April-June quarter (Q1) of the current fiscal year 2024-25, set to be released on Friday, August 30. Additionally, the fiscal deficit and infrastructure sector output data for July will be disclosed, providing further insights into the health of the Indian economy.

Primary Market Action

The week promises significant action in the primary markets, with nine new initial public offerings (IPOs) and eight listings slated across the mainboard and small and medium enterprises (SME) segments. Among the notable IPOs are Premier Energies, ECOS (India) Mobility & Hospitality, and Baazar Style Retail in the mainboard segment, alongside Indian Phosphate, Vdeal System, and others in the SME segment.

Foreign Institutional Investors (FII) Activity

Foreign Institutional Investors (FIIs) were net sellers in the past week, offloading Rs 1,608.89 crore in the cash segment. However, Domestic Institutional Investors (DIIs) maintained their buying momentum, acquiring Rs 13,020.29 crore. Foreign Portfolio Investors (FPIs) have sold Rs 16,305 crore worth of Indian equities, with net outflows of Rs 3,070 crore as of August 23.

Global Cues

On the global front, US economic data releases, particularly durable goods orders, initial jobless claims, and personal income and spending data for July. Additionally, Japan's industrial production, unemployment rate, and consumer confidence data for July will be closely monitored.

Crude Oil Prices

International crude oil prices, which settled 2% higher in the previous session, will continue to be a significant factor. Brent crude futures closed at $79.02 per barrel, while US West Texas Intermediate (WTI) finished at $74.83 per barrel. Domestically, crude oil futures settled 2.11% higher at Rs 6,288 per barrel on the multi-commodity exchange (MCX).

Volatility In The Week Ahead

The upcoming week is expected to be marked by heightened volatility, especially with the monthly Futures and Options (F&O) expiry rollover scheduled. The market's overall sentiment remains positive, bolstered by improved global cues and Powell's indications of a potential rate cut. However, experts advise traders to remain cautious, emphasizing the need for stock selectivity and a 'buy on dips' approach.

Sustained participation from the banking sector is seen as crucial for the Nifty 50 to breach the 25,500 mark, a level that could signal further upside in the markets. However, given the looming macroeconomic data and global developments, market participants are likely to adopt a wait-and-watch approach.

Corporate Actions and Ex-Dividend Stocks

On the corporate action front, shares of several major companies, including public-sector undertakings like Oil India, Hindustan Zinc, and MOIL Ltd, are trading ex-dividend this week. Additionally, some private companies have also declared buybacks, which could influence stock prices in the short term.

The Indian stock markets are on the cusp of reaching new highs, driven by favourable global cues and domestic inflows. However, the coming week's key economic data releases and global developments, particularly from the US and Japan, will be critical in determining the market's direction.