Market Action Next Week: Sensex & Nifty Record Steepest Weekly Decline In 2 Years; Key Triggers Ahead?

The Indian stock market experienced its sharpest weekly decline in over two-and-a-half years as bearish sentiments overwhelmed bulls. The week saw domestic benchmarks Sensex and Nifty 50 shedding 5% each, erasing gains accumulated over the last month, driven by global and domestic headwinds. The steep sell-off resulted in investors losing Rs 18.43 lakh crore in market wealth.

The Week That Was!
Both the Sensex and Nifty 50 tumbled, with the Sensex closing below the critical psychological mark of 80,000 at 23,857.5, and the Nifty 50 finishing at 78,041.59. The indices marked daily declines throughout the week, closing near their respective lows. Nifty 50 snapped a four-week winning streak, losing 1,180 points or 4.77%, while the Bank Nifty suffered a bigger blow, falling by over 5%.

The correction was triggered by multiple factors, including persistent selling by foreign institutional investors (FIIs) at higher levels ahead of the Christmas holidays, the US Federal Reserve's hawkish tone, and heightened market volatility reflected in an uptick in the India VIX.

The broader markets mirrored the downfall, with all key sectors except pharma finishing in the red. Metals, energy, and banking stocks were the hardest hit. The Nifty also slipped below its 200-day moving average for the first time in a month.

BSE Market Cap
The relentless sell-off wiped out Rs 18,43,121.27 crore of investors' wealth in just five trading sessions. The market capitalization of BSE-listed firms fell to Rs 4,40,99,217.32 crore ($5.18 trillion).

Global Triggers
The US Federal Reserve's latest decision to cut rates, coupled with its revised forecast of two reductions in 2025 from four earlier, sent ripples across global markets. Meanwhile, rate cuts generally support emerging market assets like Indian equities by encouraging foreign inflows.

Adding to the woes was the anticipation of heightened volatility due to the scheduled expiry of December's derivative contracts.

Key Triggers for the Coming Week
IPO Frenzy
The primary market is set for a flurry of activity, with three new IPOs and eight listings scheduled across the mainboard and SME segments.

New IPOs: The mainboard IPO of Unimech Aerospace will open for subscription on December 23, while ongoing IPOs such as Transrail Lighting, DAM Capital Advisors, Mamata Machinery, Sanathan Textiles, and Concord Enviro will close on the same day. In the SME segment, Ventive Hospitality, Senores Pharmaceuticals, and Carraro India IPOs will close for bidding on December 24.

Listings: Shares of Transrail Lighting, DAM Capital Advisors, Mamata Machinery, Sanathan Textiles, and Concord Enviro will be listed on December 27. Three SMEs will also debut on either the BSE SME or NSE SME platform.

FII and DII Activity
FIIs sold over Rs 15,828 crore in the secondary market last week, adding pressure on equities, while domestic institutional investors (DIIs) provided some relief by purchasing Rs 11,874 crore worth of shares. High US bond yields and a strengthening dollar have intensified outflows from emerging markets like India.

Global Cues
Key global data points, including US bond yields, dollar index performance, initial jobless claims, new home sales, and durable goods orders, will influence market sentiment. Markets will remain closed on December 25 for Christmas.

Crude Oil Prices
Crude oil prices remained subdued amid concerns about weak Chinese demand and tempered interest rate-cut expectations. Brent crude closed at $72.94 a barrel, while West Texas Intermediate (WTI) settled at $69.46 a barrel. On the MCX, crude oil futures in India edged up 0.1% to Rs 5,944 per barrel.

Corporate Actions
Several companies will trade ex-dividend, ex-bonus, or ex-split in the coming week. Notably, Vedanta shares will trade ex-dividend, NMDC will trade ex-bonus, and Mazagon Dock Shipbuilders will trade ex-split.

Technical View
An Axis Securities report highlighted that Nifty showed initial consolidation before witnessing strong gains on Friday, closing at 24,768 with a weekly gain of 91 points. Despite the recovery, the broader index formed a small bullish candle with a long lower shadow on the weekly chart, suggesting buying interest near the 20-day SMA at 24,214.

For Bank Nifty, the week ended on a similar note, closing at 53,584 with a gain of 74 points. The index displayed a small bullish pattern, indicating demand at lower levels.

Despite last week's turmoil, the market outlook remains cautiously optimistic, supported by domestic institutional flows and expectations of a bounce-back in global markets. Investors will monitor macroeconomic data, FII activity, crude oil price movements, and corporate actions to gauge market direction.

As the year-end approaches, markets may witness continued volatility, driven by the expiry of derivatives contracts and profit-booking. However, the pipeline of IPOs and listings could provide some respite.