Key Stock Market Triggers for week starting 16th Jan, 23

The week starting 16th January promises to be a busy week in terms of the results to be announced and also in terms of the domestic and global macro data flows. Here are some of the important cues to watch out for in the week, that could impact stock markets.

1. It was a mixed week for the indices. For instance, the Nifty closed the week +0.59% higher largely supported by the IT stocks on the back of favourable results. While IT and banking saw buying, there was pressure on pharma stocks. There was less of alpha hunting and markets are likely to remain cautious in mid and small stocks this week. Last week, the mid-cap index was down -0.33% while the small cap index was up +0.20%.

2. The results season gathers steam in the coming week. Some of the major large cap results for the week include big index names like Asian Paints, Hindustan Unilever Ltd, Reliance Industries, ICICI Bank, Kotak Bank and Ultratech, apart from leading insurers like ICICI Prudential Life and HDFC Life. In addition, small cap results expected in the week include popular names like Havells, Happiest Minds, Persistent, LTTS, Bandhan Bank, Coforge and IDFC First Bank.

3. There is the second part of inflation data to come out this week. After CPI inflation fell 16 bps to 5.72%, the WPI inflation number is likely to be announced on Monday 16th January. The Bloomberg estimates suggest that WPI inflation could fall by another 25 bps to 5.60% on lower core WPI inflation. Overall, the fall in CPI inflation has not been able to match the sharp fall in WPI inflation, which is already down nearly 1,100 basis points and expected to fall further in December. But WPI is normally a lead indicator.

4. Trade data for the month of Dec-22 would be announced late on Monday 16th January. The pressure on exports is likely to continue due to weak demand amidst recession expectations globally. Trade deficit for the month is likely to widen for Dec-22 due to a sharp spike in imports from China, as per Ministry of Commerce. However, the real area of interest will be the trade in services, which has reined in CAD in the current year.

5. Crude oil prices bounced late last week to $85/bbl and could hold the uptrend. The reason for the enthusiasm in the oil prices is the expected recovery in the Chinese economy in the aftermath of the lifting of COVID lockdowns. Also, the OPEC is again expected to cut oil supply citing weak demand. Thirdly, the EU sanctions on Russian diesel kick in within 22 days and could drive crude prices higher in the week

6. Indian rupee rallied sharply during the week on positive cues coming from a weakening dollar as the rupee rallied to Rs81.29/$ in the previous week after touching a low of Rs83. This can be largely attributed to the Dollar index (DXY) weakening to 102 levels. This is the lowest level for the dollar since June 2022. With the Fed hinting at just 50-75 bps of rate hike pending, the rally is already in the dollar value.

7. The cues from FPIs is not too encouraging. In fact, FPIs have been net sellers for 16 consecutive sessions in the equity markets. The total FPI selling has been to the tune of $2 billion in the first 2 weeks of January. There has been a good deal of FPI reallocation from India happening into Asian countries like China.

8. In terms of technicals for the coming week, Nifty has given a bullish candle by closing above the crucial 17,800 mark for the week. If this support base is combined with the fall in VIX to around 14 levels, it does look like a recipe for a buy on dips market. While 17,800 levels looks like a support, the concern would be on the FPI flows front.

9. The F&O data is mostly concurring with the technicals data in terms of outlook for the coming week. The Nifty put / call accumulation data is indicating at a broad range shifting marginally higher to 17,800 to 18,300 range. Most of the FPIs are heavily short in the Indian market. As a result, traders are expecting some bouts of short covering in the F&O market, which could give the Nifty an upward bias in the coming week.

10. Finally, we look at the key data points and data flows from the global market. The Key data points from the US markets to be keenly watched include Retail sales, PPI, IIP, API crude stocks, housing starts, jobless claims, existing home sales and MBA mortgages. In terms of other global regions, one can look for cues as under; EU Inflation, CAD, Monetary Policy; Japan PPI, interest rates, inflation; China GDP, IIP, Unemployment, retail sales.