Key stock market triggers to watch out for this week

The week starting 28th November is expected to be a data packed weak with critical data points expected to be out on the macro front. Here are some major data points that could have bearing on the direction of the Nifty and the Sensex.

    a) Both the Nifty and the Sensex scaled new highs during the week, despite the global headwinds. For the week, Nifty was up over 1%, while the mid-caps and small caps gained over 2%. Going ahead, this week could see the Nifty holding higher levels and a lot of buying interest also shifting to the mid-cap and small cap space, where alpha opportunities are still aplenty. 

    b) Core sector data for October 2022 will be announced on 30th November. It is expected to hold above the 7.9% reported last month amid lower base effect. However, a more important gauge will be the PMI manufacturing number this week, which is a much better indication of the high frequency growth in the economy.

    c) Second quarter GDP for Q2FY23 will be announced by MOSPI on 30th November. The Q1FY23 GDP had come in at 13.5% but due to global headwinds and weak exports is expected to put pressure on the GDP to around 6.3% growth in Q2. That would still keep Indian economy on target to achieve 7% average GDP growth in FY23 overall.

    d) With the fiscal and revenue deficit for the month of October 2022 and for first 7 months to be announced on 30th November, there would be 2 questions markets will seek answers to. Firstly, can the government hold fiscal deficit at under 6.4% for FY23. Secondly, will the government venture to cut fiscal deficit to GDP ratio by another 50-100 basis points. Finance Ministry officials have unofficially hinted at lowering fiscal deficit target for FY24 by 50 bps to 5.9% with a 3-year glide path.

    e) The IPO market is again in the limelight. While existing IPOs are all listed, there are 2 IPOs that will open during the coming week. Dharmaj Crop Guard IPO opens on Monday to raise Rs. 251 crore and it will close on Wednesday. The other is Uniparts India IPO will open on Wednesday to raise Rs. 836 crore and the IPO will close on Friday. The two IPOs will look to raise close to Rs1,100 crore between them and will gauge IPO retail appetite.

    f) Last week FPI flows will be closely watched for November. FPIs have so far infused $3.8 billion in November, with IPOs contributing $400 million of net inflows. The month is still likely to be well short of $6.44 billion infused in August 2022. However, FPI flows will hold the key to stock market sentiments and also for the value of the rupee.

    g) November auto sales numbers will be out on Thursday. However, these are wholesale dispatches and not retail sales. With robust demand for CVs and tractors in India, the EV growth of these auto companies will also matter. With falling input costs, improved chip supply conditions and a gradual revival in auto demand, it look like happy days are back again for the auto sector in India. The auto sales numbers will be a key measure.

    h) Two things could drive Brent prices in the coming month. First is the COVID rise and the rising unrest in China. If the situation becomes more fluid, oil demand could be hit badly Secondly, the EU price caps on Russian oil is expected at $65-$70/bbl which will also exert downward pressure on crude Brent is already at $81/bbl and that is good news for a country like India which relies on imported crude for 85% of its daily needs.

    i) How does the market data look like. Nifty is expected to hold the range of 18,500 to 19,000 levels this week with an upward bias. With low VIX, the markets may be in a range but most likely, it would remain a buy-on-dips market only. Supporting that contention is the stock market volatility index (VIX), which has been extremely subdued at between 12.50 and 13.50 levels.

    j) Finally, there will be some big US data points coming this week. US Q3 GDP will be announced (2nd estimate) this week and it has already been pegged a turnaround after 2 quarters of negative growth. Other key US data inputs would include API crude stocks, pending home sales, jobless claims, personal spending, PMI and non-farm payrolls. In cues from rest of the world, investors in the stock market can watch out for EU IIP, PMI, unemployment rate; Japan jobs, retail sales, housing starts, PMI and China Caixin Manufacturing PMI.

The above factors will set the trend for the week, but what is likely to stand as a driver of the market would be the colour and mix of GDP growth in the September 2022 quarter.