Key weekly triggers to watch out for in Stock Markets next week

As the markets get into a data heavy week starting 12th December, the market direction is likely to be largely driven by the data flows. Here are the key triggers that could have an impact on the direction and momentum of the stock markets in the coming week.

1. Let us look at the index performance first. The large cap Nifty-50 was up 1.08% in the previous week largely led by banks and financials. Most of the market action was focused on the large caps stocks with the mid-cap index gaining just 0.59% for the week and small cap index gaining 1.11%. Amidst uncertainty, investors are not seeking alpha.
    

2. A key trigger for the markets in the week starting 12th December will be the fiscal deficit discussions ahead of the Union Budget. Indications from the Finance Ministry are that the government may settle for a lower fiscal deficit of 5.6% to 5.9% for FY24. A lower fiscal deficit target with a clear glide path will be positive for the markets.
    

3. Watch out for the technology stocks in the coming week after HCL Tech issued a warning that FY24 could see them hitting the lower end of the revenue growth guidance. That had an impact on IT stocks across the board as lower IT spends and pricing pressure could put stress on the IT stocks through the coming week.
    

4. Brent Crude had fallen last week to $76/bbl and that downward trend is likely to continue. The oil market is back to the lows that it witnessed ahead of the Ukraine war in early 2022 and that is largely due to weak demand expectations. However, for India due to its 90% dependence on imported crude, this could be a blessing in disguise.
    

5. The forex market action will be focused on the Bloomberg dollar index (DXY) and the USDINR rates. The collection dollar index has already fallen sharply from 114 levels to 104 levels .However, at the same time the Indian rupee is hovering around 82/$, fairly close to its all-time lows of slightly above 83/$.
    

6. The next week will be a buys week for IPOs. A total of 3 IPOs viz. Abans Holdings, Sula Vineyards and Landmark Cars will open for subscription and also close during the week. IN addition, Uniparts India will list on the bourses on Monday 12th December. Apart from these, the regular flows of SME IPOs will continue unabated.
    

7. The two big triggers for the market from the US economy would be the FOMC statement coming out on 14th December and US consumer inflation coming a day ahead of that. The Fed has already indicated that it would look to reduce the rate hikes from 75 bps to 50 bps in the December Fed meet. However, markets would be impressed if the Fed also reduces the terminal rate targets. US consumer inflation was 7.7% in October and the consensus is that it will taper further to 7.3% in November. A sharp fall in consumer inflation will be a morale booster for the stock markets in the US and in India too.
    

8. In India data flows, both the consumer inflation (CPI) and the producer inflation (WPI) will be announced in the coming week. While the consensus estimate is that CPI inflation would taper from 6.77% to 6.40%, the fall in the WPI inflation is likely to be much sharper from 8.39% to 6.50% for the month of November. Overall, lower CPI and WPI inflation combination will give greater confidence to RBI to go slow on rate hikes.
    

9. Apart from the inflation, one must also keep an eye on the growth data and the international trade data; both of which will be announced in the coming week. On Monday, the IIP growth for October will be announced it is expected to taper from 3.1% in September to just 0.3% in October 2022 as exports falter. Manufacturing output is expected to dip into negative zone for the month of October 2022. Another related parameter will be the trade data. The trade deficit was $26.9 billion in October and with weaker exports, that is likely to have widened in November. If the trade data hints at higher current account deficit, then the rupee can be expected to weaken this week.
    

10. Finally, in an increasingly globalized and integrated world order, global data points will also be extremely material. The US being the world largest economy, its data flows will have an obvious impact on Indian trades and investors too. Key US data to track will include Fed statement, CPI YOY, Core CPI, CPI MOM, Fed Budget Balance, API crude stock, retail sales, jobless claims, PMI. From the rest of the world, traders can keep a tab on the following data points from key regions. It includes Euro Zone (EU IIP, ECB Rates), Japan (Machine Orders, Capex, IIP), China (Retail sales, IIP) and UK GDP, IIP, CPI, PPI and the MPC Vote