Dalal Street Anticipations | MPC Minutes, Jio Financial Listing, and Powell Speech Among Top Drivers of Action

Dalal Street

In the upcoming week, several pivotal factors are poised to steer the financial landscape. Among these, the resounding emphasis in Fed Chair Powell’s speech on the conclusion of the ongoing rate hike phase and the probable timing of the rate cut cycle’s commencement are anticipated to capture significant attention.

The week just gone by witnessed a subdued sentiment on Dalal Street, with the benchmark indices experiencing a 0.6 percent dip. The culmination of this four-week period saw the Nifty50 and Sensex registering total losses of 3.4 percent and 3.94 percent, respectively, compared to their record highs from July 20.

The market sentiment bore the burden of various pressures, including discouraging industrial production figures for June, an unexpectedly high surge in CPI inflation, concerns of an imminent rate hike by the Fed driven by robust retail sales statistics, the devaluation of the domestic currency vis-à-vis the US dollar, escalating US bond yields affecting FII investments, and the deceleration of China’s economic growth.

The impending week is predicted to sustain the prevailing consolidation trend with a negative inclination. Experts point out that focus will center around Powell’s speech, MPC policy minutes, FII sentiment, and international equity market movements.

The Nifty50 retreated by 118 points to reach 19,310, while the BSE Sensex declined by 374 points to settle at 64,949. This drop was particularly influenced by weaknesses in metal, banking & financial services, technology, oil & gas, and pharma stocks.

Siddhartha Khemka, the head of retail research at Motilal Oswal Financial Services, forecasts, “With the prospect of Fed Chair Powell’s speech and a slew of global macro data awaiting us next week, both local and international markets are likely to face pressure.” Nonetheless, Khemka foresees continued activity in the broader market coupled with sector-specific rotations.

Here are 10 pivotal aspects to monitor in the upcoming week:

Jio Financial Services Listing

The focus of market participants will converge on Reliance Industries (RIL), a heavyweight in the index. The much-anticipated listing of Jio Financial Services (previously known as Reliance Strategic Investments), a subsidiary spun off from Mukesh Ambani-led Reliance, is scheduled to unfold on the exchanges come August 21.

Following last month’s demerger, the financial services arm of Reliance is valued at Rs 261.85 per share. Notably, Jio Financial Services will retain its position in FTSE Indices and will be incorporated into the MSCI Global Standard Index on August 23.

MPC Meeting Minutes

An equally significant point of interest will be the release of the minutes from the MPC’s gathering on August 10. This event, scheduled for August 24, is expected to unveil insight into the potential postponement of the rate cut cycle to FY25 rather than the previously anticipated final quarter of FY24. This shift is attributed to the Reserve Bank of India’s upward revision of CPI inflation forecast for FY24, driven by surging food prices. July witnessed CPI inflation escalate to 7.44 percent, significantly above street expectations and a leap from June’s 4.87 percent.

Jackson Hole Symposium

Global attention will converge on Fed Chair Jerome Powell’s address during the Jackson Hole economic policy symposium, set to take place between August 24 and 26. Powell’s speech, slated for August 25, will be a highlight of the event hosted by the Kansas City Fed. In the wake of a 25 basis points increase in fed funds rate in July, Powell has already indicated the likelihood of another rate hike in the forthcoming policy meetings. The Federal Reserve’s steadfast commitment to reining in inflation to its 2 percent target and its data-dependent approach to further policy adjustments underscore its approach. July’s CPI inflation stood at 3.2 percent, with core CPI at 4.7 percent.

Foremost among Powell’s insights is the probable termination of the ongoing rate hike cycle and the potential timeframe for the initiation of the rate cut cycle.

FIIs Sentiment

After three consecutive months of significant purchasing activity, Foreign Institutional Investors (FIIs) shifted course in August, transitioning to net sellers. Escalating US dollar index (103.43 from mid-July’s sub-100 level) and US 10-year treasury yields (4.25 percent from mid-July’s 3.8 percent) have driven FIIs to exit emerging markets, including India. This trend is anticipated to persist in the near term, with Domestic Institutional Investors (DIIs) striving to counterbalance the outflow.

Over the past week, FIIs divested shares worth Rs 3,379 crore, bringing the monthly cash segment outflow close to Rs 11,000 crore. Concurrently, DIIs purchased shares worth Rs 3,892 crore, significantly offsetting FII outflows. Their monthly net purchases approached Rs 9,250 crore.

Indian Rupee

The trajectory of the Indian rupee remains a focal point, following its record low of 83.42 against the US dollar and its closing at an unprecedented 83.12 in the previous week. Elevated oil prices and an ascending US dollar index underpin these dynamics. The rupee’s four-week downward spiral is also influenced by equity market profit-taking and FII outflows. Experts anticipate further weakening in the coming days, buoyed by risk aversion in global markets and the greenback’s overall strength. Anuj Choudhary, a research analyst at Sharekhan by BNP Paribas, anticipates that the resurgence of crude oil prices could further burden the rupee. He acknowledges the potential for intervention by the Reserve Bank of India to stabilize the rupee at lower levels.

Domestic Economic Indicators

Domestic data revelations are on the horizon, with the bank loan and deposit growth figures for the fortnight ending August 11 scheduled for release on August 25. Additionally, foreign exchange reserves for the week concluding on August 18 will see their disclosure on the same day.

Technical Perspective

The Nifty50’s pattern of decreasing highs during four successive weeks and its reach of the lowest closing level since late June on a weekly basis characterize recent trends. However, the index managed to defend its 50-day Exponential Moving Average (EMA) coinciding with the 10-week EMA on an intraday basis, along with the 19,300 mark on a closing basis. This positions the 19,300-19,250 range as pivotal for potential downward momentum towards the psychological 19,000 level. Conversely, resistance is projected around the 19,400-19,500 range. Ajit Mishra, SVP of technical research at Religare Broking, underscores the Nifty’s adherence to the short-term moving average and the potential for declines to 19,100 and 18,900 levels. A rebound would encounter obstacles around the 19,500 level.

F&O Insights

Option data analysis points to the 19,400-19,500 range emerging as a critical resistance zone in forthcoming sessions, supported by levels at 19,300-19,200. The most substantial weekly Call open interest is at the 19,400 strike, trailed by the 19,500 strike. Notably, significant Call writing is evident at the 19,400 strike, followed by the 19,300 and 19,600 strikes. Meanwhile, maximum Put open interest and Put writing are concentrated at the 19,300 strike, with additional attention on the 19,200 strike.

The India Volatility Index (VIX) witnessed a third consecutive week of escalation, crossing the 12 level threshold for the first time since May’s third week. A 5.4 percent rise during the week brought the VIX to rest at 12.14 levels. If the VIX climbs above 13.5-14 levels, the market is likely to adopt a more cautious stance.

IPO Outlook

The primary market remains vibrant in the forthcoming week. Aeroflex Industries, a manufacturer of flexible flow solution products, is set to initiate its Rs 351-crore IPO from April 22-24, priced within the range of Rs 102-108 per share. Simultaneously, infrastructure company Vishnu Prakash R Punglia will launch its Rs 309-crore maiden public issue on August 24, with a price band of Rs 94-99 per share.

Pyramid Technoplast’s Rs 153-crore IPO will conclude on August 22, while TVS Supply Chain Solutions will make its bourse debut on August 23. In the SME segment, power solutions provider Sungarner Energies will open its IPO for subscription from April 21-23, priced at Rs 83 per share. Shoora Designs’ initial public offering will close on August 21, alongside the culmination of Crop Life Science and Bondada Engineering public issues on August 22. Shelter Pharma’s shares are also set to be listed on August 23.

In conclusion, the upcoming week promises to be rife with pivotal events and developments that will undoubtedly reverberate across the financial landscape. From the eagerly awaited insights from Powell’s speech to the launch of high-profile IPOs, market participants are poised for a week of intense action and strategic considerations.

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