Dalal Street Week Ahead: Q1 Earnings, US Inflation, Powell Testimony, and FII Activity to Shape Market Sentiment

The Indian stock market is expected to remain positive in the coming week, with the benchmark indices likely to continue their upward trend. However, analysts warn that bouts of volatility may arise due to the onset of the Q1 earnings season and the release of US and India inflation numbers. Here are the top 10 key factors to watch that will shape market sentiment:

Corporate Earnings

The Q1 FY25 earnings season is set to kick off, with IT giant TCS releasing its quarterly numbers on July 11, followed by HCL Technologies on July 12, and Avenue Supermarts on July 13. This will trigger stock-specific action, with investors closely watching individual company performances.

India Inflation

Market participants will keep a close eye on the inflation data, due to be released on July 12. India’s retail inflation eased to a 12-month low of 4.75 percent in May 2024, while core inflation dropped to 3.1 percent. However, food inflation remains sticky at 8.69 percent.

Domestic Economic Data

Aside from inflation numbers, the focus will be on industrial production, manufacturing production, bank loan and deposit growth, and foreign exchange reserves data, all slated to be released on July 12.

US Inflation and Powell Testimony

Federal Reserve Chairman Jerome Powell will deliver crucial testimony on July 9, followed by a significant speech on July 10. Investors will keenly await insights from Powell as these events coincide with the release of US inflation data on July 11, shaping market sentiment and strategy for the upcoming week.

Global Economic Data

Investors will also focus on China’s inflation and Producer Price Index (PPI) data, as well as South Korea’s interest rate decision, influencing regional monetary policy. From the United States, significant data releases include MBA Mortgage Applications, API & EIA crude oil stocks change, Wholesale Inventories for May, Initial Jobless Claims for the week ended July 6, and the Producer Price Index (PPI) for June.

FII Flows

Foreign institutional investors (FIIs) returned to Indian equities, buying shares worth Rs 6,874.66 crore in the previous week. Domestic institutional investors (DIIs) booked some profit, net selling equities worth Rs 385.29 crore. “FII buying can sustain provided there is no sharp up move in US bond yields,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

IPO

The primary market is set for another buzzing week, with two companies, Emcure Pharmaceuticals and Bansal Wire, making their market debut on July 10. Both IPOs had garnered strong investor responses and were subscribed nearly 70 times their respective offer sizes.

Technical View

The Nifty 50 witnessed buy-on-dips action on July 5, closing on a flattish note. Technically, this market action signals the formation of a bullish counterattack type candle pattern, which signals a possible comeback of bulls after a small dip. The underlying trend of Nifty continues to be positive, with a possibility of an upside breakout hurdle around 24,400-24,500 levels in the next few sessions.

F&O Cues

The weekly options data indicated that the Nifty is likely to achieve 24,500 in coming sessions, followed by 24,800, provided it holds 24,000.

India VIX

The volatility has consistently been declining in the last couple of weeks, making the trend more favourable for bulls. The India VIX, the fear index, dropped 8.02 percent to 12.70, from 13.8 levels during the week.

Corporate Action

Here are key corporate actions taking place next week:

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Historical Context:

The Indian stock market has been experiencing a positive trend in recent weeks, with the benchmark indices showing an upward momentum. This is attributed to various factors such as the easing of inflation, a stable rupee, and a positive outlook on the economy. The Q1 earnings season is expected to kick off, with major IT companies like TCS and HCL Technologies set to release their quarterly numbers. The US inflation data and Federal Reserve Chairman Jerome Powell’s testimony will also be closely watched, as they may impact market sentiment and strategy.

Key Factors to Watch:

• Q1 FY25 earnings season: IT giant TCS will release its quarterly numbers on July 11, followed by HCL Technologies on July 12, and Avenue Supermarts on July 13. • India inflation: Market participants will keep a close eye on the inflation data, due to be released on July 12, which is expected to ease further. • US inflation and Powell testimony: Federal Reserve Chairman Jerome Powell will deliver crucial testimony on July 9, followed by a significant speech on July 10, and US inflation data will be released on July 11. • Global economic data: Investors will focus on China’s inflation and Producer Price Index (PPI) data, as well as South Korea’s interest rate decision, influencing regional monetary policy. • FII flows: Foreign institutional investors (FIIs) returned to Indian equities, buying shares worth Rs 6,874.66 crore in the previous week. • IPO: Two companies, Emcure Pharmaceuticals and Bansal Wire, will make their market debut on July 10. • Technical view: The Nifty 50 witnessed buy-on-dips action on July 5, signaling a possible comeback of bulls after a small dip. • F&O cues: The weekly options data indicated that the Nifty is likely to achieve 24,500 in coming sessions, followed by 24,800, provided it holds 24,000. • India VIX: The volatility has consistently been declining in the last couple of weeks, making the trend more favourable for bulls. • Corporate action: Key corporate actions taking place next week include the release of quarterly numbers by major IT companies and the market debut of two companies.

Summary in Bullet Points:

• The Indian stock market is expected to remain positive in the coming week, with the benchmark indices likely to continue their upward trend. • The Q1 earnings season is set to kick off, with major IT companies releasing their quarterly numbers. • India’s retail inflation eased to a 12-month low of 4.75 percent in May 2024, while core inflation dropped to 3.1 percent. • Federal Reserve Chairman Jerome Powell will deliver crucial testimony on July 9, followed by a significant speech on July 10. • US inflation data will be released on July 11, shaping market sentiment and strategy. • Foreign institutional investors (FIIs) returned to Indian equities, buying shares worth Rs 6,874.66 crore in the previous week. • Two companies, Emcure Pharmaceuticals and Bansal Wire, will make their market debut on July 10. • The Nifty 50 witnessed buy-on-dips action on July 5, signaling a possible comeback of bulls after a small dip. • The India VIX has consistently been declining in the last couple of weeks, making the trend more favourable for bulls.