Week Ahead: FII inflows, F&O expiry, global signals among key market triggers as Nifty 50 approaches 26K

The Indian stock market had a rocky week, hitting record highs largely due to the 50 basis point (bps) interest rate cut by the US Federal Reserve, without any significant concerns about the US economy. In the last week of September, investors will be closely monitoring key market factors such as domestic and global macroeconomic data, monthly derivatives expiry, foreign fund inflows, crude oil prices and other global cues.

Domestic equity indices Nifty 50 and Sensex continued their uptrend for the second week in a row, hitting record highs of 25,849.25 and 84,694.46 respectively. Bulls took control of the markets, with the rally supported by a massive interest rate cut by the US Federal Reserve, its first policy cut in four years, which has whetted investors’ risk appetite in global markets.

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A 50-basis-point rate cut on Wednesday and data showing lower-than-expected weekly jobless claims on Thursday raised hopes for a soft landing for the U.S. economy. In this scenario, inflation falls without triggering a recession. Historically, U.S. rate cuts have been positive for emerging markets, and India has been a favorite among global investors.

The indices traded in a range-bound manner for most of the week but a strong rally on Friday helped the Nifty and Sensex close at record highs of 25,790.90 and 84,544.31 respectively. The rally was primarily driven by positive sentiment in global markets following the US Federal Reserve decision.

This week, the NSE Nifty 50 and the 30-share BSE Sensex gained 1.7 per cent and 2 per cent respectively, registering their fifth week of gains in six. Among sectoral indices, construction or real estate was the best performer, followed by banking and financials, while pharma ended the week in the red. Interestingly, the usually strong IT index fared poorly, ending the week down 2.75 per cent.

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“Fears of a slowdown in growth have been somewhat eased by lower-than-expected US unemployment benefits. The data pointed to a soft landing in the US economy at the start of the rate cut cycle. However, the IT index has failed to recover, mainly due to layoffs and USD depreciation. Strong monsoon and festive demand cheer up the auto index with an outperformance,” said Vinod Nair, Head of Research, Geojit Financial Services

“We have seen sector rotation among investors towards large caps, especially in consumer discretionary, consumer staples, auto, financials and real estate. In the short term, investors are cautious towards export-oriented sectors like pharma and IT due to dollar depreciation,” Nair added.

The Bank Nifty, which had been lagging, took the lead, gaining 3.5 per cent to eventually hit its all-time high. Broader market indices fared poorly, with the domestically-biased midcap index posting modest gains and the smallcap index falling almost one per cent.

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“The market showed clear signs of sectoral rotation as investors shifted their focus towards sectors with renewed momentum. As we approach the September F&O expiry, increased volatility is likely, making it imperative for investors to remain vigilant and adapt to market swings,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Primary markets will generate buzz among investors this week as several new initial public offerings (IPOs) and important listings are scheduled across the primary market and small and medium-sized enterprise (SME) segments. The week will be critical from a domestic and technical perspective as investors track global markets and macroeconomic data.

Here are the key factors impacting stock markets in the coming week:

Macro data

Market participants will be closely monitoring upcoming macroeconomic data releases, including the HSBC Composite PMI Flash, HSBC Manufacturing PMI Flash and HSBC Services PMI Flash. These indicators will provide insight into the country’s economic health and could impact market sentiment. Investors will also be monitoring trends in foreign fund flows and oil price movements, which could impact market direction in the coming week.

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11 new public offerings, 14 listings on D-Street

In the mainboard segment, two new issues – Manba Finance IPO and KRN Heat Exchanger IPO will open for subscription this week. In the SME segment, nine new issues will open for bidding between September 23 and 27.

In addition, Western Carriers (India), Arkade Developers and Northern Arc Capital will debut on the BSE and NSE this week. In addition, 11 companies will be listed on the BSE SME or NSE SME.

FII Activity

The most important event of the week was the aggressive investment activity of foreign institutional investors (FII), who poured in ₹14,000 crore on Friday alone. However, around ₹8,000 crore of this amount was attributed to FTSE rebalancing.

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On the domestic front, strong foreign inflows further boosted market sentiment. FIIs were net buyers, injecting ₹11,517.92 crore to the cash segment. Domestic institutional investors (DIIs) on the other hand, became net sellers, selling ₹633.67 crore in the cash segment.

Foreign portfolio investors (FPIs) became aggressive buyers in September, buoyed by the recent massive 50 basis point interest rate cut by the US Federal Reserve. FPIs invested ₹The value of Indian equities stood at Rs 33,691 crore and the net investment stood at ₹63,000 crore as of September 20, taking into account debt, hybrid, debt-VRR and equities.

This month, the total value of investments in debt markets is ₹7,361 crore. On the stock side, September is on track to record the highest FPI inflows year-to-date (YTD), while total investment is already at a nine-month high.

Global Tips

While the major event of the US Federal Reserve rate cut is now behind us, attention will remain focused on US markets for further clues. The US Federal Reserve’s move to cut interest rates by half a percentage point, its first cut in over four years, provided a significant boost to markets.

Although the global economy went through a cycle of interest rate cuts, the Bank of England (BoE) remained cautious and kept the rate unchanged, citing inflationary pressures. On the other hand, the Bank of Japan (BoJ) kept the rate unchanged, in line with expectations as the central bank adopted a wait-and-see approach after raising the interest rate in July.

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Analysts say no major triggers are expected this week, but upcoming US macroeconomic data will be key to monitor. While markets currently appear unfazed by geopolitical risks, these factors could significantly undermine the ongoing bull market.

The Dow Jones Industrial Average (DJIA) surged to a fresh record high, approaching the upper bound of its ascending channel at 42,300. “A decisive break above this level can generate fresh momentum and lead to further gains. However, if the index fails to break through this resistance, there could be some consolidation in the near future,” said Ajit Mishra, Vice President – ​​Research, Religare Broking Ltd.

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Oil prices

International oil prices stabilised lower in the previous session but posted a second straight weekly gain, gaining support from a massive 50 basis point interest rate cut by the US Federal Reserve and a drop in US supply. Signs of a slowing economy in China, the world’s largest consumer of goods, kept prices on the floor.

Brent crude futures fell 39 cents, or 0.52 percent, to $74.49 a barrel. U.S. WTI crude futures fell three cents, or 0.4 percent, to $71.92. Prices rebounded after Brent crude fell below $69 for the first time in almost three years on Sept. 10. However, both benchmarks are up more than four percent this week. Domestically, crude futures fell 0.22 percent. ₹5,976 per barrel on the Multi-Commodity Exchange (MCX).

Corporate Action

In the last week of September, shares of several major companies including Bajaj Healthcare Ltd, Bharat Dynamics Ltd, Ceigall India Ltd, Cochin Shipyard Ltd, Rail Vikas Nigam Ltd and others will be trading ex-dividend. Shares of some companies will also be trading ex-premium and ex-split this week. Check the complete list here

Technical view

Ajit Mishra of Religare Broking Ltd said, “Nifty 50 is approaching a major milestone of 26,000, potentially extending its rally to 26,500. This extension will depend on the continued strength of banking and financial giants, which will lead the market’s uptrend. Traders are advised to adopt a ‘buy on dips’ strategy, with key support expected in the 25,150-25,350 zone.”

“Apart from banking and financials, auto and real estate sectors are also providing opportunities for new long positions and are selectively picking from other sectors. However, given their recent weak performance, investors should also remain cautious in midcap and smallcap segments,” Mishra added.

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Nifty Bank Index touched a fresh all-time high of 54,066.10, forming a strong bullish candle on the weekly charts and closing above previous highs. This signals fresh momentum, driven mainly by private sector banks.

“The index is likely to continue its uptrend towards 55,000 with minor resistance at 54,300. On the upside, immediate support is at 53,200 and a break of that level could take the index towards 52,500,” said Palka Arora Chopra, Master Capital Services Ltd.

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