The Week Ahead: Macro data, FII flows, among key factors that will guide Dalal Street investors

The bulls continue to roar on Dalal Street as the equity market registered its best weekly gain in seven months last week. Strong GDP data, sustained foreign capital inflow, better auto sales and a weak US dollar lifted the benchmark Sensex above 58,000 and Nifty above 17,300 for the first time in the week gone by.

The Sensex jumped 2,005.23 points, or 3.57 percent, to close at 58,129.95, while the Nifty50 rallied 618.40 points, or 3.70 percent, to 17,323.60 in the week ended September 3. The rally was largely led by realty, bank, auto, metals, pharma and energy stocks.

The broader market outperformed the frontliners as the Nifty Midcap100 index rose almost 5 percent and the Nifty Smallcap 100 index gained 4 percent during the week.

"The market is under the strong grip of bulls and there are no signs that bulls want to lose their control soon. The beauty of last week's rally is that it was broad-based with a gain in quality stocks and there was no euphoria kind of situation,” said Santosh Meena, Head of Research, Swastika Investmart.

The next week is a holiday-shortened one and participants will eye IIP data, the pace of vaccination and other COVID-related updates and the trend in global markets.

"Global markets have played a supportive role in the recent surge and their performance in the coming week would be equally important to maintain the prevailing bias," said Ajit Mishra, VP Research, Religare Broking.

Mishra expects Nifty to test the 17,500 level next week, however, it may see some pause or consolidation first. The recent trend of rotational buying across sectors is likely to continue in the coming week too.

"Though the broader indices have also witnessed a decent surge of late, we recommend remaining cautious as any profit-taking in the market may again derail the momentum. In short, align your positions according to the trend and continuing with the “buy on dips” approach,” Mishra said.

Meanwhile, the US market will remain closed on Monday on account of Labor day and as there was no major movement in Friday’s trading session, analysts expect some consolidation in the Indian market on Monday.

However, if Nifty consolidates, then Meena believes Midcap and Smallcap stocks may outperform.

The Indian equity market will remain shut on September 10 for Ganesh Chaturthi.

The industrial output for the month of July is scheduled for September 10, Friday. Analysts expect a strong growth due to a low base in the year-ago period led by robust manufacturing PMI data.

The deposit and bank loan growth for the fortnight ended on August 27 will also be released on Friday.

Additionally, foreign exchange reserves for the week ended September 3 is also scheduled on Friday.

The share allotment of Ami Organics and Vijaya Diagnostic Centre IPOs are likely to be finalized on September 8. The refunds to the unsuccessful bidders would take place on September 9.

The Rs 570-crore initial public offer (IPO) of Surat-based Ami Organics was subscribed 64.6 times during September 1-3. The issue received bids for 42.2 crore shares against 65.4 lakh shares on offer.

The IPO of Vijaya Diagnostic Centre was subscribed 4.54 times during September 1-3 as investors put in bids for 11.36 crore equity shares against the IPO size of 2.50 crore equity shares.

The Rs 1,895-crore issue was priced at Rs 522-531 per equity share and was a complete offer for sale (OFS) of 3,56,88,064 shares by promoter Dr S Surendranath Reddy, and investors Kedaara Capital AIF and Karakoram Capital AIF 1.

The foreign institutional investors (FII) turned buoyant in the Indian market as they net bought Rs 6,867.73 crore worth of shares in the week gone by.

However, the domestic institutional investors net sold Rs 1,421.12 crore worth of shares last week.

The Indian rupee appreciated to around 73 per US dollar level led by strong FII inflow, buying in equity markets and a weak US dollar index. Analysts believe the rupee to appreciate further as the weakness in the dollar index may continue.

"Next week is going to be data light and hence the downward bias will continue in USD-INR, barring any unexpected sell-off in stocks. However, with USD-INR back near 73.00, the tussle between the market and RBI is fully underway. Market wants to know where the RBI will draw the line and intervene aggressively,” said Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities.

On the technical front, Nifty ended the week with a bullish white long marabozu candlestick formation that may lead to a further upside where 17520 is an immediate target while 17700 is the next target level.

“Though the momentum indicator RSI is trading in overbought territory on both daily and weekly time frames, the market can remain overbought for some more time. On the downside, 17,200-17,140 is an immediate demand zone to buy any dip while 17,050-17,000 will be the next support area,” said Meena.

Total Vehicle Sales for August, MBA Mortgage Applications for the week ended September 3 on Wednesday, September 8.

Initial Jobless Claims for the week ended September 4 on Thursday, September 9.

Wholesale Inventories for July; PPI for August on Friday, September 10.

Construction PMI for August on Monday, September 6.

Q1CY21 GDP estimates on Tuesday, September 7.

ECB Interest Rate decision on Thursday, September 9.

Household Spending for July on Tuesday, September 7.

Q2CY21 GDP on Wednesday, September 8.

Machine Tool Orders for August on Thursday, September 9.

Inflation for August on Thursday, September 9.

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