Sensex and Nifty50: The Week Gone and the Week Ahead

Benchmark Indian equity indices snapped their three-session winning streak to close modestly lower on Friday, December 10. In fact, the key indices ended flat in the week gone by as bulls took a breather. Investors stayed on the sidelines ahead of the release of key macroeconomic data. A depreciating rupee and sub-due trend in world markets too impacted the overall sentiments. After a choppy session, the BSE Sensex closed 20.46 points or 0.03% lower at 58,786.67 on December 10. Likewise, the broader NSE Nifty50 slid 5.55 points or 0.03% to end at 17,511.3.

BSE Sensex 30 was pulled down by the top laggard—Titan which shed ~1.4%. It was followed by HDFC (NS:HDFC), Axis Bank (NS:AXBK), Kotak Bank, HCL Tech (NS:HCLT), and Tech Mahindra (NS:TEML). On the other hand, the BSE’s benchmark index was pushed upward by Asian Paints (NS:ASPN), SBI (NS:SBI), M&M (NS:MAHM), TCS (NS:TCS), Bajaj Finserv (NS:BJFS), and ICICI Bank (NS:ICBK) which climbed as much as ~3.3%. The market participants are on the wait-and-watch mode ahead of the domestic industrial production data. The benchmark indices traded with minor cuts following weak sentiments across world markets as the market awaits the release of Indian and US November inflation numbers. Losses in the IT and financial sectors put pressure on the indices. On the contrary, positive realty, metals, and auto scrips aided in eliminating losses strongly helped by mid and small caps. Notably, the broader Indian equities generated marginally positive returns in December 10 week. It was due to easing concerns pertaining to the potential severity of the Omicron variant of Covid19.

Factors that will decide December 13-17 week

Domestic inflation data, FIIs flow direction, and the US Fed’s rate decision will determine the course of key equity indices moves in the next week. Apart from these aspects, investors will also watch out for other important factors such as the progression of Covid19’s Omicron variant and global oil prices. You should note that in December 10 week, both the major indices S&P BSE Sensex and NSE Nifty50 gained the most in eight weeks. This was on account of a relief rally that drove over the inflated fears about Omicron. However, the upward momentum ran out of gas towards the week’s end ahead of the US inflation data. The next resistance level for Nifty50 appears at 17600-17,700. 

We feel that Nifty can march ahead in the initial part of the coming week, as we don’t have much negative surprise from US inflation data. Investors on Monday are likely to react to the US inflation data that was released on Friday. Inflation in the US accelerated at its fastest pace since 1982 November, according to the Labor Department. It is likely to put pressure on economic recovery. Although the US markets digested the inflation levels, the elevated levels of inflation could stall Fed’s tapering plans and may accelerate interest rate hikes. Hence, US Federal Reserve’s Monetary Policy Committee (or MPC) meeting due next week will be the major event to watch out for and which can further set the market’s direction.