Bulls start the week on an upbeat note with exit polls forecasting an emphatic win for the NDA alliance on June 4, ending weeks of speculation that the numbers were likely to disappoint the market.
Adding to that, the strong Q4 GDP numbers announced post-market hours on Friday, the benchmark Nifty appears set to hit a fresh all-time high shortly.
That magic figure could even come as early as Monday, some market participants say, fuelled by a combination of short covering and fresh buying. The upswing should continue on Tuesday if the actual results are in line with the exit poll numbers, and thereafter the market could consolidate the gains.
On Friday, the Nifty 50 rose 42 points to close at 22,531 following a late-session rally that helped end five consecutive sessions of losses. The BSE Sensex gained 76 points to close at 73,961, although both indices were down 1.9 percent each for the week. In the broader markets, the Nifty Midcap 100 and Smallcap 100 indices gained half a percent each while falling over a percent each for the week.
“Exit poll results completely remove the so-called election jitters which have been weighing on markets in May,” said V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Story continues below Advertisement
He expects a massive rally on Monday, led by large-cap financials, capital goods, automobiles, and telecom.
Also read: Markets could recoup last week’s losses on Monday, says Prashant Khemka
Narendra Solanki, Head of Fundamental Research at Anand Rathi Shares, also bets on a big rally on Monday as the market was not expecting an easy win for the NDA coalition.
Story continues below Advertisement
“The market could make a fresh high on Monday, as the strong verdict is positive for the market both from a long-term and short-term perspective,” he said.
Here are 10 key factors to watch next week:
Lok Sabha Election Results
After strong exit polls, all eyes will be on the actual election results due on June 4. Market experts are hoping for similar kind of results on the same day and confident about policy continuation. And after June 4, the market will start focussing on the government’s roadmap for the next five years.
The survey of people, who exited polling stations after voting, conducted by the several agencies indicated that the BJP-led NDA is likely to get more than 350 seats in the Lok Sabha election 2024 and few agencies pointed out even more than 400 seats for the NDA, with Narendra Modi becoming the Prime Minister for third time.
RBI Policy
The next domestic event to watch out for would be the outcome of three-day Monetary Policy Committee (MPC) meeting, due on June 7. Most experts expect the policy rates to remain unchanged and the focus will be mainly on the RBI governor commentary. According to them, the rate cut may not happen before Q4-2024 given the central bank’s own inflation trajectory and persistent upside surprises in growth.
“Q4FY24 GDP print at 7.8 percent (against estimates of 7 percent) suggests growth is moving faster than expected by the RBI, which means the central bank should see little urgency to cut rates while the MPC awaits for comfort on headline inflation. In our view, the MPC will likely vote 5-1 to keep the policy mix unchanged at its meeting on June 7,” Shreya Sodhani, Regional Economist at Barclays said.
Domestic Economic Data
Further, the street will also look for cues from the PMI numbers due next week. The HSBC Manufacturing and Services PMI numbers for the month of May will release on June 3 and June 5, respectively. Most experts expect both to be higher than previous numbers of 58.8 and 60.8 (respectively) recorded in April.
Apart from that, foreign exchange reserves for the week ended May 31 will also release in the coming week on June 7.
Global Econonomic Data
Globally, the major focus of the markets participants next week will be seen on the unemployment rate, non farm-payrolls, JOLTs job openings & quits, and Challenger job cuts from the United States. These data points are crucial especially ahead of FOMC meeting scheduled in the following week on June 12.
In addition, the manufacturing and services PMI numbers by several countries including US, China, Japan and Euro Area, due on June 3 and June 5 respectively, will also be closely watched.
Foreign institutional investors activity will also be a key factor to watch going ahead. Most experts expect the FIIs to comeback, after their significant outflow in the past couple of months, citing the likely political stability, strong economic growth, and manageable inflation in India, although US interest rates.
FIIs have net sold Rs 42,214 crore in the cash segment in May, the highest monthly selling since June 2022, due to their buying in Chinese stocks, and spike in US bond yields (trading at 4.5 percent). However, domestic institutional investors fully compensated the FII outflow by buying Rs 55,733 crore worth shares during the same month, which in fact, has been acting as a major supporting factor for the market.
“If the election results ensure political stability, FPIs are also likely to turn buyers in such a scenario. However, in the medium term, US interest rates will exert more influence on FPI flows,” Vijayakumar said.
In the primary market, investors will see three new public issues in the coming week. The Rs 130-crore Kronox Lab Sciences IPO, from the mainboard segment, will open on June 3, while other two IPOs – Magenta Lifecare, and Sattrix Information Security – will be from the SME segment, bothopening on June 5.
Further in the SME segment, Aimtron Electronics, and Associated Coaters will close their initial public offerings on June 3, and the closing of TBI Corn IPO will be on June 4.
On the listing front, Vilas Transcore will debut on June 3, while the trading in Beacon Trusteeship, and Ztech India IPO shares will commence effective June 4. Further, Associated Coaters, and Aimtron Electronics will list their shares on June 6, and TBI Corn on June 7.
Technical View
Technically, the market seems to be poised for further upward journey in the coming week, considering the Nifty 50 holding the mid of Bollinger band (or 20-day SMA) as well as defending 50 percent Fibonacci retracement level (from the low of 21,821 to record high of 23,111, in May) for another session on Friday, especially ahead of exit polls which now are likely to strengthen the chart structure.
Most experts are hoping for gap-up opening and record high journey for the market on Monday and the continuation of higher highs-higher lows on the longer timeframes. According to them, the Nifty 50 is likely to climb above the upper end of Rising Channel (placed at 23,150-23,200 area) in the coming week, with crucial support at 22,300.
F&O Cues
The weekly options data indicated that the Nifty 50 is likely to face initial resistance at 23,000 and then 23,500, while 22,500 now is likely to be key support area.
On the Call side, ahead of exit polls, the maximum open interest was seen at 23,000 strike, followed by the 24,000 and 23,500 strikes, with maximum writing at the 23,500 strike, then the 23,000 and 24,000 strikes. On the Put side, the maximum open interest was observed at the 22,000 strike, followed by the 22,500 strike, with maximum writing at 21,500 strike, followed by the 22,600 and 22,500 strikes.
India VIX
The volatility remained elevated and hit a fresh two-year high on Friday. However, now with the exit polls outcome and post-election results (on June 4), it is likely to come down in the coming sessions as generally it always spikes during such mega events, experts believe. India VIX, the fear gauge, jumped 13.3 percent during the week to 24.6, the highest closing level since May 2022, continuing upward journey for fifth consecutive week.
Corporate Action
Here are key corporate actions taking place in the coming week:
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
