Synopsis
Week Ahead in the Markets: 18 Dec to 22 Dec 2023
After seven weeks of Indian market gains, the focus shifts to whether the bullish trend will persist. Positive global and domestic factors, such as a dovish Fed, FII buying, and improved macro data, suggest the rally might continue. Experts anticipate some consolidation, though.
Last week, BSE Sensex climbed 2.37%, closing at a record 71,483, while Nifty50 gained 2.32%, reaching 21,456. Broader markets saw action too, with Nifty Midcap 100 rising 2.67%, and Nifty Smallcap 100 surging 3.35%. Sectoral indices all ended positively, with Nifty IT up 7%, Nifty PSU Bank and Metal indices rising 5%, and Nifty Realty gaining nearly 4% after the Federal Reserve hinted at three rate cuts next year.
Looking ahead, key factors to watch include US Q3-2023 GDP, Bank of Japan’s policy decision, RBI MPC meeting minutes, and primary market activity.
![Bullish Trend in Market](https://thesundayfinancials.com/wp-content/uploads/2023/12/businesswoman-painting-a-bull-with-light-2023-11-27-05-24-33-utc-1024x768.jpg)
Bank of Japan monetary policy action
The focus now turns from the recent US Federal Reserve developments to the upcoming Bank of Japan’s decision on December 19. Analysts highlight the importance of this decision, especially with the Japanese Yen gaining strength.
Economists, on the other hand, anticipate that Japan’s central bank will remain one of the world’s most dovish by year-end. Given weak consumption and uncertainty about next year’s wage outlook, the Bank of Japan is expected to stick to its ultra-loose monetary policy.
RBI MPC minutes
Mark your calendars for December 22 when the Reserve Bank of India unveils the details of its recent policy meeting. Back on December 8, the RBI, as anticipated, maintained the repo rate at 6.5%, the rate at which banks borrow short-term funds. This decision came as inflation persisted above the central bank’s medium-term target of 4%. RBI Governor Shaktikanta Das emphasized the committee’s vigilant monitoring of inflation, expressing readiness to take rate-related actions based on data.
US Q3 GDP Growth
International investors will closely monitor the latest GDP figures from the world’s largest economy for the September quarter of this year. In the second estimates released in November, the US economy showed growth at a rate of 5.2%, surpassing the initial estimate of 4.9% published in October. This outperformed the expectations of most economists, and notably exceeded the 2.1% growth rate recorded in the April-June quarter.
Global Economic Data
Additionally, keep an eye on key data like new home sales, durable goods orders, personal income and spending, and housing starts in the US for November. Also, pay attention to the United Kingdom’s GDP figures for the third quarter of 2023, along with November’s inflation data. Don’t forget to track the inflation rate in Europe for November.
Key Global Cues to watch out for
19-Dec-2023: Tuesday
- United States: November Housing Starts, Building Permits Preliminary.
- Europe: November Inflation
- Japan: Bank of Japan (BOJ)Interest Rate Decision.
20-Dec-2023: Wednesday
- United States: API & EIA Crude Oil Stock Exchange, November Housing Sale, Current Account Q3, MBA Mortgage Applications for the last week (Dec 15).
- Europe: Construction Output, Current Account Data
- Japan: November month Balance of Trade.
- United Kingdom (UK): November – Inflation and PPI Core Input/Output.
21-Dec-2023: Thursday
- United States: Initial Jobless Claims (last Week ended), Core PCE Prices Final – Q3, Q3 GDP Final.
22-Dec-2023: Friday
- United States: Durable Good Orders, Personal Income & Spending Data, Core PCE Price Index, New Home Sales and Building Permits Final for November month.
- Japan: November Inflation, Bank Of Japan (BOJ) Monetary Policy Meeting Minutes.
- United Kingdom (UK): Current Account and Business Investments – Q3, Q3 GDP, November Car Production and Retail Sales.
Technical View on Indian Market
The bulls continued their strong buying spree in the domestic markets, propelling the Nifty to a seventh consecutive week of gains. The benchmark index saw an increase of around 2.5 percent for the week and a noteworthy monthly gain of 6.57 percent.
NIFTY
In our recent analysis, we highlighted the potential upside of 21,400 in Nifty, a level that was indeed reached last week. Looking ahead, the immediate resistance for the index is at 21,500. This level is derived from calculating the distance between 20,200 and 18,850, which amounts to approximately 1,350 points. Notably, the breakout above 20,200 triggered a rally to 21,500, covering a distance of 1,300 points.
As we move forward, there could be a period of consolidation around the 21,500 levels in the upcoming sessions. A breakthrough beyond this point might pave the way for a further rally towards 21,800.
![Nifty50 Weekly Chart](https://thesundayfinancials.com/wp-content/uploads/2023/12/Screenshot-2023-12-17-at-12.50.47 PM-1024x459.png)
Bank Nifty
The Nifty Bank index didn’t perform as well as expected because the IT sector had a significant impact on boosting the overall Nifty. Currently standing at over 48,000, the Nifty Bank has the possibility of hitting the 50,000 mark in the weeks ahead. It’s important to note that this optimistic outlook would be invalidated if the index closes below 47,000.
![Bank Nifty Weekly](https://thesundayfinancials.com/wp-content/uploads/2023/12/Screenshot-2023-12-17-at-12.55.12 PM-1024x457.png)
Nifty IT
After hitting a low of 26,184 on April 17, 2023, marking the potential reversal point for the bullish BAT pattern, Nifty IT has been on a strong upward trend. It has surged by a substantial 9,763 points, reflecting an impressive 37 percent gain in just 7-8 months.
Currently, the index appears highly optimistic as it surpasses a 0.618 percent retracement from its previous 2022 decline. Looking ahead, we anticipate robust support around 34,300 and resistance near 36,600. It’s advisable to consider buying heavyweights such as TCS, Infosys, and HCL Technologies during any market dips.
![Nifty IT Weekly Chart](https://thesundayfinancials.com/wp-content/uploads/2023/12/Screenshot-2023-12-17-at-1.18.37 PM-1024x564.png)
Current weekly chart had broken out of the channel it was passing through for several weeks, so expect a bullish uptrend to surpass 36,700 mark and march towards touching the peak of 39000.
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Commodity Markets
In a notable twist, the markets saw a surge in positive momentum following the Federal Reserve’s strongest hints yet about shifting to a more relaxed monetary policy next year.
Despite the widespread expectation of maintaining the status quo in the December meeting, investors received a pleasant surprise in the Summary of Economic Projections. For the first time since March 2021, Federal Open Market Committee (FOMC) officials projected no further interest-rate hikes. Notably, the fed funds rate was predicted to be at 4.6 percent by the end of the next year, suggesting a potential 75 basis points rate cut—well below the earlier forecast of 5.1 percent. While markets were anticipating a hawkish stance from Powell and resistance to early rate cuts, no such tone was present. The dovish shift, combined with Fed Chair Powell’s acknowledgment of progress in alleviating inflation, has raised expectations of a highly likely rate cut in March.
The market’s response to this news has been overwhelmingly positive, with investors already factoring in 150 basis points of rate cuts for 2024. As a result, the US Dollar dropped to 101.77, and US 10-year treasury yields fell below 4 percent for the first time since August. Simultaneously, the Dow Jones reached a historic high, closing above 37,000 for the first time, and the S&P 500 neared all-time highs. Furthermore, the European Central Bank (ECB) and Bank of England (BOE) followed suit by maintaining their rates in their year-end policy decisions.
Crude prices
The International Energy Agency predicts a 1.1 million barrels per day increase in global oil demand by 2024, a slight uptick from the earlier projection of 930,000 barrels per day. Sharekhan suggests that crude oil might reach $75 soon, with support levels at $70/$67. Given India’s status as a net crude oil importer, close attention will be paid to price movements.
Moreover, the markets will closely watch China for extra support actions, particularly following the substantial infusion of cash by the People’s Bank of China through one-year policy loans.
Primary Market Action
Last week saw a buzz on IPO Street as several companies headed to D-Street.
- DOMS Industries and India Shelter Finance wrapped up their public issues on the mainboard, with Inox India’s offer closing on December 18. These companies will soon be listed on the stock exchange following the T+3 listing norms, where T represents the issue’s closing day.
- Looking ahead, Suraj Estate Developers, Motisons Jewellers, and Muthoot Microfin will open their IPO subscriptions on December 18, followed by Happy Forgings, RBZ Jewellers, and Mufti Menswear on December 19.
- Azad Engineering IPO is scheduled for December 20, and Innova Captab will follow on December 21.
- In the SME market, keep an eye on Sahara Maritime, Shanti Spintex, Electro Force, and Trident Techlabs for potential opportunities.
Read More: Have a detailed view on the IPO’s in IPO Week Action.