The benchmark indices experienced another week of decline, ending on August 9. Market sentiment was negatively impacted by profit-taking, disappointing US economic data indicating potential recession fears, the unwinding of the yen carry trade, and a hawkish stance from the Reserve Bank of India (RBI) following its recent policy meeting.
The market reached a multi-week low early in the week, but participants adopted a buy-on-dips strategy later on, which helped to limit the losses.
On August 12, the market is anticipated to react to allegations from the Hindenburg Research report, which claims that SEBI Chairperson Madhabi Buch and her husband Dhaval Buch were involved in Adani Group’s offshore funds.
The Buch family has denied these charges, maintaining that they had no hidden stakes in the funds mentioned, while the Adani Group has dismissed the allegations, asserting that their overseas holding structure is fully transparent.
Looking ahead, with a decrease in volatility, the upcoming truncated week is expected to be consolidative. The market will likely attempt to recover, with a focus on inflation numbers from both India and the US, as well as alignment with global market trends, according to experts.
Market Decline Continues Amid Global Concerns, Focus Shifts to Earnings and Inflation Data
During the week, the BSE Sensex fell by 1,276 points, or 1.6 percent, closing at 79,706, while the Nifty 50 dropped 350 points, or 1.4 percent, to 24,368. The Nifty Midcap 100 and Smallcap 100 indices also declined, by 1.3 and 2.1 percent, respectively. All sectoral indices, except for pharma, closed in the red.
Vinod Nair, Head of Research at Geojit Financial Services, suggested that the future direction of the domestic market will be influenced by global markets. He indicated that the lack of fresh triggers and subdued earnings might hinder higher valuations, advising investors to shift their focus from growth stocks to value stocks.
In the coming week, corporate earnings will be a key focus, with over 1,900 companies set to report their quarterly results. This includes notable Nifty 50 companies such as Hero MotoCorp and Hindalco Industries. Additionally, several other companies, including Nykaa, Vodafone Idea, and Bajaj Hindusthan Sugar, among others, will release their earnings.
On the domestic front, market participants will also monitor CPI inflation, expected to be lower for July due to a higher base of 7.4 percent from the previous year. In June, CPI inflation was at 5.08 percent. Shreya Sodhani from Barclays estimates July CPI inflation to be around 3.3 percent year-on-year. Additionally, industrial and manufacturing numbers for June, WPI inflation, balance of trade for July, and foreign exchange reserves will also be released.
Globally, attention will be on US inflation data for July, which is anticipated to be similar to June’s 3 percent. Core inflation and other data points like PPI and retail sales will be closely watched. These figures are crucial for the US Federal Reserve, which may announce its first rate cut at its September meeting. Furthermore, GDP estimates and economic data from Europe, Japan, and China will be important for market participants.
Foreign institutional investors (FIIs) significantly sold off in the cash segment last week, but this was offset by domestic institutional investors (DIIs) buying shares. FIIs net sold shares worth Rs 19,139.76 crore, while DIIs net bought Rs 20,871.1 crore, indicating a continuation of the buy-on-dips strategy despite market declines.
In the IPO space, the Rs 160-crore IPO of Saraswati Saree Depot will open for subscription on August 12, with Brainbees Solutions and Unicommerce Esolutions debuting on August 13. Additionally, various SME segment IPOs, including Positron Energy and Sunlite Recycling Industries, will launch on August 12, while Broach Lifecare Hospital and Solve Plastic Products will open on August 13. Aesthetik Engineers will close its public issue on August 12 and list on NSE Emerge on August 16.
From a technical perspective, the Nifty 50 formed a bullish hammer pattern on weekly charts, but the RSI indicator showed a negative bias. The index is expected to consolidate, with immediate resistance at 24,400 and support around 24,100-24,000. The options data suggests support at 24,000 and resistance at 24,400, with volatility (India VIX) remaining high, signaling caution for market participants.
