In addition, the strong mood in the broader markets and the hope of a robust outlook post-general elections also led to buying interest.
The market, in the coming truncated week, is expected to be consolidative with a positive bias.
"The release of PMI data for May from both the US and India next week will be closely monitored for further market insights.
In the coming week, the Lok Sabha election will move to the next two phases.
Experts believe that FIIs may be preferred to stay on the sidelines as they are focussing on the general election results, due on June 4, for making fresh investments.
Dalal Street Week Ahead
The market showed a drastic recovery from recent lows in the extended week ended May 18 with the benchmark index rising a couple of percentage points despite sharply increasing volatility on the other side. Better-than-expected earnings by index heavyweights, positive global cues, and sustained hope for Fed funds rate cut following US economic data (though uncertainties persist over the timing of the rate cut) supported the sentiment. In addition, the strong mood in the broader markets and the hope of a robust outlook post-general elections also led to buying interest.
The market, in the coming truncated week, is expected to be consolidative with a positive bias. The market participants will focus on the FOMC minutes as well as the speech by the Fed chair, along with phases of Lok Sabha elections, and corporate earnings lined up next week as these factors are likely to help the indices for further direction, experts said.
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The Nifty 50 rallied 447 points or 2 percent to 22,502, and the BSE Sensex closed 1,341.5 points or 1.85 percent higher at 74,006, while the broader markets outperformed benchmark indices, with the Nifty Midcap 100 and Smallcap 100 indices gained 4.7 percent and 5.6 percent, respectively.
"The release of PMI data for May from both the US and India next week will be closely monitored for further market insights. Amidst ongoing uncertainties surrounding election results and quarterly earnings, we anticipate continued volatility in the near term," Vinod Nair, Head of Research at Geojit Financial Services said.
Also read: Trading Plan: Will the trend likely remain bullish in Nifty, Bank Nifty going ahead?
Equity markets will remain closed on May 20 for general elections.
Here are 10 key factors to watch:
1) Corporate Earnings
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The March quarter earnings season is near the end as in the seventh week, nearly 900 companies will release their quarterly earnings including major ones like Oil and Natural Gas Corporation, Grasim Industries, Power Grid Corporation of India, Sun Pharmaceutical, ITC, Hindalco Industries, NTPC, and Divis Laboratories.
Further, Aurobindo Pharma, BHEL, Bharat Electronics, Bosch, Petronet LNG, InterGlobe Aviation, Ashok Leyland, Jubilant FoodWorks, One 97 Communications, FSN E-Commerce Ventures, Honasa Consumer, New India Assurance Company, India Cements, Oil India, SAIL, Gland Pharma, Glenmark Pharmaceuticals, Hindustan Copper, Manappuram Finance, Nazara Technologies, Suzlon Energy, and United Spirits will also announce their quarterly earnings next week.
Corporate earnings announced so far are largely in line with expectations with no major surprise on the positive and negative sides, analysts said.
2) Lok Sabha Elections
Further, the market participants will also keep an eye on the remaining three phases of ongoing general elections and the voter turnout in all those phases. The voting, which started with the first phase on April 19, has been done so far in four out of seven phases. In the coming week, the Lok Sabha election will move to the next two phases. In the fifth phase, on May 20, the people from the 49 constituencies across 6 states and two union territories will cast their ballots, while the voting for the sixth phase, in 57 constituencies across seven states and union territories, will be conducted on May 25.
Also read: Trade Spotlight: How should you trade Aurobindo, Tech Mahindra, TVS Motor, MTAR Tech and others?
According to the Election Commission, the cumulative voter turnout in the first four phases of the general elections stood at 66.95 percent, while the turnout in the first phase on April 19 was recorded at 66.14 percent, the second phase at 66.71 percent on April 26, third phase on May 7 at 65.68 percent, and the fourth phase at 69.16 percent on May 13.
3) Domestic Economic Data
Meanwhile, HSBC Manufacturing and Services PMI Flash numbers for the month of May will be released on May 23. In April, the Manufacturing PMI was at 58.8 against 59.1 in March, while the Services PMI came in at 60.8 against 61.2 during the same period.
Further, foreign exchange reserves for the week ended May 17 will be released on May 24.
4) FOMC Minutes, Fed Chair Powell Speech
On the global front, all focus will remain on the speech by Federal Reserve Chair Jerome Powell on May 21, followed by FOMC minutes of the monetary policy meeting held earlier this month, on May 22. In last week's speech on May 14, Powell reiterated that the fall in inflation has been slower than they expected, indicating the benchmark interest rates likely to remain elevated for an extended period, but does not expect the central bank to be raising rates going ahead. In April 2024, the US inflation came in at 3.4 percent against 3.5 percent in the previous month, which is still way above the Fed's target of 2 percent.
In the last FOMC meeting, the Fed retained interest rates at 5.25-5.5 percent for the sixth consecutive time. Hence, all eyes will be on the cues with respect to the timeline for the rate cut from the minutes and speech.
5) Global Economic Data
Further, the market participants will also track jobs data, new home sales and durable goods orders data from the US, while the Manufacturing and Services PMI flash numbers from the Eurozone and Japan, and Japan's inflation for April will also be watched.
6) FII/DII Flow
The activity at the foreign institutional investors (FIIs) desk will also be one the important factors to watch in the coming week, as they have been big sellers for yet another month (might be due to uncertainty around the election outcome which has already seen in the significantly increased in volatility), though domestic institutional investors (DIIs) continued to compensate FIIs outflow by a significant margin who in fact have been drivers for the equity markets.
Experts believe that FIIs may be preferred to stay on the sidelines as they are focussing on the general election results, due on June 4, for making fresh investments. FIIs have net sold Rs 10,650 crore worth of shares in the cash segment in the last week ended May 18, taking the total net selling for the current month to Rs 33,625 crore (similar to the previous month), however, DIIs were net buyers to the tune of Rs 14,410 crore during the week and Rs 33,820 crore in current month (against Rs 44,186 crore in April).
7) IPO
In the primary market, Awfis Space Solutions, the only IPO (worth Rs 599 crore) from the mainboard segment, will open on May 22, while Go Digit General Insurance will make its debut on the bourses on May 23.
In the SME segment, GSM Foils will be the only IPO opening on 24. In addition, seven companies - ABS Marine Services, Veritaas Advertising, Mandeep Auto Industries, Indian Emulsifier, Quest Laboratories, HOAC Foods India, and Rulka Electricals - will list their shares in the coming week.
Further, IPOs by HOAC Foods India, and Rulka Electricals, which opened on May 16, will close on May 21.
8) Technical View
Technically, the Nifty 50 reached to important level of 22,500, the highest closing level since May 2, which is expected to play a crucial role in the market direction going ahead, as climbing decisively above the same can take the index to record high levels but falling below the same can drag it down to 22,400-22,300. According to experts, 22,200 is the key support area, while the trend seems to be in favour of bulls considering the formation of a Bullish Piercing Line pattern on the weekly charts and the index trading above all key moving averages on all time frames.
9) F&O Cues
According to the weekly options data, the 22,800 and 23,000 strikes on the Call side owned the maximum open interest, which is likely to act as key resistance levels for the index in the coming week, while 22,400, 22,200 and 22,000 strikes on the Put side held the maximum open interest, which can be support levels for the index.
Meanwhile, the India VIX, the fear gauge, maintained an upward journey for the third consecutive week, rising from 10.93 levels to 20.53 in the said period, which needs to be watched as the market approaches general election results. Any further increase in the volatility may make the bulls more uncomfortable, experts feel.
10) Corporate Action
Here are key corporate actions to take place next 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.
