The rally will depend on continued strength in banking and financial heavyweights, which have been leading the market’s upward trajectory, Ajit Mishra of Religare Broking said.
The broad trend remains strongly positive, with the Fed signaling a data-driven approach, which supports the “buy on dips” strategy in the market, analysts say.
“We have seen a sectorial rotation among investors to large caps, especially in consumption, staples, auto, finance, and realty. In the short term, investors are being cautious on export-oriented sectors like pharma and IT due to depreciation in the dollar,” said Vinod Nair of Geojit Financial Services.
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Key factors to track this week:
1) FII flow
Encouraged by the Fed’s jumbo rate cut of 50 basis points, fall in US weekly jobless claims and FTSE rejig, foreign investors made their largest single-day shopping in the last 3 years on Friday when they bought stocks worth Rs 14,064 crore in the cash market.Analysts say the trend of FII buying is likely to continue in the coming days as well.
2) Macro data
Key economic data releases in the US this week are flash services PMI, manufacturing PMI & consumer confidence data for the month of Sep’24, and weekly jobless claims, and PCE data for Aug’24. It will be a muted week on the Indian economic data front as no major data release is scheduled except for the flash services and manufacturing PMI for September.
These indicators will provide insights into the country’s economic health and could influence market sentiment.
3) F&O expiry
As we approach the September F&O expiry, heightened volatility is likely. Technically, a bullish candle on weekly charts and higher bottom formation on daily charts suggest further upside from the current levels.
FIIs’ long exposure in index futures stands at 76%, indicating a bullish bias, though the market appears to be slightly overbought at these levels.
Nifty is likely to test the level of 26,100, followed by 26,350 in the short term. While on the downside, the support zone has shifted higher in the zone of 25,500-25,450 in the short-term, SBI Securities said.
4) Crude oil
Oil prices settled lower on Friday but recorded a second straight week of gains, garnering support from a U.S. interest rate cut and a dip in U.S. supply.
Brent futures settled at $74.49 a barrel.
5) Global markets
All three major US stock indexes ended the week higher, not far off all-time peaks hit on Thursday as buyers piled into riskier assets.
Markets are fully pricing in a cut of at least 25 bps in November, with expectations for a cut of 50 bps given a 48.9% chance, according to CME’s FedWatch Tool.
Last week, the Bank of Japan left rates unchanged. Markets had been expecting rates to remain steady, but Governor Kazuo Ueda tempered expectations around imminent rate hikes.