Key Factors Driving Dalal Street This Week: India’s Fiscal Deficit to US Unemployment Rate

As the new week commences, traders will be closely monitoring macroeconomic data and monthly sales figures from auto companies, which are expected to generate significant market activity.

SUMMARY:

In the upcoming week, the market’s focus will be on significant economic indicators, including India’s fiscal deficit, RBI Monetary and Credit Information, S&P Global Manufacturing PMI, and the US unemployment rate.

Additionally, Adani group stocks such as Adani Enterprises, Adani Power, Adani Green Energy, and Adani Transmission are set to announce their first-quarter results during this period.

From a technical perspective, the Nifty’s crucial support level lies at 19,562. If this level is breached, there is a possibility of a further 2% decline, which could signal the end of the 17-week rally starting from the low of 16,828.

During the past week, the markets experienced a downward trend following the US Federal Reserve’s decision to raise interest rates to their highest level in over two decades. As the new month begins, traders are eagerly anticipating macroeconomic data and monthly sales figures from auto companies, which are expected to create a dynamic market environment.

Moreover, this week will see the release of Q1 earnings from prominent entities in Dalal Street, including State Bank of India (SBI), Bank of Baroda (BoB), Adani Enterprises, Adani Power, Bharti Airtel, Mahindra and Mahindra, Maruti Suzuki India, and Power Grid.

In terms of economic events, investors will keep a close eye on key data releases, starting with the fiscal deficit and RBI Monetary and Credit Information Review on July 31. The S&P Global Manufacturing PMI figure is scheduled for August 1, followed by the S&P Global Services PMI on August 3, and foreign exchange reserves data on August 4.

Additionally, on August 2, the Goods and Services Tax (GST) Council is set to convene and make significant decisions regarding the taxation of funds collected by online gaming companies and casinos. Under the guidance of Finance Minister Nirmala Sitharaman, the council will deliberate on whether to impose a 28% tax on the total funds deposited for playing an online game or to opt for a tax on each bet placed.

During the ongoing earnings season, market participants will be closely monitoring the quarterly results of various companies. Some notable entities include Maruti Suzuki India, Mahindra and Mahindra, Adani Enterprises, Adani Power, Adani Green Energy, Adani Transmission, UPL, Escorts Kubota, Godrej Agrovet, Godrej Properties, Interglobe Aviation, Metropolis Healthcare, Titan Company, Bharti Airtel, Blue Star, Dabur India, Eicher Motors, Lupin, MRF, Zomato, Zydus Wellness, and many others.

In addition to these, several PSU firms are also set to release their Q1 results, such as SBI, Bank of Baroda, Hindustan Petroleum Corporation, Indian Overseas Bank, Gail (India), Power Grid Corporation of India, and BHEL. Investors will be closely tracking these earnings announcements to gauge the performance and outlook of these companies in the current economic scenario.

Global investors will closely monitor important economic data from the US. Key events to watch include ISM Manufacturing PMI and ISM Manufacturing Employment on August 1, followed by Initial Jobless Claims, ISM Services PMI, ISM Services Employment, and Factory Orders on August 3. On August 4, the focus will be on the Unemployment Rate, Non-Farm Payrolls, and Baker Hughes Total Rig Count. These data releases will play a crucial role in shaping market sentiments and expectations on the international front.

According to Deepak Jasani, Head of Retail Research at HDFC Securities, the Nifty experienced a second consecutive day of decline on July 28, primarily influenced by weak global cues and a series of underwhelming Q1 results. Although the Nifty initially dropped during the trading session, it managed to recover some of its losses later in the day, forming a high wave doji pattern following a minor fall.

Looking at the weekly chart, the Nifty witnessed a 0.5% decrease over the week, breaking the streak of four consecutive weeks of gains. At the moment, the critical support level for the Nifty is at 19,562, and a breach of this level could lead to a further 2% decline. If this happens, it may indicate that the 17-week rally starting from the low of 16,828 has concluded. On the other hand, the level of 19,748 may serve as a resistance in the near term.

According to Kunal Shah, Senior Technical & Derivative analyst at LKP Securities, the Bank Nifty experienced a bearish trend, with bears dominating the market and consistent selling pressure observed from higher levels. This indicates a prevailing bearish sentiment in the market. However, the index was able to close slightly above its 20-day moving average (20dma), which currently stands at 45,350.

The 20-day moving average plays a critical role as a support level, and breaching it might intensify selling pressure, potentially extending the ongoing downtrend. On the other hand, should the index remain above the 20dma, it could find temporary support, leading to a possible pullback towards levels around 45,700 or 45,800. Kunal Shah suggests that such a pullback could be viewed as a short-term relief rally within the current bearish trend.

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