Dalal Street’s Week Ahead: RBI’s Interest Rate Call and US Trade Balance in Focus for Sensex, Nifty

This week, investors will closely monitor several key factors impacting the financial markets. First, the focus remains on the remaining third-quarter corporate earnings results. Additionally, the Reserve Bank of India’s (RBI) upcoming decision on interest rates will be a crucial event influencing market sentiment.

In the upcoming week, several prominent companies, including Ashok Leyland, Bharti Airtel, Britannia Industries, Godrej Properties, Apollo Tyres, Lupin, and Nestle India, are set to report their Q3 financial results, drawing significant attention from investors. Additionally, market participants will closely watch the release of HSBC Composite PMI Final and HSBC Services PMI Final data on February 05 for insights into economic trends.

A key event to watch is the Reserve Bank of India’s (RBI) interest rate decision scheduled for February 08. Having maintained the benchmark policy repo rate at 6.5% for five consecutive meetings through December 2023, the RBI’s decision will be closely scrutinized for its implications on monetary policy and economic conditions.

During the previous week, Indian markets experienced significant gains, propelled by a growth-oriented budget announced by the government. Positive macroeconomic data further uplifted investor sentiments. In the upcoming week, investors will shift their attention to the remaining quarterly results of key companies spanning various sectors. Alongside this, market focus will be on critical events such as the Reserve Bank of India’s (RBI) interest rate decision, deposit growth, and bank loan growth data in India.

Additionally, global factors, including initial jobless claims and the balance of trade in the United States, will play a pivotal role in influencing market dynamics. These events collectively contribute to the ongoing buzz and activity in the markets.

This week, a diverse range of companies is set to disclose their quarterly earnings. Notable releases from the healthcare and pharma sector include Fortis Healthcare, Lupin, Apollo Hospitals Enterprise, Biocon, and Zydus Lifesciences. Insurance giant LIC is also on the list to unveil its Q3 results.

In addition to these, companies across various industries such as Ashok Leyland, Bharti Airtel, Britannia Industries, Godrej Properties, Apollo Tyres, Cummins India, Nestle India, Power Grid Corporation of India, Escorts Kubota, Grasim Industries, MRF, PI Industries, SJVN, and Tata Power are among those scheduled to announce their Q3 financial numbers. Investors will be closely watching these releases for insights into the performance and financial health of these companies.

Investors and traders will be closely monitoring economic data releases in the coming week. Key indicators include the HSBC Composite PMI Final and HSBC Services PMI Final, scheduled for release on February 5, providing insights into economic activities and trends.

Another significant event on the economic calendar is the Reserve Bank of India (RBI) interest rate decision, scheduled for February 8. In the last five consecutive meetings through December 2023, the RBI maintained its benchmark policy repo rate at 6.5%.

This decision aims to balance the goals of keeping inflation within the central bank’s 2-6% target range while supporting economic growth. Market participants will keenly await the outcome of this decision for its potential impact on monetary policy and overall economic conditions.

On February 9, additional economic data releases will further shape market sentiment. Investors will closely analyze key indicators, including bank loan growth, deposit growth, and foreign exchange reserves data.

Investors will be closely monitoring a series of important economic indicators from the US in the upcoming week:

1. February 5: S&P Global Composite PMI and S&P Global Services PMI will provide insights into the overall economic activity and the services sector.
2. February 6: Redbook data will be released, offering information on retail sales trends.
3. February 7: The Balance of Trade data will be a key indicator, reflecting the difference between the value of a country’s exports and imports.
4. February 8: Initial Jobless Claims data will be scrutinized for insights into the labor market and unemployment trends.
5. February 9: Baker Hughes Oil Rig Count will be released, providing data on the number of active oil rigs, which is a key indicator for the energy sector.

The remarks by Vinod Nair, Head of Research at Geojit Financial Services, highlight the continued market growth driven by a pre-election rally, indicating resilience despite a conservative interim budget. Investors will carefully analyze these US economic indicators for their potential impact on global markets and to gauge the health of the world’s largest economy.

Vinod Nair’s comments emphasize the positive impact of a significant reduction in the fiscal deficit target. The resulting decline in bond yields is expected to lower corporate borrowing costs, providing increased incentives for companies to boost investments. Additionally, he notes that the Federal Open Market Committee (FOMC) is tempering expectations of imminent interest rate cuts, suggesting a more stable monetary policy outlook.

The technical outlook for NIFTY, as assessed by Rupak De, Senior Technical Analyst at LKP Securities, indicates a dynamic market situation:

• NIFTY surpassed the 22,000 mark in the first half of the Friday session.
• However, it subsequently formed a double top pattern on the hourly chart.
• To confirm a resumption of a bullish trend, a decisive breakout above the identified double top level at 22,125 is required.
• On the contrary, a break below the support level at 21,500 could suggest a bearish momentum.
• In the event of a breakout above 22,150, NIFTY may witness upward momentum, potentially reaching levels like 22,500 and beyond.

Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, provides a technical perspective on Bank Nifty:

• Bears regained control as Bank Nifty couldn’t surpass the critical level of 46,500 on a closing basis.
• The immediate support for the index is identified at 47,700.
• A breach below this support level is anticipated to intensify selling pressure, potentially leading the index towards the 45,000 mark.

This analysis suggests that the performance of Bank Nifty will be closely tied to its ability to maintain or breach key support levels. Traders and investors will be monitoring these levels to gauge potential market movements and make informed decisions.

Kunal Shah advises caution in approaching the market due to heightened volatility in the near term. He emphasizes the importance of implementing strict risk management measures to navigate potential fluctuations.

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