As the market gears up for a week filled with impactful events, including the Interim Budget, Federal Reserve interest rate decision, and January’s auto sales, volatility is expected to be a defining factor. In the previous holiday-shortened week, both the BSE Sensex and Nifty 50 experienced a 1 percent decline, closing at 70,700 and 21,352, respectively.
With mixed Q3 earnings, continued FII selling, and the upcoming interim Budget and FOMC meeting, market participants anticipate a fierce battle between bullish and bearish forces. It’s worth noting that SEBI sources clarified that there are no immediate deadlines for liquidating holdings, and the recent market fall was influenced more by stock-specific triggers than panic FPI selling.
Zee Entertainment Enterprises emerged as the biggest stock loser, declining over 38 percent due to the cancellation of a $10-billion deal with Sony. Additionally, Nifty Midcap 100 fell by 1.7 percent, and Nifty Smallcap 100 was down 0.7 percent in the past week.
Market experts attribute the ongoing FII selling to rising yields on US benchmark bonds, coupled with concerns about high valuations, subpar results, and geopolitical tensions. As the market approaches the interim Budget announcement on February 1, expectations include measures to boost consumption, implement reform policies, allocate funds for infrastructure, and focus on agriculture.
The upcoming Federal Open Market Committee (FOMC) meeting on January 30-31 will be closely watched, especially for signals from Fed Chair Jerome Powell. Investors anticipate the maintenance of key interest rates at current levels.
In the IPO space, EPACK Durable and Nova AgriTech are scheduled for listing, while BLS E-services limited IPO will open for subscription from January 30 to February 1. Several SME IPOs are also set to open in the coming week.
Auto sales numbers, starting from February 1, will be a significant focus for the market, considering the 4.4 percent YoY increase in passenger vehicle sales in December 2023.
Despite continued FII selling, domestic institutional investors (DIIs) provided some support by purchasing equities worth Rs 9,701.96 crore. The tug of war between FIIs and DIIs is expected to keep volatility high in the near term.
Technical experts suggest a sideways trend within the range of 21,300 and 21,500 for the benchmark indices. Bank Nifty, which corrected for a fourth consecutive week, may find support around 43,800-44,000.
Options data indicates critical areas to watch, with 21,300 as a pivotal level for the Nifty 50, and 21,400 serving as an immediate hurdle. Support zones are expected at 21,200 and 21,000.
As volatility rises for the third consecutive week, the India VIX index reached near the 200-week EMA, a crucial factor to monitor in the coming sessions. With these key events on the horizon, market participants brace for a dynamic week ahead.
