10 Key Stock Market Triggers for week starting 02nd Jan, 23

The Nifty held the 18,000 mark during the week, but did give up some gains on the last day of the week as traders preferred to stay light over the weekend. Here is what traders can expect from the markets in the coming week.

1. The Nifty held the psychological 18,000 mark during the week. For the month of December as a whole, the Nifty was down 3.5% while the mid-cap was down -1.6% and the small caps were down -2.5%. In the coming week, the action is likely to be focussed on the mid-caps and the small caps as traders hunt for alpha in the market.
    

2. The big focus this week will be on what is happening in China. The BF.7 variant is a serious threat to the global economy and India has already imposed flying restrictions on certain countries in Asia. To add to that China is reversing most of its zero-COVID protocols and the concern is that it could result in the number of cases burgeoning. That will be the key factor to watch out for the stock markets this week.
    

3. At a global macro levels, the markets will be closely watching the Fed minutes to be announced on Thursday this week. Normally, the Fed publishes of the Fed meeting, 21 days after the Fed statement. The area of interest will be what the dot plot chart says about the likely trajectory of interest rates. Fed had already hinted at 3 more hikes of possibly 25 bps each. The pace of hike would be of interest to markets.
    

4. This week, the markets are expected to react to the core sector numbers that were announced late on Friday. Now, the core sector is a comprehensive picture of how 8 infrastructure sectors grew. The overall bounce to 5.4% in November 2022 was impressive. Markets will take solace from the sharp 28% production growth in cement, which bodes well for cement stocks overall.
    

5. The PMI (purchase manager index) is an important indicator of short term growth momentum. India manufacturing PMI will be put out on Monday and the composite PMI on Wednesday. Both manufacturing and services PMI have been in expansion mode with positive momentum, and that trend is expected to have sustained in December too. PMI remains the best indicator of short term momentum and high frequency growth.
    

6. The auto sector will take solace from the fact that PV numbers got back to record levels after a very long time. The full auto wholesale numbers are expected on Monday. While PV sales are likely to have got a major boost, the two-wheeler sales are likely to have taken a hit with the completion of the festival season. As per channel checks, even tractor numbers and CV numbers are expected to be positive for December 2022.
    

7. There are not new mainboard IPOs opening in this week. However, in mainboard IPO action, the IPO of Sah Polymers will close this week on 04th January. Also, the IPO of Radiant Cash Management will list on 04th January and the listing should be interesting considering it only got 53% subscription. There are a slew of SME IPOs opening in next few days including Chaman Metallics, Eastern Logica Infoway and Ducol Organics.
    

8. Technically, the bullish bias of the Nifty is likely to be intact as long as the index holds the 17,800 levels for the week. Anything below that could change the undertone but now the RSI is hinting at an oversold zone around the 17,800 levels. On the upside, the 18,300 levels on the Nifty would continue to be a resistance in this week and any bullish shift would happen only above that level. The 17,800 levels also marks the 50% retracement of the recent up move, so it should hold for this week.
    

9. Let us now turn to what the F&O data indicates for the first week of 2023? The Nifty put and call accumulation of open interest (OI) are hinting at a worst case support in the range of 17,500 to 17,800 and a best case resistance in the range of 18,300 to 18,500 on the higher side. The lower range has remained the same, but the upper range has moved higher over last week. The Volatility Index (VIX), which had shot up to 16.16 levels in the previous week, is now hovering below the 15 levels. However, that still does not indicate confident buy-on-dips.
    

10. Finally, let us look at the key global data flows that would be material for the stock markets in the current week. In terms of US data flows, the focus this week will be on PMI, construction spending, Fed minutes, API crude stocks, initial jobless claims, non-farm payrolls, vehicle sales and factory orders. In rest of the world the data focus would be on manufacturing and composite PMI in Japan and China. In the Euro area, the key data points to watch would be the PMI Composite, PPI, retail sales and Industrial sentiments in the EU zone.