Investors awaiting next level triggers

Dragged by concerns over rising crude oil prices, unabated FII selling, fears of inflationary pressures, which were compounded by fears of another rate hike by the Fed, and rising bond yields; the frontline indices ended the week on weak footing. NSE Nifty settled 0.18 per cent down at 19,638 and BSE Sensex was down 0.27 percent at 65,828 for the week.

However, the broader market outperformed with Nifty Mid-cap and Nifty Small-cap gaining one percent and 2.18 per cent for the week, respectively. FIIs net sold equities worth Rs8,430.77 crore, while DIIs net bought equities worth Rs8,143.28 crore. Cumulatively, FIIs net sold Rs26,692.16 crore worth of equities in the month of September, while DIIs net bought equities worth Rs20,312.65 crore. Observation is that strong dollar index has usually coincided with an increase in foreign outflows within emerging markets like India and a weaker dollar index has usually coincided with an increase in foreign inflows within emerging markets like India.

Going ahead, it will be key to monitor this trend in the backdrop of easing the dollar index. Key event in the week ahead will be the RBI Monetary Policy Committee (MPC) meeting scheduled for October 4-6, 2023. The RBI is likely to maintain status quo on policy rates for the fourth time in a row as retail inflation continues to remain high and the US Federal Reserve has decided to keep a hawkish stance for some more time, according to observers. Near-term direction of the market will be dictated by macroeconomic data, crude prices, RBI Policy meet and global cues. Indian markets will remain shut for trading on Monday, October 2, on account of Mahatma Gandhi’s birth anniversary. Chinese markets will remain closed on October 2-6.

F&O / SECTOR WATCH

The settlement week saw derivatives segment grappling with heightened volatility and multiple headwinds. Rollovers in Nifty futures declined with Nifty rollovers at 76 per cent (last month 78%), below last 3-month average of 79 per cent. On the flip side, Bank Nifty boasts a rollover rate of 85 per cent, surpassing the average rollover rate of the last three months. On other hand, market wide rollovers stood at 92 per cent (last month’s market wide 91%).

(The author is a senior maket analyst and former vice- chairman, Andhra Pradesh State Planning Board)