Sensex, Nifty this week: From RBI rate decision to US inflation, factors that may drive Dalal Street

Last week, markets ended over half a percent down amid mixed macroeconomic data. This week, traders will be eyeing macro data such as repo rate decisions by the RBI, Index of Industrial Production (IIP) data, and core inflation rate in the US. Besides, this week the market will be looking at Q1 earnings from some of the top names in Dalal Street such as Adani Ports, DLF, Tata Chemicals, Grasim Industries, Hero Motocorp, and Pidilite Industries.

Economic events: Investors will be eyeing the macro data, starting with the Reserve Bank of India's (RBI) interest rate decision. The policy decision would be announced on August 10. On August 11, traders will be looking forward to the Index of Industrial Production (IIP) data. Industrial production in India rose 5.2 percent year-on-year in May 2023, accelerating from a 4.2 per cent gain in the previous month and above market expectations of 4.8 per cent.

Quarterly Results: In the ongoing earning season, market participants would be majorly looking for earnings from companies like Adani Ports, DLF, Tata Chemicals, Torrent Pharma, Emami, Godrej Consumer Products, Hindalco Industries, Bajaj Consumer Care, Bata India, Berger Paints, Tata Power, Zee Entertainment Enterprises, Apollo Tyres, Bajaj Electricals, Biocon, Grasim Industries, Hero Motocorp, Pidilite Industries, Apollo Hospitals, Glenmark Pharmaceuticals, Godrej Industries, Voltas, and Aurobindo Pharma, etc. among others.

Among the PSU firms, Oil and Natural Gas Corporation (ONGC), IRCTC, Coal India, NHPC, NMDC, SJVN, NBCC, BEML, and Oil India will release their Q1 results.

US market data: On the global front, investors would be eyeing key economic data in the US, starting with Imports and Exports data, Redbook on August 8, Core Inflation Rate, Initial Jobless Claims, Monthly Budget Statement on August 10, and finally Core PPI, Michigan Consumer Sentiment, Baker Hughes Total Rig Count on August 11.

Foreign Investment Trends: Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that after sustained buying of Rs 1,37,603 crore in three months, FPIs have turned sellers in the Indian market. NSDL data suggests during the last seven trading sessions, FPIs sold stocks worth Rs 8,545 crore in the cash market. A sharp spike - in the US - in 10-year bond yield above 4 per cent is a near-term negative for capital flows to emerging markets.

"If the US bond yields remain high, FPIs are likely to continue selling or at least refrain from buying. FPIs continued to buy autos, capital goods, and financials. A significant change in FPI's strategy is that they have started buying IT stocks, which they have been selling earlier. This explains the strength in IT stocks recently," Vijayakumar said.

Technical Outlook

Nifty: Rupak De, Senior Technical analyst at LKP Securities, said Nifty fell sharply following the downgrading of the US credit rating from AAA to AA+, leading to a breakdown from the recent consolidation on the daily timeframe. The recent fall has pulled the index below the 21-day exponential moving average (EMA) for the first time since March 29.

He further said that on an immediate basis, 19,300 has acted as support. However, on the higher end, 19,566 is likely to act as a crucial resistance level. The sentiment is likely to remain weak as long as the Nifty remains below 19,566. However, a decisive move above 19,566 could take the index towards 19,700-19,750. On the other hand, a failure to move above 19,566 could trigger selling pressure.

Bank Nifty: Kunal Shah, Senior Technical & Derivative analyst at LKP Securities, said following a significant drop, the Bank Nifty index managed to regain some ground and concluded the day with a positive outcome. The bears demonstrated activity around the 45,200 level. A conclusive break above this level, particularly on a closing basis, could initiate further upward movement, potentially targeting levels around 45,800 or even 46,000.

On the downside, a support level can be identified at 44,500. Should the index break below this support, the bears could regain control, potentially leading to more downward movements. "In terms of the price range, the Bank Nifty index has been fluctuating within the broad range of 44,500-45,200. A breach on either side of this range could signal a shift towards trending movements," Shah said.