Markets week ahead: From CPI, IIP data to Q4 earnings, factors that may drive Nifty, Sensex

The coming week is expected to be a crucial one for Indian equity markets as it marks the start of the Q4 earning season, which would formally commence with the earnings of IT bellwether, Tata Consultancy Services (TCS) reporting its number on April 12, 2023. With the onset of earning season, besides TCS, traders would also be eyeing the results of Infosys, which is releasing on April 13, and HDFC Bank on April 15.

On the economic front, the Index of industrial production (IIP) data for February will be released on April 12. India's industrial production increased 5.2 per cent year-on-year in January of 2023, following a 4.3 per cent rise in December and compared to market forecasts of a 5 per cent increase. On the same day, the Consumer price index (CPI) inflation data for March will be announced. The Consumer Price Index in India increased 0.17 per cent in February of 2023 over the previous month. Also, market participants will be eyeing wholesale price inflation and export-import data on April 14.

Commenting on economic indicators, Vinod Nair, Head of Research at Geojit Financial Services, said: "It was an encouraging week for the Indian stock market, with a solid upside compared to other EMs which were muted. The release of positive monthly auto sales data, higher-than-expected PMI manufacturing data, strong quarterly bank, and NBFC numbers, and a cut in windfall tax were the driving factors. Above all, the surprising pause in an interest rate hike by the RBI was the game changer. It is expected to have a constructive effect, led by a drop in market yields that encourages both bond and stock prices to rally. The RBI’s hint of a rise in FY24 GDP growth to 6.5 per cent from 6.4 per cent and a drop in inflation from 5.3 per cent to 5.2 per cent was a proactive direction."

Nair further said that given the upside horizon on domestic growth and a stable financial market, India is expected to have an edge in the performance of equities going forward. "We can expect FII inflows to prosper going forward. However, the high level of inflation should meaningfully drop during the latter part of the year, or else the positivity will be lost. FOMC meeting minutes are to be announced next week, which can have an impressive effect on the global market. Investors are looking for signs of a future FED interest rate pause, which can have a positive impact on the global market else vice versa," he added.

US market data: On the global front, investors would be eyeing a few economic data from the world’s largest economy, the US, starting from the Core Inflation Rate, FOMC Minutes on April 12 followed by Producer Price Inflation, Initial Jobless Claims on April 13 and Retail Sales, Industrial Production, Import- export data, Michigan Consumer Sentiment, Baker Hughes Total Rig Count on April 14.

Technical outlook for Nifty: Rupak De, Senior Technical Analyst at LKP Securities, said: "The Nifty has given a falling channel breakout on the daily timeframe, pointing towards a bullish trend reversal. Besides, the index has closed above the critical moving average for the second consecutive day. A positive crossover in the momentum indicator RSI will boost sentiment. Going forward, the market will remain buy-on-dips as long as it remains above 17500. On the higher end, immediate resistance is visible at 17700; above which the index may move up towards higher levels."

Bank Nifty: Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, said: "The Bank index continued its rally on the upside and any dip was bought confidently by the bulls. The index surpassed the level of 40,000 last week and post that there has been a one-way rally. The index is now trading around the next resistance zone of 41,000 and if we sustain above this in the upcoming week we expect the rally to continue higher toward the 42,000 mark. The lower-end support is visible at the 40,600-40,500 zone which will act as a cushion for the bulls."