Market outlook for week (03-Feb to 07-Feb)

3 Feb 2025 , 09:30 AM

SECTORAL STORY IN THE WEEK TO JANUARY 31, 2025

The week to January 31, 2025 saw Nifty and Sensex rally by +1.80% and +1.72% respectively. During the week, FPIs were net sellers of $(1,604) Million in Indian equities, but the big story was the Union Budget. Here is how 20 key sectors performed this week.

Sectoral Index	Weekly Returns	Index (31-Jan)	Index (24-Jan)
Nifty Realty	11.59%	952.50	853.55
Nifty Automobiles	5.12%	23,305.45	22,171.05
Nifty FMCG	4.15%	58,396.05	56,069.35
Nifty Mobility	3.85%	19,245.70	18,532.25
Nifty Private Banks	2.84%	24,425.50	23,750.45
Nifty Banks	2.36%	49,506.95	48,367.80
Nifty Consumer Durables	1.75%	38,704.10	38,037.70
Nifty Non-Banks	1.75%	25,073.05	24,642.20
Nifty India Defence	1.53%	6,197.95	6,104.80
Nifty MNC	1.47%	27,534.85	27,136.30
Nifty PSU Banks	1.04%	6,216.80	6,152.95
Nifty CPSE	0.15%	5,954.60	5,945.85
Nifty Infrastructure	0.13%	8,254.35	8,243.65
Nifty Energy	-0.27%	33,172.60	33,263.55
Nifty Oil & Gas	-0.33%	10,438.20	10,472.55
Nifty India Digital	-1.07%	9,075.75	9,173.95
Nifty Healthcare	-1.55%	13,775.35	13,992.20
Nifty Metals	-1.66%	8,298.50	8,438.80
Nifty IT	-3.43%	42,030.30	43,524.10
Nifty Capital Markets	-5.11%	3,467.95	3,654.55

Data Source: NSE

Here are key takeaways from weekly sectoral returns table.

• Out of 20 sectoral indices, 13 sectors gave positive returns and 7 gave negative returns. The star performer was real estate, which saw double-digit rally after strong Q3FY25 numbers. Automobiles and FMCG stocks were the big budget gainers.
• Of the 7 sectors that contracted this week, big losers were Capital Markets, IT, Metals, and Healthcare. Overall, 5 sectors fell more than -1%, while 1 sector fell more than -5% last week.
• For the week, the arithmetic average of returns of the 20 sectors stood at +1.21%. The top-10 sectors delivered +3.64%, and bottom 10 sectors delivered -1.21%. The dichotomy favoured realty and consumers at the cost of IT and financial inclusion.

Nifty VIX fell sharply to 14.10 levels. The coming week, therefore, could see the first signs of a buy-on-dips market as the budget impact gets digested.

WEEK THAT WAS; THE GOOD, THE BAD AND THE UGLY

Here are the key events that decided the course of the last week. Let us look at the positive triggers with focus on the Union Budget announced on Saturday. Firstly, the FM offered a big bonanza to the middle class by making income up to ₹12.75 lakhs tax-free (including the impact of standard deduction). Secondly, amidst the consumption spike the capital spending was also hiked in double digits but the real impact could be bigger if one looked at the next 15 months of capex leeway. Thirdly, the Union Budget did not compromise on fiscal deficit control, pegging it at 4.8% of GDP for FY25 and at 4.4% of GDP for FY26. In other financial data, the Fed holding rates and higher US inflation should favour the Indian markets.

Let us turn to the negative swing factors in the week. Needless to say, FPI selling continued unabated at $1.60 Billion in the week. This takes total FPI selling to $8.56 Billion in last 4 weeks. Secondly, quarterly results are still showing pressure on the top line and bottom line across most sectors. Thirdly, the global situation continues to be hazy with Trump now threatening the BRICS nations with penal tariffs, should they try to move away from the dollar. Lastly, core sector growth for December 2024 was subdued at 3.97%, while the fiscal deficit update continues to indicate weak receipts and compromise on capex spending.

Let us turn to big triggers in the coming week; both domestic and global.

STOCK MARKET TRIGGERS FOR COMING WEEK TO FEBRUARY 07, 2025

Here are key triggers to keep a watch for in the coming week to February 07, 2025.

• The auto and FMCG stocks had a late rally after the Union Budget brought crores of Indians out of the tax bracket. The consumption boost led to a sharp rally in FMCG and auto stocks. The budget driven trend is likely to continue in the coming week.
• Key large cap results next week: Asian Paints, Titan, Bharti Airtel, Britannia, Hero Moto, ITC, SBI, M&M, LIC, and Divi’s Laboratories. Key mid-cap results; Tata Power, Alembic, Zydus Lifesciences, Alkem, Gland Pharma, Godrej Properties, Thermax, Cummins, BDL.
• Big domestic macro event next week will be the RBI Monetary Policy statement on Friday February 07, 2025. The RBI is expected to support a growth-oriented budget with a 25 bps cut to 6.25%, but the language of the RBI will be the real focus area.
• In key global macro triggers; the US will announce unemployment data for Jan-25 this week. Three Indian data points on FPI flows, USDINR trend and the Brent Crude prices will also be in focus. USDINR needs to stabilize for FPI flows to come back to India.
• Here are key data points. PMI, Construction Spending, Unemployment, JOLTS, EIA crude stocks, Vehicle sales, wholesale inventories, (US). PMI, Inflation (China); PMI, PPI, Retail Sales (EU); PMI, Household Spending (Japan); and PMI, car sales, BOE Rates (UK).

What does this mean for Nifty and Sensex in the coming week to February 07, 2025.

PARTING THOUGHTS ON MARKET INDEX LEVELS

For the coming week, there are 3 things to observe.

• During the week, VIX fell sharply from 16.75 to 14.20 levels. While, 11-12 is where VIX is market accretive, this fall in VIX should make it a buy-on-dips market.
• Nifty close of 23,482 is above the 50-day EMA, but 23,655 and 24,000 will be the next key resistance levels for the Nifty.
• FPI flows were negative for eighth week in a row. With IPO flows limited, the focus would entirely be on the USDINR stabilizing to bring back FPI flows.

The undertone of the markets could improve meaningfully post a market-friendly budget.