Market outlook for week (27-Jan to 31-Jan)

27 Jan 2025 , 09:57 AM

SECTORAL STORY IN THE WEEK TO JANUARY 24, 2025

The week to January 24, 2025 saw Nifty and Sensex down by -0.48% and -0.56% respectively. During the week, FPIs were net sellers of $(2,283) Million in Indian equities ahead of the Union Budget. Here is how the 20 key sectors performed this week.

Sectoral Index	Weekly Returns	Index (24-Jan)	Index (17-Jan)
Nifty IT	3.55%	43,524.10	42,032.20
Nifty FMCG	0.48%	56,069.35	55,800.85
Nifty Private Banks	0.30%	23,750.45	23,680.05
Nifty Banks	-0.36%	48,367.80	48,540.60
Nifty Healthcare	-0.47%	13,992.20	14,057.75
Nifty India Digital	-0.54%	9,173.95	9,223.30
Nifty MNC	-0.83%	27,136.30	27,363.10
Nifty Metals	-0.97%	8,438.80	8,521.70
Nifty Infrastructure	-1.87%	8,243.65	8,400.90
Nifty PSU Banks	-2.24%	6,152.95	6,294.00
Nifty Non-Banks	-2.27%	24,642.20	25,215.25
Nifty Automobiles	-2.72%	22,171.05	22,791.10
Nifty CPSE	-2.91%	5,945.85	6,123.90
Nifty Mobility	-3.39%	18,532.25	19,183.50
Nifty Consumer Durables	-3.44%	38,037.70	39,394.70
Nifty Oil & Gas	-3.85%	10,472.55	10,891.70
Nifty Energy	-4.10%	33,263.55	34,686.10
Nifty India Defence	-4.61%	6,104.80	6,400.00
Nifty Capital Markets	-4.95%	3,654.55	3,844.75
Nifty Realty	-9.12%	853.55	939.25

Data Source: NSE

Here are key takeaways from weekly sectoral returns table.

• Out of 20 sectoral indices, 3 sectors gave positive returns and 17 gave negative returns. The star performer was IT sector, which saw a bounce after the sell-off in the previous week. FMCG and private banks were mildly positive.
• Of the 17 sectors that contracted this week, big losers were Realty, Capital Markets, Defence, Energy, Oil, Consumer Durables, and Mobility. Overall, 7 sectors fell more than -3%, while 11 sectors fell more than -2% last week.
• For the week, the arithmetic average of returns of the 20 sectors stood at -2.22%. The top-10 sectors delivered -0.29%, and bottom 10 sectors delivered -4.14%. The dichotomy favoured IT, at the cost of PSUs and customer facing segments.

During the week, Nifty VIX edged higher and closed at 16.75 levels. The coming week, therefore, could remain a sell-on-rises market.

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. Firstly, Trump has called upon Putin and Zelensky to end the war that has been going on since early 2022. With an Israel-Hamas ceasefire already in place, it should cut macro risks for India. Secondly, the Bank of Japan decision to hike rates, is more in sync with the RBI standpoint, which is still apprehensive about inflation. Thirdly, the two swing macros favoured India this week. Brent Crude prices tapered to $78/bbl, while the rupee hardened from 86.95/$ to 86.15/$. Amidst market volatility, investor enthusiasm is still strong with the NSE adding 1 crore fresh customers in just the last 5 months.

Let us turn to the negative swing factors in the week. Needless to say, FPI selling continued unabated at $2.28 Billion in the week. This takes total FPI selling to $6.95 Billion in last 3 weeks. Secondly, quarterly results continued to be under pressure with a distinct risk of FY25 EPS being lower than projected. In Q3FY25, all sectors other than IT, have seen stress. Lastly, the real stress on growth was visible in the PMI Composite index, which touched a 14-month low. However, PMI manufacturing is still robust, but the real pressure is coming from PMI Services, which has dipped to a 26-month low. With over 50% share in GDP, the high frequency pressure on GDP is likely to come from the services sector.

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

STOCK MARKET TRIGGERS FOR COMING WEEK TO JANUARY 31, 2025

Here are key triggers to keep a watch for in the coming week to January 31, 2025.

• While, the Nifty and Sensex fell -0.48% and -0.56% respectively, the real pressure was seen in mid-caps down -2.46% and small caps down -4.05%. Alpha hunting in smaller stocks has given way to caution. With VIX at 16.75, large cap concerns stay too.
• Key large cap results next week: CIL, IOCL, Tata Steel, Bajaj Auto, BFIN, L&T, Bajaj Finserv, Adani Ports, Sun Pharma, ONGC, Nestle, BEL. Key mid-cap results; Petronet, Kaynes, ACC, BHEL, JSW Infra, SRF, KPIT, PEPL, Kalyan Jewellers, Biocon, Bandhan Bank.
• Big domestic macro event next week will be Union Budget, with focus on reforms, growth, and fiscal prudence. Core sector numbers and fiscal deficit updated for December 2024 are also expected to be announced this week.
• In key global macro triggers; FOMC policy statement expected with status quo on rates looking likely. However, focus will also be on US PCE inflation and US Q4GDP (FAE). On the watch list will also be FPI flows, global crude oil prices, and USDINR equation.
• Here are key data points. Fed Policy, PCE inflation, Q4GDP (FAE), Building Permits, New Home Sales, Crude Stocks, initial jobless claims (US). Composite PMI (China); ECB Policy, GDP (EU); Core CPI, IIP, BOJ Policy Minutes (Japan); and Nationwide HPI (UK).

What does this mean for Nifty and Sensex in the coming week to January 31, 2025.

PARTING THOUGHTS ON NIFTY AND SENSEX

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

• During the week, VIX surged to the 16.75 levels. With VIX entering the 16-17 zone; it is now becoming an affirmed sell-on-rises market.
• Nifty support / resistance at 22,979 / 23,276 and Sensex support / resistance at 75,859 / 76,754 levels. Any sustained upsides on the Nifty will require a breakout with volumes above 24,200.
• FPI flows continue to be negative in secondary markets, but with the ₹3,027 crore IPO of Dr Agarwal Healthcare opening next week; there are hopes of FPI IPO inflows next week.

The undertone of the markets remained under pressure; and that is likely to continue!