Will Sensex, Nifty extend gains or turn volatile? Q1 updates, F&O expiry among 8 factors set to steer stock market this week

Indian equities enter the new week at a crucial juncture, having ended the previous week with modest gains amid range-bound trading. While benchmark indices displayed resilience despite mixed global cues, broader markets witnessed profit booking, indicating cautious investor sentiment ahead of a packed week of triggers.

Market participants will closely monitor the beginning of the June-quarter earnings season, monthly auto sales, the June F&O expiry, foreign fund flows, crude oil prices, monsoon progress, global bond yields, and key macroeconomic data for cues on the market’s next direction. Here are eight factors that could dictate Dalal Street this week.

1) Q1 business updates in focus
Investor attention will gradually shift from macro factors to corporate earnings as the June-quarter reporting season approaches. The first set of Q1 business updates and quarterly results will be watched closely for indications on demand trends, margins and management commentary.

According to Mayuresh Joshi, Head of Equity at Marketsmith India, markets have rebounded strongly in recent weeks and attention will now shift to earnings.

“The expectation is largely getting built out for Q1 that it is going to be a washout quarter because of supply chain issues, input cost inflation and some element of demand probably coming off,” he said.

2) June F&O expiry, portfolio rebalancing
Traders are bracing for a volatile week as the NSE’s June monthly derivatives expiry falls on Tuesday, accompanied by quarterly portfolio rebalancing by institutional investors.
According to Santosh Meena, Head of Research at Swastika Investmart, derivatives positioning has improved marginally, but expiry-related adjustments could lead to heightened volatility.3) Auto sales data
Monthly automobile sales for June, scheduled to be released on July 1, will be another major domestic trigger.

Investors will track dispatch trends across passenger vehicles, two-wheelers, commercial vehicles and tractors to gauge demand momentum after the onset of the monsoon. Strong numbers could reinforce optimism around consumption-led sectors, while any disappointment may weigh on auto stocks.

4) Monsoon progress
The progress and distribution of the southwest monsoon will remain on investors’ radar, given its implications for rural demand, inflation and agricultural output.

A healthy monsoon is expected to support farm incomes and consumption, benefiting sectors such as FMCG, automobiles and rural-focused businesses.

5) FII flows
Foreign institutional investor activity will continue to be a key determinant of market direction after selling pressure showed signs of easing in recent sessions.

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said relentless foreign selling appears to be over.

“A significant trend in FPI activity in the second half of this month is the tapering of FPI selling. The big relentless FPI selling appears to be over,” he said.

According to Vijayakumar, the appreciation in the rupee and volatility in other Asian markets have made India relatively more attractive for overseas investors despite weak earnings expectations.

“The crash in crude to below $73 is a huge positive for India. Therefore, it can be safely concluded that the period of relentless FPI selling is over. But it may take some time for FPIs to become sustained buyers in India,” he added.

6) Oil prices
Crude oil prices will remain a closely watched global variable after retreating sharply from recent highs.

Lower crude prices are positive for India as they ease inflationary pressures, improve the current account position and reduce input costs for several sectors. Any fresh geopolitical developments that trigger volatility in oil could quickly influence market sentiment.

7) US bond yields
Global investors will also monitor movements in US Treasury yields and the dollar index for signals on capital flows into emerging markets.

Persistently elevated bond yields or renewed strength in the dollar could limit risk appetite, while softer yields may support foreign inflows into equities.

8) Macro data
A host of macroeconomic releases will keep global markets on edge during the week.

Investors will track manufacturing PMI data and employment numbers from the US, along with key economic indicators from China, for fresh clues on global growth and the outlook for interest rates.

Technical setup
According to Santosh Meena of Swastika Investmart, the Nifty continues to face a strong hurdle around the 24,200 mark.

A sustained breakout above 24,200 could open the door for a rally towards the 24,450-24,600 zone. On the downside, 24,000 and 23,770 remain immediate support levels.

Bank Nifty continues to outperform and is trading above its key moving averages. The index faces resistance in the 59,000-59,300 zone, while 57,500 and 57,000 are expected to provide strong support.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)