10 Key Triggers to watch out for in Stock Markets this week

It was a week in which the markets reacted negatively to the US Fed hawkishness and the indications from the RBI MPC minutes, which hinted at more rate hikes. For the coming week, here are some major triggers to watch out for.

1. The Nifty slipped below the psychological 18,000 mark during the week and the 2.5% correction in the indices is indication that now the 18,000 levels could serve as the resistance for the markets. During the previous week, even the mid-caps and the small caps were not spared and they bore the brunt of the sell-off across the board, losing between 6% and 8% of their value in just the last one week.
    

2. Overall, the markets are likely to be quiet in the coming week, being the last week of the year. Most fund managers and global investors would not want to get caught on the wrong side of the market and spoil their full year performance and that is evident from the huge amount of cash that most of the investors are currently sitting on.
    

3. The big news to watch out for is the COVID concerns. The new BF.7 variant, it is expected (or hoped) that it would not be as virulent as the Delta variant or the Omicron variant. However, the impact has been quite nasty in China and other Asian economies, so there would be concerns about a spill over impact. One needs to watch out if the global investors again turn risk-off due to this development.
    

4. In big data announcements, the core sector data for November would be announced this week on Friday. The infrastructure sector showed a lot of pressure in September with oil showing a lot of strain. Core sector also matters as it would be a key driver of the IIP growth to be announced in January due to its 40.3% weightage.
    

5. Perhaps, the biggest data to watch out for this week will be the current account deficit data. The RBI puts out the current account deficit data each quarter with a gap of 3 months. On December 30th, the RBI will put out the current account deficit data for the September quarter (Q2FY23). A recent Reuters poll had indicated the CAD in the second quarter at around 4.3%, which is sharply higher than 2.8% in Q1. This could be critical.
    

6. The week will be the last week for the IPO action and the bounce in IPO action has been quite aggressive in the last 3 months. During the current week, Radiant Cash Management Services IPO will close on Tuesday 27th December. At the same time, Sah Polymers IPO is likely to open on 30th December. That will conclude the IPO action for the year. In addition, KFIN Technologies IPO will list on Thursday while the Elin Electronics IPO will be listed on the bourses on Friday.
    

7. The Rupee continues to hover around Rs. 82.60/$ and is likely to driven by two key factors in the week viz. the FPI flows and the price of crude oil. FPI flows were over Rs. 11,500 crore into equities in the month of December. That is positive, although nothing as impressive as what we saw in November. Also, Brent Crude has bounced sharply from $80/bbl to $84/bbl on global recovery hopes. That has larger implications for the Indian trade deficit numbers.
    

8. Let us turn to the technical perspective on the markets. During the last week, the Nifty fell below its 50-DMA and 50-DEMA of around 18,175-18,180. That will prove to the big resistance for the markets now. However, the positive outcome is that the 100-DMA of 17,840 has been protected so a bounce does look likely. Also, the RSI (relative strength index) hints at the markets being in oversold territory. The risk-rewards does look favourable for the week in technical terms.
    

9. The Nifty put and call accumulation of open interest (OI) are hinting at a worst case support in the range of 17,500 to 17,800 and a best case resistance in the range of 18,000 to 18,200 on the higher side. However, one roadblock to the markets scaling higher levels could be the Volatility Index (VIX), which has shot up 41% in the week to 16.16 levels, which is normally a resistance for the markets overall.
    

10. Finally, let us look at the key global data flows that would be material for the stock markets in the current week. In terms of US data flows, the watch would be on pending home sales, API crude stocks and initial jobless claims. In rest of the world the data focus would be on Japanese unemployment, retail sales, housing starts and IIP, while China will not just be about COVID progress but also about key data points like Industrial profits and Current Account balance.