Nifty 50 Nears 26K: FII Inflows, F&O Expiry, and Global Cues to Drive Stock Market This Week

The Indian stock market had an outstanding week, reaching new record highs, mainly fueled by a 50 basis points (bps) rate cut by the US Federal Reserve. The Fed’s decision eased concerns about the US economy, encouraging a positive outlook for markets. As we head into the final week of September, investors will focus on important factors such as domestic and global economic data, the monthly derivatives expiry, foreign fund inflows, oil prices, and other global trends.

Nifty 50 and Sensex Hit All-Time Highs

Last week, both Nifty 50 and Sensex continued their upward movement, hitting record levels of 25,849.25 and 84,694.46, respectively. The rally was driven by the US Fed’s large rate cut, its first in four years, which boosted investor confidence across global markets.

Throughout the week, the stock indices traded in a narrow range, but Friday saw a strong surge, pushing Nifty to close at 25,790.90 and Sensex at 84,544.31. For the week, Nifty 50 gained 1.7%, while Sensex rose 2%, marking five weekly gains out of six. The realty and banking sectors performed particularly well, while the pharmaceutical sector struggled. Interestingly, the IT sector also underperformed, posting a 2.75% decline.

US Economy and FPI Inflows Boost Market Sentiment

The US Fed’s 50 bps rate cut and data showing lower-than-expected jobless claims gave hope that the US economy might avoid a recession while keeping inflation in check. Historically, such rate cuts have been positive for emerging markets like India, making it an attractive option for global investors.

Foreign Institutional Investors (FIIs) were aggressive buyers last week, investing ₹14,000 crore in Indian equities, though around ₹8,000 crore of this was due to FTSE rebalancing. Overall, FIIs poured in ₹11,517.92 crore into the cash segment. Meanwhile, Domestic Institutional Investors (DIIs) turned net sellers, offloading ₹633.67 crore.

Foreign Portfolio Investors (FPIs) also became major buyers, investing ₹33,691 crore in September, making it the highest FPI inflows of the year so far. The total net investment in Indian equities reached ₹63,000 crore by September 20, 2024.

Sector Rotation and IPO Buzz

The market saw a shift in focus towards sectors like banking, finance, realty, and auto, which gained momentum. On the other hand, export-oriented sectors like IT and pharma faced challenges due to the depreciation of the US dollar.

The upcoming week will also be exciting for the primary markets, with 11 new IPOs and 14 company listings, including two mainboard IPOs from Manba Finance and KRN Heat Exchanger. Additionally, several SMEs will debut on the BSE and NSE.

What to Watch This Week:

1. Macroeconomic Data: Investors will closely follow data releases like the HSBC Composite PMI, Manufacturing PMI, and Services PMI. These indicators will offer insights into India’s economic health and could influence market movements.
2. F&O Expiry: The monthly derivatives expiry on September 28 is likely to increase market volatility, making it important for traders to stay alert.
3. Global Cues: The US Fed’s recent rate cut is behind us, but investors will keep an eye on US economic data for further market direction. Additionally, the Bank of England kept its rates unchanged due to inflation concerns, while Japan took a wait-and-see approach after its July rate hike.
4. Crude Oil Prices: Oil prices saw a second straight week of gains, supported by the US Fed’s rate cut and a decline in US supply. However, concerns about China’s economic slowdown have capped further price increases.

Technical Outlook

The Nifty 50 is approaching a significant milestone of 26,000, and analysts suggest the rally could extend to 26,500 if banking and financial stocks continue to perform well. Investors are advised to adopt a “buy on dips” strategy, with support levels expected around 25,150-25,350. In contrast, midcap and smallcap stocks may face more pressure.

The Bank Nifty index reached a new high of 54,066.10, driven mainly by private-sector banks. Analysts believe the index could continue rising towards 55,000, with minor resistance at 54,300. If it fails to break through this level, it could face a pullback to 53,200.

The week ahead is filled with crucial market triggers, and investors should remain cautious and informed as markets may experience higher volatility.