Dalal Street week ahead: Key factors influencing market dynamics

With the Bharatiya Janata Party-led National Democratic Alliance (NDA) poised to form the new government, Dalal Street anticipates a week of reduced volatility following a tumultuous period. Here are ten key factors expected to influence market trends in the coming days:

1. CPI Inflation

The Consumer Price Index (CPI) data for May is slated for release on June 12. Economists predict a slight decrease in inflation to 4.8%, down from April's 4.83%. This drop is attributed to lower fuel and energy costs, although food inflation remains high. The Wholesale Price Index (WPI), to be released on June 14, is anticipated to rise sharply to 4% from April’s 1.26%, driven mainly by fuel price increases .

2. Industrial Production

The Index of Industrial Production (IIP) for May will be released this week. It is expected to show a slowdown, with growth potentially dipping to 3.9% from 4.9% in April. Manufacturing, a key component, may also see reduced growth .

3. Passenger Vehicle Sales

May’s passenger vehicle sales data, due on June 13, will be closely watched as an indicator of consumer sentiment. April saw a significant decline in growth, attributed to reduced pent-up demand post-pandemic .

4. Global Economic Data

The Federal Open Market Committee (FOMC) will meet on June 11-12, with a policy announcement expected on June 13. Markets anticipate no change in interest rates. Other important global economic data includes Japan’s GDP figures and China’s inflation data, which will offer insights into the health of major economies .

5. Foreign Institutional Investor (FII) Flows

Last week saw significant net selling by foreign institutional investors, totaling over ₹16,971 crore in equities, despite being net buyers of debt. This trend may continue, influenced by political uncertainties and potential policy changes .

6. IPO Activities

Two key IPOs are set to capture market attention: Le Travenues Technology’s ₹120 crore issue from June 10-12, and the listing of Kronox Lab Sciences on June 10. Additionally, several small and medium-sized enterprises (SMEs) are scheduled to list, including 3C IT Solutions, Magenta Life Care, and Sattrix Information Security .

7. Technical Indicators

Nifty's recent high volatility, with swings over 2,000 points, indicates a cautious approach for the coming week. Traders are advised to avoid over-leveraged positions and to buy on dips, given the negative divergence spotted in technical indicators like the Relative Strength Index (RSI) .

8. Futures and Options (F&O) Cues

Options data suggest key resistance for Nifty 50 at 23,700 and support at 22,500, with an immediate trading range between these levels. Significant open interest at various strike prices reflects potential market pressure points .

9. Volatility Index (India VIX)

The India VIX, a key measure of market volatility, has dropped significantly, which bodes well for bullish investors looking to increase their positions in a more stable market environment .

10. Corporate Actions

Several corporate events are scheduled this week that could impact market sentiment, including earnings reports and significant corporate announcements .

With the new government expected to take office, market participants are optimistic about policy continuity and stability. However, they remain cautious of potential global economic shifts and domestic policy changes that could influence market dynamics. Traders and investors should stay informed and prepared for potential market movements driven by these key factors.