Stock Market Week Ahead: Factors to watch amid economic data and market volatility

As markets prepare for a truncated week starting February 24, experts anticipate a cautious sentiment on Dalal Street. Key events such as the release of quarterly GDP growth figures from India and the US, monthly auto sales data, updates on Trump administration tariffs, and developments in Ukraine-Russia peace talks will dominate market attention. The expiry of monthly Futures & Options contracts could amplify volatility.

The Nifty 50 ended the week with a 0.6% decline, settling at 22,796, while the BSE Sensex dropped 0.8% to 48,981. Despite this, there was notable buying interest in midcap and smallcap stocks, which gained 1.7% and 1.5%, respectively. The auto sector saw pressure from concerns over increased competition, particularly with Tesla’s potential entry. Pharma, FMCG, and IT stocks also ended in the red, though metal stocks saw strong performance.

Experts predict that market sentiment will remain subdued until there’s clearer improvement in corporate earnings and global liquidity conditions. Vinod Nair, Head of Research at Geojit Financial Services, noted that India's performance is trailing behind its Asian counterparts, as foreign institutional investors (FIIs) continue to sell off stocks, with the "sell India, buy China" strategy still showing returns.

Here are 10 key factors to watch in the week ahead:

1. US GDP Data

The market will focus on the second estimate for US GDP for Q4 2024, due on February 27. The initial estimate pegged growth at 2.3%, down from 3.1% in Q3 2024. Other important data includes the second estimates for core PCE prices and real consumer spending, as well as weekly jobs data. These will provide insights into the Federal Reserve's future monetary policy. Trade policy developments, including new tariffs proposed by former President Trump, will also be closely watched.

2. Global Economic Indicators

The focus will also be on inflation data from the Eurozone, the ECB’s monetary policy accounts, and Japan’s January retail sales figures.

3. India GDP

Back in India, market participants will scrutinize GDP growth numbers for the December 2024 quarter and second estimates for FY25 on February 28. Preliminary estimates show India’s economy grew by 6.4% in FY25, down from 8.2% the previous year. A modest improvement is expected in Q3FY25 GDP numbers. Other significant releases include fiscal deficit data, infrastructure output for January, and updates on bank loans, deposits, and forex reserves.

4. Auto Sales Data

Auto stocks will be in the spotlight with February sales numbers expected from two-wheeler, four-wheeler, and commercial vehicle companies. There were mixed trends in the segment last month, and any deviation from expectations could cause significant market movement.

5. FII Flow

Foreign Institutional Investors (FIIs) were net sellers last week, with Rs 7,793 crore worth of shares sold, making it Rs 36,977 crore for the month so far. However, Domestic Institutional Investors (DIIs) bought Rs 16,582 crore worth of shares last week. Experts believe that FII flows may not return until there is a robust economic and earnings growth revival.

6. Oil Prices

Oil prices will continue to influence market sentiment. Brent crude remained below $80 a barrel, closing at $74.43. Movements in oil prices will depend on US sanctions and Russia’s stance on the conflict with Ukraine, which may impact global supply and demand.

7. IPO Activity

While the mainboard segment remains quiet due to market conditions, three IPOs will open in the SME section: Nukleus Office Solutions (Feb 24), Shreenath Paper Products (Feb 25), and Balaji Phosphates (Feb 28). Additionally, a number of IPOs will close, including HP Telecom India and Swasth Foodtech India.

8. Technical Indicators

The technical outlook remains weak, with Nifty trading near the lower band of Bollinger bands and below key moving averages. The immediate support level is around 22,500-22,600, while resistance is expected in the 23,000-23,100 range. If the market rebounds, 23,400 could be a significant resistance level.

9. F&O Cues and India VIX

Options data indicates that Nifty is expected to trade within a broad range of 22,200-23,500 for the expiry week. India VIX, which measures market volatility, remains elevated. Bulls may only gain confidence if VIX falls below the 14 mark.

10. Corporate Actions

Investors should watch for corporate actions, including stock splits, dividends, and board meetings scheduled for the week.

Market sentiment will likely remain cautious with several economic data points, geopolitical developments, and institutional flows to navigate. The expiry of monthly Futures & Options contracts and volatility due to external factors will add to the uncertainty.