Week ahead: Q4 results, Inflation, FOMC minutes, and F&O cues among key market triggers this week

Markets extended the gains for the third week in a row and closed at record high. The NIFTY50 gained 0.8% for the week and closed above the psychologically crucial 22,500-mark. The SENSEX gained 0.8% at 74,248.

The broader markets remained buoyant and outperformed the benchmark indices after a correction in March. The NIFTY Midcap 100 index gained 4% last week, registering its biggest weekly gains in the last 7 months. The NIFTY Smallcap 100 index gained 7% for the week and registered its biggest weekly gain since April 2020.

On the sectoral front, except for the FMCG which ended marginally lower, all the other sectoral indices ended in the green. Media (+6.7%), Metal (+5.3%) and PSU Bank (+4.2%) were the top gainers.

Index breadth- NIFTY50

As you can see in the chart below, a healthy 62% of the NIFTY50 stocks are trading above their 20-DMA and 66% of stocks are above their 50-DMA. Both the breadth indicators cooled off a bit after reaching 74%.

In the coming week, we will be closely monitoring the crossover of these two parameters (blue and green line). When both parameters are above 60%, it indicates a broad participation of the NIFTY50 pack. However, the breadth indicator tends to fluctuate between 50 and 70. A sustained rise above 70 could signal further upside momentum.

FIIs positioning in the index

Foreign Institutional Investors (FIIs) started the April F&O series with a long to short ratio of 45:55 in index futures, which has remained more or less the same at 43:57 with a marginal increase in the short ratio. Currently, FIIs' net open interest (OI) in the index futures stands at -35,190 contracts, indicating a range-bound positioning.

As you can see in the chart below, since 29 February the positioning of the FIIs have been range bound with a partial upticks on the short OI. Going forward, traders should keep a track of unwinding or addition of net OI by FIIs to get a clear understanding of the ongoing trend.

To track the open positions of FIIs in the index futures and cash market activity: Login https://pro.upstox.com/ ➡️F&O➡️FII-DII activity➡️FII Derivatives

In the cash market, the FIIs turned net sellers for the first week of April and sold shares worth ₹3,835 crore. On the other hand, flows from the Domestic Institutional Investors (DIIs) remained flat on a net basis.

F&O - NIFTY50 outlook

Initial open interest for the 10 April expiry of NIFTY50 shows a concentration of significant call and put options at the 22,500 and 22,500 strikes. Based on the initial build-up, market participants expect the NIFTY50 to trade between 21,900 and 22,900.

In last week's blog, we drew readers' attention to the confirmation of the bullish hammer on the weekly chart of the NIFTY50, indicating a potential upward move. As a result, the NIFTY50 rallied to close near its record high, cementing support in the 21,900-22,000 area.

Despite weak global cues, the NIFTY50 showed resilience and closed close to the previous week's high. This points to inherent strength in the domestic market. The RBI's decision to keep rates on hold and its positive GDP growth forecast of 7% for FY25 further bolstered market sentiments.

With a holiday-shortened week ahead, the focus will shift to the earnings season, particularly in the IT sector. Tata Consultancy Services' results, to be released on 12 April, will be a key event to watch.

F&O - BANK NIFTY outlook

For the 10 April expiry, significant call OI was seen on the BANK NIFTY at 48,500 and 49,000 strikes, while maximum put writing was seen at the 48,000 and 47,500 strikes. Based on options data, traders expect the BANK NIFTY to trade between 47,200 and 49,100.

The BANK NIFTY formed a bullish candle on the weekly chart this week and once again closed above the previous week’s high. The index gained nearly 3% and closed near its all-time high, indicating the strength of the bulls. Looking ahead, the 47,300-47,500 zone should provide immediate support.

📅Events in focus: Investors will be keeping a close eye on inflation data next week, with the release of the Consumer Price Index for both the U.S. and India. Following a slight uptick in January and February 2024, the current forecast in the U.S. projects a gain of 0.3%, compared to 0.4% in February. In addition, insights into the U.S. Fed’s policy stance will be highlighted with the release of the March FOMC meeting minutes. Traders will also be watching the earnings reports from financial giants like JPMorgan Chase, Citigroup and Blackrock in the week ahead.

💻Spotlight: Gold prices soared to a fresh all-time high, extending gains for the third week in a row. Spot gold rose 4.3% to $2,329 an ounce last week, taking its total gain since March to over 13%. Silver mirrored the strong performance, gaining over 10% in the past two weeks.

⚡Mark your calendars: Indian markets will be closed on Thursday 11 April for Eid-ul-Fitr. Due to the holiday, the NIFTY50 weekly contracts will expire on 10 April.

📊Stocks in focus: In terms of open interest and price, the long build-up was seen in Tata Chemicals, ICICI Prudential, ABB, Indraprastha Gas, Mahanagar Gas. To track the OI losers login https://pro.upstox.com➡️F&O➡️Futures smartlist ➡️OI gainers/losers/most active.

📓✏️Takeaway: Both the NIFTY50 and BANK NIFTY continued their strong performance this week, staying above all the key daily moving averages (20 and 50). This uptrend is further supported by the formation of higher-highs and higher-lows on the daily chart.

However, next week’s data releases post the expiry of weekly contracts of both the indices will be critical and will decide the future direction of the market. Key events to watch include the U.S. and India’s retail inflation data, the release of the FOMC minutes and the commencement of the earnings season in both India and the U.S.

Traders are advised to closely monitor the data releases next week and plan the trading strategies accordingly.

And we'll keep you updated on the changes and important developments via our morning trade setup blog, which is available every day before the market opens at 8 am.

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