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The Indian stock market, represented by Dalal Street, is bracing for a week filled with crucial economic data releases, corporate earnings announcements, and global trade developments. After a period of high volatility, which saw the market close 0.7 percent lower for the week ending May 23rd, investors are keenly watching for signals that will shape market direction. The previous week was characterized by a retreat following a more than 4 percent rally, a performance undermined by weak US bond auctions fueled by concerns about the fiscal deficit. This, coupled with spikes in treasury yields in the United States and Japan, and a consistent outflow of Foreign Institutional Investor (FII) capital, significantly dampened market sentiment. Adding to the negative pressure were renewed tariff threats from the Trump administration directed at the European Union and specific tech companies, including Apple. These actions raised concerns about broader trade negotiations with China, further contributing to market unease. However, not all news was negative. Expectations of a normal monsoon season, coupled with lower oil prices, provided some relief. Strong inflows from Domestic Institutional Investors (DIIs) also played a crucial role in mitigating losses, as did the rising hope that the Reserve Bank of India (RBI) might consider an interest rate cut in its upcoming monetary policy meeting. Looking ahead to the week starting May 26th, experts anticipate a rangebound market with a slight positive bias. Key macroeconomic data, including GDP figures for both the United States and India, will be closely scrutinized. A speech by Federal Reserve Chair Jerome Powell and the release of the minutes from the Federal Open Market Committee (FOMC) meeting will also be critical events. In addition, developments related to trade tariffs and the last set of quarterly earnings reports will be major focal points for investors. The benchmark Nifty 50 corrected by 167 points (0.67 percent) to reach 24,853, while the BSE Sensex declined by 610 points (0.74 percent) to 81,721. Broader market indices showed a mixed trend, with the Nifty Midcap 100 index falling by 0.65 percent and the Smallcap 100 index decreasing by 0.5 percent. Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, believes that markets are expected to remain firm, supported by macroeconomic and earnings tailwinds, with broader market segments likely to participate. Investors will also be closely monitoring key data releases, including quarterly GDP figures for both India and the United States.
A primary focus for the coming week will be the corporate earnings season. Over 1,700 companies are expected to release their March quarter earnings, providing a comprehensive overview of corporate performance. Key companies reporting include Bajaj Auto, Apollo Hospitals Enterprise, Aurobindo Pharma, and Life Insurance Corporation of India. Furthermore, several other prominent companies such as FSN E-Commerce Ventures Nykaa, Brainbees Solutions (Firstcry), KEC International, Nazara Technologies, General Insurance Corporation of India, Bosch, Bharat Dynamics, NMDC, Hindustan Copper, Info Edge, Cummins India, Bata India, Indian Railway Catering and Tourism Corporation, Natco Pharma, SAIL, Ipca Laboratories, Alkem Laboratories, Amara Raja Energy & Mobility, Engineers India, Lemon Tree Hotels, Samvardhana Motherson International, Suzlon Energy, and AstraZeneca Pharma are also scheduled to announce their March quarter earnings. In addition to earnings reports, auto stocks will be closely watched in the latter part of the week as automobile manufacturers release their monthly sales volume numbers for May, starting from June 1st. Globally, market participants will be closely monitoring further developments in the ongoing trade tensions, particularly between the United States and its trade partners. The recent threat by US President Donald Trump to impose a 50 percent import tariff on all EU goods, starting from June 1st, has heightened concerns and delayed trade talks. Furthermore, warnings of potential 25 percent tariffs on Apple and hints of tariffs for Samsung and other tech firms by the end of June, unless devices sold in the United States are manufactured domestically, have added to the uncertainty. The US government's directive to American companies to halt the use of China-made AI chips, particularly those from Huawei Technologies, also escalated tensions during the past week. However, both nations have since attempted to smooth nerves by signaling continuity in trade talks, and US Treasury Secretary Scott Bessent hinted at several large deals in the coming weeks. The speech by US Federal Reserve Chair Jerome Powell on May 26th and the release of the minutes from the last FOMC monetary policy meeting on May 28th are expected to provide critical insights into the Federal Reserve's thinking. In his last speech, Powell noted that longer-term interest rates are expected to be higher due to more frequent changes in tariff rates and persistent supply shocks, which could complicate the Fed's balancing act. Despite these concerns, the US Federal Reserve remains committed to its 2 percent inflation target and kept rates unchanged at 4.25-4.5 percent in its May policy meeting, similar to the March meeting, although it is worried about the economic growth, unemployment and inflation due to tariff war.
Another crucial factor is the second estimates for US GDP growth for the January-March 2025 quarter, which will heavily influence the central bank's interest rate decisions. Preliminary estimates announced last month indicated that the US economy contracted by 0.3 percent, marking the first quarterly decline since Q1-2022, compared to a 2.4 percent growth in the October-December 2024 quarter. Additionally, the market will be closely tracking the second estimates for PCE prices, real consumer spending of Q1-2025, weekly jobs data, and personal income & spending data from the US. Domestically, market participants will be focusing on India's GDP numbers for the fourth quarter of FY25, due on May 30th. Most economists expect India to grow at more than 6.5 percent in Q4FY25, compared to 6.2 percent in Q3FY25, supported by sectors like agriculture, hotels & transport, and construction. CareEdge Ratings projects a real GDP growth of 6.8 percent for Q4 FY25, bringing the full-year FY25 GDP growth to 6.3 percent, slightly lower than its earlier forecast of 6.4 percent and the Ministry of Statistics and Programme Implementation's advance estimates of 6.5 percent. Industrial production numbers for April, scheduled for May 28th, will also be a key indicator, followed by fiscal deficit data for March-April, and foreign exchange reserves for the week ended May 23rd, due on May 30th. The behavior of Foreign Institutional Investors (FIIs) will also be closely monitored. FIIs turned net sellers in the week ended May 23rd due to rising US bond yields, net offloading Rs 11,591 crore worth of shares. However, Domestic Institutional Investors (DIIs) maintained strong support, net buying to the tune of Rs 11,199 crore worth of shares during the week. In fact, DIIs net bought close to Rs 34,500 crore worth of shares in the current month, compared to the net buying of Rs 12,192 crore by FIIs. The US 10-year Treasury yield jumped 1.44 percent during the past week to 4.5 percent after hitting an intra-week high of 4.63 percent. It has been rising for the fourth consecutive week, up from 4.124 percent, tracking Moody’s downgrade of the US credit outlook and fiscal concerns. Experts anticipate that FII flows will remain volatile.
The primary market will also be active, with nine companies launching their initial public offerings (IPOs) worth over Rs 6,900 crore, including four mainboard public issues. Brookfield-backed Schloss Bangalore, the operator of hotels, palaces and resorts under The Leela brand, will open its Rs 3,500 crore public issue on May 26th. The Rs 2,800-crore IPO of Aegis Vopak Terminals, the operator of storage terminals for liquefied petroleum gas, will also be launched on the same date. The Rs 168-crore Prostarm Info Systems IPO will open on May 27th, followed by Scoda Tubes' Rs 220-crore IPO on May 28th. The SME segment will also see significant activity, with five companies - Astonea Labs, Blue Water Logistics, Nikita Papers, Neptune Petrochemicals, and N R Vandana Tex Industries - launching their maiden public issues in the coming week. Technically, the Nifty 50 is expected to be rangebound, with 25,116 acting as a key hurdle on the higher side, and 24,400-24,450 as a support zone. Above 25,116, the 25,200-25,300 is the immediate zone to watch, followed by 25,500. However, below the support zone, selling pressure may be seen. Overall, experts believe the trend is still up, considering the continuation of higher highs-higher lows formation, while the MACD maintained a positive crossover with an improving histogram, and the RSI sustained above the 60 mark. Options data suggests that the Nifty 50 may see a 24,500-25,500 range in the short term. The maximum Call open interest was seen at the 25,000 strike, followed by the 25,500 and 25,800 strikes, with the maximum Call writing at the 25,800 strike, and then the 24,900 and 25,700 strikes. On the Put side, the 24,000 strike holds the maximum open interest, followed by the 24,500 and 24,800 strikes, with the maximum writing at the 24,800 strike, and then the 24,900 and 24,500 strikes. The India VIX, the fear index, remained at elevated levels, rising 4.4 percent for the week to 17.28 levels. A cautious stance is advised until the VIX drops below 15.