Ahead of Market: 10 Factors for D-Street Action on Monday

As the weekend draws to a close, traders and investors are bracing for another eventful session on Dalal Street. With a host of domestic and global factors in play, the market's direction on Monday will hinge on a mix of technicals, flows, and macro cues. Here are 10 things that are likely to decide the action.

Global Cues and US Fed Watch

Asian markets are expected to open mixed, tracking Wall Street's performance from Friday. The Dow Jones ended marginally lower, while the S&P 500 and Nasdaq posted gains, buoyed by tech stocks.

The US Federal Reserve's stance remains a key overhang. Recent data showing a cooling jobs market has raised hopes of a rate pause, but any hawkish commentary could spook emerging markets like India.

FII and DII Flows

Foreign institutional investors (FIIs) have been net sellers in recent sessions, offloading equities worth over Rs 2,000 crore in the past week. Domestic institutional investors (DIIs), however, have stepped in to absorb some of the selling pressure.

Market participants will closely watch Monday's flow data. Sustained FII selling could cap upside, while a reversal might trigger a short-covering rally.

Crude Oil Prices

Brent crude is hovering around $82 per barrel, with geopolitical tensions in the Middle East providing support. Any spike above $85 could reignite inflation fears and weigh on India's trade deficit.

A sharp fall in oil prices, on the other hand, would be a positive for the market, given India's status as a major crude importer.

Technical Levels for Nifty

The Nifty 50 closed the previous week at 24,350, forming a Doji candle on the daily chart, indicating indecision. The index is now testing its 20-day exponential moving average (EMA) at 24,280.

A decisive break below this level could drag the index towards 24,000, while a bounce above 24,500 would signal strength. Options data shows maximum call open interest at 24,500 and put interest at 24,000.

Bank Nifty and Sectoral Watch

The Bank Nifty index is facing resistance near 52,000, with support at 51,500. Any breakout above the resistance could trigger a rally in banking stocks.

IT stocks will be in focus after TCS and Infosys reported inline quarterly results. The Nifty IT index is up 2% in the past week, and further gains depend on global demand commentary.

Rupee Movement

The Indian rupee has been under pressure, trading near 83.50 against the US dollar. A weaker rupee typically hurts FII inflows and adds to import costs.

The Reserve Bank of India's intervention in the forex market will be a key factor to watch. A stable rupee could support market sentiment.

Corporate Earnings and IPOs

Several companies are set to report their quarterly results next week, including HDFC Bank and Reliance Industries. Strong earnings from these heavyweights could provide a floor to the market.

On the IPO front, two mainboard issues are opening for subscription, which could suck out liquidity from the secondary market.

Economic Data Releases

India's trade deficit data for June is due later this week. A widening deficit could spook investors, while a narrowing trend would be seen as positive.

Globally, US GDP and PCE inflation data are scheduled for release, which will influence the Fed's rate path.

Options and Futures Activity

Market-wide rollovers are underway as the monthly derivatives expiry approaches. High rollover costs and elevated volatility could keep traders on edge.

The India VIX, currently at 13.5, has risen from recent lows, suggesting some caution in the market.

Sentiment and Positioning

Retail investor sentiment remains positive, with mutual fund SIP inflows continuing to rise. However, the futures data indicates that long positions are being trimmed by speculators.

A combination of these factors suggests a cautious start to the week, with the possibility of volatile intraday moves.

Watch for global cues and FII flows in early trade on Monday. If the Nifty holds above 24,200, the bias could turn positive. A break below this support may lead to further profit-booking.