Markets week ahead: Momentum to continue; GDP data, Fed message eyed

MarkeIndia’s benchmark indices continued its unabated liquidity-driven up-move and ended yet another week with gains. The market remained less volatile than expected over the past five days as Nifty moved in a defined range of 275-odd points. The move, however, remained unidirectional as the index continued to move higher.
Banking and financial stocks grossly outperformed frontline indices. Despite Nifty’s relative underperformance, it still ended the week with a net weekly gain of 276 points, or 2.43%.

Overseas fund inflow played a key role in pushing indices higher and the surge was driven mainly by a huge gush of liquidity. Bank Nifty played a massive catchup as the index gained a massive 2,224 points, or 9.97%. Volatility, too, declined further, with INDIA VIX coming off 7.97% to 18.35 on a weekly basis.
Foreign portfolio investors (FPIs) bought shares worth Rs 1,164.32 crore, while domestic institutional investors (DIIs) were net sellers to the tune of Rs 809.27 crore in the Indian equity market on August 27, provisional data showed.

Given the current technical setup and the ongoing weakness in the US dollar, Nifty is likely to move higher and financial stocks should stay resilient along with other defensives.
In the event of any consolidation, the index is expected to stay within a broad range. Market participants will need to guard against any likely surge in volatility at higher levels.

September is historically challenging for the market, but stocks could start the month on an upswing.
Nifty is expected to see a stable start in the coming week. The 11,735 and 11,885 levels will act as key resistance points, while supports will come in at 11,410 and 11,330. Nifty is also likely to have a wider trading range on either side in the coming week.

India GDP data release, vehicle sales, will be watched keenly next week.
In US, the Fed speakers and economic reports, including the important August employment count Friday will be watched closely. Fed Vice Chairman Richard Clarida speaks Monday on monetary policy. He is is one of several officials, who are expected to reiterate Chairman Jerome Powell’s Jackson Hole message that the Fed would be willing to let inflation run hot temporarily to help the economy and job market.

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