Looking ahead on Dalal Street: Keep an eye on India and US inflation, along with the Federal Reserve meeting, among 10 crucial factors.

The stock markets witnessed an impressive performance in the week ending December 8, marking the most significant weekly gain in the last 16 months and breaching the long-awaited psychological milestone of 21,000 for the first time. 

The positive momentum was fueled by several factors, including favorable state election results suggesting increased government infrastructure investment, better-than-expected economic growth in Q2FY24, and the Reserve Bank of India (RBI) maintaining its policy rates while raising full-year GDP growth estimates.

As the market enters the upcoming week, after a consistent upward trend over the past six weeks, analysts anticipate a period of range-bound trading and consolidation. The focus will be on the Federal Reserve meeting outcome and commentary from Fed Chair Jerome Powell, particularly in light of the recent positive job data and lower unemployment rate in November, alongside the release of monthly inflation data from both the US and India.

In the previous week, benchmark indices and Bank Nifty achieved record closing highs, with the Nifty50 closing at 20,969 (a 3.46 percent increase) and the BSE Sensex rallying 2,344 points or 3.47 percent to 69,826. Notable sectoral contributors to the market's positive sentiment included banking and financial services, energy, infrastructure, technology, metal, oil and gas, and auto stocks, while FMCG and pharma stocks faced downward pressure.

The broader markets also experienced gains, with the Nifty Midcap 100 and Smallcap 100 indices rising by 2.35 percent and 1.16 percent, respectively.Looking ahead to the coming week, here are ten key factors to monitor:

US FOMC Meeting:

 The outcome of the two-day Federal Open Market Committee (FOMC) meeting and Fed Chair Jerome Powell's commentary on December 13 will be crucial, especially given the recent positive job data. Analysts expect the fed funds rate to remain unchanged, with a focus on any cues regarding the potential timing for a rate cut cycle.

US Inflation: 

US inflation numbers, set to release on December 12, will be closely watched by market participants.

Global Economic Data:

 Decisions on interest rates by the European Central Bank and Bank of England, along with manufacturing and services PMI Flash data from key economies, are expected on December 14.CPI Inflation in India: India's Consumer Price Index (CPI) inflation data for November, releasing on December 12, is anticipated to rise to around 5.5-6 percent.

FII Flow:

 Foreign institutional investors have shown strong activity in December, buying nearly Rs 10,900 crore worth of shares. The flow is expected to continue, supported by positive economic policies, BJP's victories in state elections, strong economic growth, falling oil prices, and declining US 10-year treasury yields.

Oil Prices:

 Falling oil prices have provided significant support to the market, alleviating fiscal concerns and boosting companies' earnings. Monitoring the trajectory of oil prices remains essential.

IPO Activity: 

The primary market will see activity with IPOs from Doms Industries and India Shelter Finance Corporation. In the SME segment, Presstonic Engineering and S J Logistics IPOs will be open for subscription.

Technical View: 

While the market momentum is strong, analysts anticipate some consolidation in the coming weeks before a potential upmove towards 21,500-22,000 levels.

F&O Cues:

 Options data indicates 21,000 as a crucial level, with a decisive close above potentially taking Nifty towards 21,500. Support levels are seen at 20,800, with crucial support at 20,500.Corporate Action and Earnings: Key corporate actions include earnings releases from Fedbank Financial Services, SpiceJet, Gandhar Oil Refinery India, and Flair Writing Industries.In conclusion, the market's outlook hinges on a combination of global economic cues, central bank decisions, inflation data, and domestic factors. Investors will closely monitor developments to gauge the sustainability of the recent market highs.

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