Taper talks, macro data among key factors that will drive market this week

New Delhi: The domestic equity market scripted history in the week gone by as BSE Sensex scaled the 58,000-mark for the first time, whereas Nifty50 climbed to 17,300, thanks to strong all-round buying and supportive global cues.

BSE barometer Sensex added over 2,000 points during the week to settle at 58,129.95 on Friday, whereas its NSE counterpart Nifty50 jumped more than 600 points to close at 17,323.60.

"Bulls continued to be on a rampage in the domestic market, backed by favourable global cues and positive domestic economic data. Anxiety over the Jackson Hole symposium subsided due to the dovish tone of the Fed Chair which helped global markets to start the week on a strong footing," said Vinod Nair, Head of Research at Geojit Financial Services.

This week, the market momentum is likely to be decided by industrial output data. Concerns over production in the domestic auto sector due to chip shortage is likely to be a key driver for Dalal Street.

Here are the key factors that may steer the market going ahead:

Industrial output
The Central Statistics Office (CSO) is slated to release the macro-economic data points of Index of Industrial Production (IIP) and Consumer Price Index (CPI) on Friday, September 10. The domestic equity market will remain shut on Friday on the account of Ganesh Chaturthi.

Experts expect the growth in industrial output to be in double digits on a low base in the year-ago period and easing restrictions by states in India leading to an increase in economic activity.

Industrial production had surged by 13.6 per cent in June mainly due to a low base effect and good performance by manufacturing, mining and power sectors.

US Producer Price Index
The United States is likely to announce the Producer Price Index (PPI), which includes factory, mining and utility output, for the month of August on Friday, September 10. It is expected to be 0.5 per cent higher during the previous month as compared to July 2021.

The Producer Price Index (PPI) measures a change in input prices of raw, semi-finished or finished goods and services. If input costs rise, some will be absorbed by the producer and some passed on to the consumer.

Auto sector production
Domestic automobile companies are forecasting a fall in production due to a shortage of the chips. Mahindra & Mahindra and Maruti Suzuki India have updated about the squeezed output due to semiconductor shortage.

The Indian passenger vehicle industry is likely to see its September output fall short by 100,000-110,000 units from previous years, almost double of last month.

This would translate into a loss of more than $1 billion in potential revenue for this month alone amid high consumer demand, industry insiders said.

FII flows
After strong selling for two weeks, foreign institutional investors marked their comeback in India with substantial inflows following a dovish commentary of US Fed Chair Jerome Powell in his speech at the Jackson Hole Symposium. On a net-net basis, FIIs have bought equities worth more than Rs 6,800 crore in the week gone by.

Taper talks
Speeches by Federal Reserve members are often used to track subtle clues regarding future monetary policy.

Investors would keenly await the speech of Federal Reserve Bank of San Francisco President and Chief Executive Officer Mary Daly and President of the New York Federal Reserve Bank and FOMC Vice Chair John C Williams.

Spread of delta variant
The widespread delta variant scare across the globe may lead to some profit booking in the equity market as the scare may lead to concerns over economic recovery.

Covid-19 resurgence could force economies to shut down again. Market participants would not like the hiatus in the equity bull run.

Technical outlook
Nifty50 index posted a big bullish candle on a weekly time frame and broader indices too participated in this rally. Nifty Bank is also trading near its previous all-time high levels, which may act as a make-or-break situation as its bullish movement in the benchmark index can take Nifty up even higher, said Samco Securities Research.

"But traders should take note that current levels are overbought and mild dips would be smarter entries. The price zone around 16,600 may act as an immediate support on declines," it added.