Domestic equity benchmarks snapped its two-week losing streak and gained nearly one per cent last week, supported by the US Federal Reserve’s rate pause which triggered a rise in global equities and a sharp correction in US bond yields.
After a positive start, frontline indices edged lower in the middle, however recovery in US markets and easing crude oil prices helped markets to regain some momentum in the final sessions.
‘’The market exhibited a cautious tone at the outset, influenced by the uncertainty surrounding the US Fed’s policy meeting. However, as the week progressed, the apprehension dissipated, and market sentiments rebounded. This turnaround was partly attributed to a modest decline in oil prices, which raised optimism about a potential pause in Fed actions,” said Vinod Nair, Head of Research at Geojit Financial Services.
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On Friday, domestic equity benchmarks Nifty 50 and Sensex ended higher for the second consecutive session amid positive global cues as the risk appetite of investors improved on hopes that the end of monetary policy tightening is near.
Nifty 50 closed at 19,230.60, up 97 points, or 0.51 per cent and Sensex closed at 64,363.78, up 283 points, or 0.44 per cent. In the broader market, the BSE smallcap gauge jumped 0.94 per cent while the midcap index climbed 0.71 per cent.
On a cumulative basis, the BSE benchmark jumped 580.98 points or 0.91 per cent while the Nifty climbed 183.35 points or 0.96 per cent. Analysts cited healthy earnings, easing inflation, steady demand and a stable interest rate outlook as factors driving growth in domestic markets. Apart from optimism around the likely end of monetary tightening, the market is also witnessing buying because of some valuation comfort after the recent correction.
‘’The market received a boost from stable domestic macroeconomic PMI and robust corporate earnings from domestic companies. These positive factors helped the market recover from its initial losses during the week. The auto sector faced challenges despite positive auto sales figures, while the mid and small-cap sectors demonstrated noteworthy performance, driven by strong demand and strong economic outlook,” added Nair.
Going forward, a busy week awaits the primary market as four new initial public offerings (IPOs) are slated across mainboard and small-and-medium enterprises (SME) segments. The week will be crucial from the domestic and technical point of view as investors will closely eye the ongoing Q2FY24 results along with key domestic and global events.
Overall, analysts believe that markets will be able to sustain an upward movement if global cues continue to remain positive. Geopolitical risks persist due to the Israel-Hamas war, but so far, it has had limited impact on the market movement.
Here are the key triggers for stock markets in the coming week:
Q2 Results:
Investors will be busy analyzing corporate earnings in the coming week with the growing momentum of Q2FY24 results. However, markets will begin the week by reacting to the September quarter results of State Bank of India (SBI), Vedanta, IndiGo, Zomato, Bank of Baroda, UCO Bank, JSW Infrastructure, among few others on Monday as these companies declared their quarterly results during the weekend or post-market hours on Friday.
Several major companies will be announcing their quarterly results in the upcoming week such as Hindustan Petroleum Corp Ltd (HPCL), Divislab, NHPC, IRCTC, Power Grid, Bata, Tata Power, Apollo Hospital, Ashok Leyland, Coal India, Hindalco, HAL, LIC, M&M, among others.
‘’So far the earnings for this quarter is in-line with the expectations. IT sector posted weak results while banks which have the major contribution in Nifty 50 index posted good results with strong asset quality and good margins. Consumer category underperformed due to slowdown in demand. Auto sector companies posted above expectation numbers due to improved margins,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
4 new IPOs, 8 new listings to hit D-Street:
In the coming week, Protean eGov Technologies IPO and ASK Automotive IPO are opening in the mainboard segment, while Sunrest Lifescience IPO and ROX Hi-Tech IPO opening in the SME segment.
Among listings, shares of Cello World and Honasa Consumer Limited/Mamaearth will get listed on BSE and NSE. Shares of KK Shah Hospitals, Vrundavan Plantation, Mish Designs, will get listed on BSE SME, while Maitreya Medicare Limited, Transteel Seating Technologies, and SAR Televenture will get listed on NSE SME.
FII Outflow:
Foreign institutional investors (FIIs) offloaded Indian equities for ₹3,063 crore through the cash markets in the first three days of November. The selling trend is unlikely to continue, going forward, since the main trigger for FII selling, the rising bond yields, has reversed, according to Geojit Financial Services.
Foreign portfolio investors (FPIs) began November on a subdued note and continued their selling streak, after emerging as net sellers in September and October. FPIs have sold ₹3,412 crore worth of Indian equities and offloaded a total of ₹195 crore as of November 3, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data.
Analysts reckon that the Indian market continues to exhibit resilience even in the midst of several challenges and there is a growing concern among FPIs that if they continue to sell, they will miss out on the potential rally in the Indian market.
This might restrain the FPIs from selling heavily in the coming days. If FIIs shift to net buying, it could further propel the market’s upward movement, according to analysts.
‘’FII selling is likely to be subdued, going forward. They may even turn buyers, not to miss the rally in the Indian market. Frontline banking, automobiles, capital goods, and mid-caps in IT and real estate are poised to do well,” added Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Global Cues:
Major global macroeconomic events, FII/DII investment pattern, crude oil inventories, movement of rupee against dollar, US bond yield, ongoing Israel Hamas conflict, risk of US market recession, will dictate the trend of market in the coming week. Investors will closely scrutinize the economic data from the US, including the PMI and nonfarm payroll releases, to gain further insights into US economic performance.
The US Federal Reserve announced its interest rate decision last week and left the benchmark interest rates unchanged at 5.25 per cent – 5.50 per cent for the second straight meeting. The Fed’s decision to hold its benchmark lending rate at the same 22-year high mark gives policymakers time to “assess additional information and its implications for monetary policy,” said the central bank.
After the latest US Federal Reserve policy outcome. 10-year US bond yields have sharply corrected to 4.66 per cent on Fed Chair Jerome Powell’s dovish commentary. Additionally, despite multiple positive factors impacting the energy market, crude oil prices have cooled off, providing another boost to the Indian markets.
‘’While geopolitical concerns persist, they have had limited impact on the market’s overall trajectory. The resilience of the global markets will be crucial in determining the sustainability of this positive momentum,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Among other major global central banks, Bank of England and Bank of Japan also held their benchmarks interest rates steady, similar to the US Fed stance.
‘’A sharp recovery in the US indices offered the needed respite however we need sustainability above the 34,150 mark in the Dow Jones Industrial Average (DJIA) to extend the recovery. On the other hand, a breakdown of 33,350 could again derail the momentum,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
Oil Prices:
Oil prices settled more than 2 per cent lower in the previous session as supply concerns driven by Israel-Hamas tensions eased, while jobs data raised expectations the US Federal Reserve could be done hiking interest rates in the biggest oil consuming economy.
Brent crude futures were down $1.92, or 2.3 per cent, to $84.89 a barrel. US West Texas Intermediate crude futures fell $1.95, or 2.4 per cent, to $80.51 a barrel. Both crude oil benchmarks settled down more than 6 per cent on the week, according to news agency Reuters.
Analysts highlighted that crude oil witnessed high volatility and recovered from 1-month lows in the international markets as gains in both US dollar index and bond yields were capped.
‘’We expect crude oil prices remain volatile. Crude oil is having support at $81.30–80.50 and resistance is at $82.70-83.40. In INR crude oil has support at ₹6,810-6,740 while resistance at ₹6,955-7040,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
Corporate Action:
Shares of several companies will trade ex-dividend in the coming week including Dabur India, Indian Oil Corp (IOC), Petronet LNG, RITES, Indian Railway Finance Corp (IRFC), among others will trade ex-dividend in the coming week, starting from Monday, November 6. Check full list here
Additionally, D.P Wires Ltd declared a bonus issue in the ratio 1:7. Shares will trade ex-bonus on November 8. HP Adhesives Ltd, Avance Technologies Ltd, and M. K. Proteins Ltd will undergo a stock split in the coming week.
Technical View:
From a technical perspective, the Nifty 50 index has demonstrated a substantial rebound, particularly from the 200-day Exponential Moving Average (DEMA). The index managed to hold the support zone of long term moving average i.e. 200 EMA around 18,800 last week however it has reached closer to the resistance zone of multiple moving averages now.
The correction is anticipated to conclude once the Nifty surpasses the 19,550 mark, maintaining a bullish outlook as long as it stays above the 19,060 mark, according to Swastika Investmarts’ Santosh Meena.
‘’We need a decisive close above 19,500 to negate the bearish tone and inch towards 19,850 levels. On the downside, the 18,800-19,000 zone would offer support in case the decline resumes. Meanwhile, we suggest staying focused on stock selection and preferring sectors like energy, FMCG & realty for long trades,” said Religare Brokings’ Ajit Mishra.
Arvinder Singh Nanda of Master Capital Services added that Nifty prices are likely to drift in the range of 19,000 to 19,300 with sideways to positive bias. With the validation aforementioned trading band, buy the dip will remain in favor, according to Nanda.
On the other hand, the Bank Nifty index has also seen a noteworthy rebound, with immediate resistance at the 43,600 level, followed by 44,000 and 44,400.
‘’On the downside, 42,500 has emerged as a crucial support level. In the event of a sustained market recovery, Bank Nifty may lead the way, driven by its attractive valuations and the fact that FIIs’ holdings are at multi-year lows,” added Santosh Meena.
Disclaimer: The views and recommendations above are those of individual analysts and broking companies, not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 05 Nov 2023, 06:13 AM IST