Dalal Street Week Ahead | 10 key factors that will keep traders busy next week

Quarterly results will dictate market sentiment and will be the talk of the coming week as they pick up pace. D-Street would be all ears to any management insights to forecast the future earnings trajectory, says Samco Securities.

The market created history in the week ended October 14, with the Nifty50 surpassing 18,000 and the BSE Sensex scaling above 61,000 mark as the mood at Dalal Street remained upbeat for the second consecutive week. The participation in the rally was seen across sectors barring IT. Auto stocks rallied on expectations of demand revival in festive season, while banking stocks gained after strong Q2 provisional numbers and favourable credit growth data.

The benchmark indices ended at fresh record closing highs. The BSE Sensex scaled above 61,000 mark for first time, rising 1,246.89 points or 2.08 percent to end at record closing high of 61,305.95, while the Nifty50 finally crossed the much-awaited 18,000 levels and continued uptrend till 18,350 levels, before closing at 18,338.55 with 443.35 points or 2.48 percent gains.

 

The broader markets also traded in line with frontline indices as the BSE Midcap index was up 3.34 percent and Smallcap index gained 1.92 percent.

The momentum is expected to continue in the market, with the ongoing corporate earnings season and the management commentaries related to their businesses and sectors, hence new highs could be possible with more stock specific actions, experts feel. The market will first react to HDFC Bank and Avenue Supermarts’ quarterly earnings announced on October 16.

“Quarterly results will dictate market sentiment and will be the talk of the coming week as they pick up pace. D-Street would be all ears to any management insights to forecast the future earnings trajectory,” said Samco Securities.

“With anticipation that companies would keep up their momentum from the previous quarter into the second quarter, investors may see whipsaw movements in the stock next week as results beat or miss market expectations,” Samco added.

Here are 10 key factors that will keep traders busy next week:

Earnings

The quarterly earnings season will be in full swing in the coming week as nearly 200 companies will declare their July-September period scorecard. Amongst them, UltraTech Cement, ACC, Hindustan Unilever, Nestle India, Asian Paints, Yes Bank, JSW Steel, TVS Motor Company, HDFC Life, L&T Infotech, Havells India, Jubilant Foodworks, Biocon, PVR, Tata Consumer Products, Reliance Industries, and ICICI Bank are the key ones to release earnings next week.

Apart from that, Route Mobile, Tata Coffee, ICICI Prudential Life Insurance Company, ICICI Securities, L&T Technology Services, Mastek, Angel Broking, L&T Finance Holdings, Shoppers Stop, Tata Communications, ICICI Lombard General Insurance Company, IDBI Bank, Indian Energy Exchange, IIFL Securities, Indian Hotels, IndiaMART InterMESH, LIC Housing Finance, South Indian Bank, Federal Bank, Gland Pharma, Inox Leisure, Jubilant Pharmova, Kajaria Ceramics, Polycab India and Tata Elxsi will also announce quarterly earnings next week.

Coronavirus and Vaccination

The COVID-19 infections rate seems to be declining further as the daily addition of cases have been below the 20,000 mark for more than a week now, which resulted into easing of further restrictions across the country. The aviation sector is allowed to operate domestic flights at full capacity with effect from October 18, while theatres and auditoriums will be reopened in Maharashtra from October 22.

Positivity rate fell further to 1.73 percent while the recovery rate improved to 98.07 percent as per the data of last 24 hours ending at 8 am on October 16.

Vaccination drive has been going on smoothly across the country as Health Minister, Mansukh Mandaviya said India would reach 100-crore COVID-19 vaccination mark next week. So far more than 97.23 crore people have been vaccinated so far in the country, including more than 8.36 lakh COVID-19 vaccine doses administered on October 15. Of which, 28.7 percent of people are fully vaccinated with both doses now.

Dollar Index and US Bond Yields

The US dollar index and bond yields corrected a bit after hitting crucial levels in the passing week, but the market will keep a close watch on both in coming days. Recent FOMC minutes hinted that the Fed tapering could start in November, so all eyes will be on Fed policy meeting in November.

The US dollar index, which measures the value of US dollar against a basket of world’s six leading currencies, closed at 93.96 levels, falling from 94.08 on week-on-week basis, while US bond yields declined to 1.57 from 1.61 levels (the highest level since June 2021) on week-on-week basis.

Indian Rupee

The Indian rupee during the week hit the lowest level (75.46 a dollar) since July 2020 but later appreciated from the same and finally settled at 75.03 a dollar, weakening by 8 paise from 75.11 on week-on-week basis, following correction in US dollar.

“The USDINR pair should correct down towards 74.80 and 74.50, which has an 80 percent probability. The key player for rupee management- “The RBI”, has so far done a remarkable job by not intervening too aggressively in selling dollars and let it be driven by market forces. However, considering the huge chunk of inflows paving the way, it will be watchful whether it also remains an active downside,” said Amit Pabari, MD at CR Forex Advisors.

Overall, he feels the medium-term trend for the USDINR pair remains bullish. “Only if the crucial resistance of 75.50 is broken on account of any major market trigger, though having less probability in immediate time, then take it can take rupee towards 76.00 levels over the medium term,” he said, adding the expected flow of IPOs in coming days could further add more capital flows at home and remain supportive for the rupee.

Commodity Prices

The commodity prices (natural gas, coal, crude oil, and industrial metals) climbed to fresh multi-year highs last week due to supply concerns, but experts feel the equity market seems to have ignored them for the time being.

Higher gas and coal prices increased expectations that the focus (of including power generators) may shift to oil as a fuel, which helped Brent crude futures to hit fresh October 2018 highs at $85.10 a barrel. An increase in travel demand globally due to easing travel restrictions after recovery from the COVID-19 pandemic also seems to have supported oil prices. The US decided to lift the travel ban with effect from November 8.

The rising oil prices is a risk for India which imports around 80-85 percent of crude oil. Globally experts feel if the energy prices sustain an uptrend amid supply issues then that could hit the industrial activity and economic recovery. Hence the markets will keep a close watch on prices, though the current focus is on corporate earnings.

After reports of coal shortage in the country, Finance Minister Nirmala Sitharaman clarified that the reports are baseless and there is no shortage of coal. “India is a power surplus country.”

Banks

Banking sector will be in focus in coming days as a lot of banks will start releasing their quarterly earnings including ICICI Bank, IDBI Bank, Bank of Maharashtra, South Indian Bank, Federal Bank, and Yes Bank.

Bank Nifty rallied nearly 5 percent in the last six consecutive trading sessions, including nearly 2 percent gains on October 14 ahead of HDFC Bank earnings announced on October 16. Improving credit growth also boosted sentiment.

The index already ended at record closing high of 39,340.90 and experts feel it can cross the 40,000 mark next week.

“In the weekly expiry of October 21, too, the high open interest concentration on the Call side was seen at 40000 strike, strongly signaling that Bank Nifty is likely to touch this level in the coming week and may find resistance also. The stocks which can drive the index are HDFC Bank, IndusInd Bank, ICICI Bank, and SBI,” said Rajesh Palviya, VP – Technical and Derivative Research at Axis Securities.

Maximum Call open interest was seen at 40000 strike followed by 39,400 & 39500 strikes with Call writing at 39400, 39900 & 40000 strikes, while maximum Put open interest was seen at 39300 strike followed by 39200 & 39000 strikes, with Put writing 39300, 39200 & 39000 strikes.

Technical View

Technically the Nifty50 formed bullish candle on the daily as well as weekly charts as it gained 1 percent on October 14 and 2.5 percent for the week, indicating further upside momentum which is unfolding in the market before any profit booking. Experts expect the index to hit 18,500 soon.

“Normally, three back to back up gaps are formed in a strong up trend movement before showing any downward correction from the highs. Hence, there is a higher chances of another opening upside gap on October 18 before witnessing any profit booking from the higher levels,” said Nagaraj Shetti, Technical Research Analyst at HDFC Securities

He feels the short term trend of Nifty continues to be positive. “Though, Nifty closed near the all time highs, still there is no indication of any reversal formation at the new highs. As per the theory of higher tops and bottoms, one may expect profit booking in the Nifty from near 18,500-18,600 levels by next week. Immediate support is placed at 18,265 levels,” he said.

F&O Cues

Option data also indicated that the Nifty could trade in the range of 18,000 to 18,500 in the coming week.

Maximum Call open interest was seen at 18400 followed by 18,500 & 18,300 strikes. Minor Call writing was seen in the 18,900 then 19,100 strike with Call unwinding at 18,200 strike followed by 18,100 & 18,300 strikes.

Maximum Put open interest was seen at 18,300 followed by 18,200 & 17,900 strikes. Meaningful Put writing was seen at 18,300 then 18,200 & 18,400 strikes with Put winding at 18,000, 18,100 and 17,900 strikes.

“If we talk about the derivative data, then FIIs’ long exposure in the index future stands at 67 percent while Put Call Ratio is trading at 1.53 mark that indicates positive bias in the market. However open interest built up for the expiry of October 21 is scattered where open interest concentration on Call options front is distributed in the range of 18500-19000 while it is 18300-18000 zone for the Put option,” said Santosh Meena of Swastika Investmart.

India VIX fell by 2.07 percent on October 14. But, on a weekly basis, it increased marginally from 15.65 to 15.77 levels.

“Overall comparative lower VIX suggests that bulls are holding the tight grip in the market. Now VIX needs to cool down below 15-14 zones to continue the smooth ride,” said Chandan Taparia of Motilal Oswal.

Corporate Action

Here are key corporate actions taking place in the coming week:

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Monetary policy meeting minutes, bank loan & deposit growth for the fortnight ended October 8, and foreign exchange reserves for the week ended October 18 will be released on October 22.

Global Cues

Here are key corporate actions taking place next week:

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