Q1 earnings, US Fed policy, FII flows: Key triggers for stock markets this week

After a non-stop record-breaking rally, domestic market benchmarks Sensex and Nifty snapped their six-day winning streak on Friday, July 21, dragged by strong losses in index heavyweights including Infosys, Reliance Industries, TCS and Hindustan Unilever (HUL). 

Shares of Infosys and HUL fell a day after their June quarter results while those of Reliance Industries declined ahead of its Q1FY24 earnings. Infosys shares suffered strong losses after the IT behemoth reported its weakest June quarter revenue growth since FY21 and sharply trimmed its FY24 revenue guidance to 1-3.5 per cent, down from 4-7 per cent. 

Investors were spooked by a significant downward revision in the company’s revenue guidance, leading to a sharp selloff in the stock. The decline also had a negative impact on other IT stocks, with the Nifty IT index plunging 4 per cent by the end of the session. 

Sensex saw a gap-down opening and extended losses cracking 1,038 points to the intraday low of 66,533.74. The index closed with a loss of 888 points, or 1.31 per cent, at 66,684.26 while the Nifty ended with a loss of 234 points, or 1.17 per cent, at 19,745 on Friday.

However, domestic markets witnessed a robust innings till July 20 (Thursday) as the sentiment remained upbeat due to the the momentum by Q1FY24 results and foreign capital inflow on India’s healthy macroeconomic outlook even amid mixed global cues.

On Thursday, the BSE benchmark had jumped 474.46 points or 0.71 per cent to settle at its fresh all-time closing high of 67,571.90 on Thursday. During the day, it rallied 521.73 points or 0.77 per cent to hit its lifetime intra-day peak of 67,619.17. The Nifty had climbed 146 points or 0.74 per cent to end at its record closing high of 19,979.15. During Thursday’s session, it had soared 158.7 points or 0.80 per cent to reach its fresh record high of 19,991.85.

In addition, Nifty has rallied by 15 per cent since the beginning of current fiscal (April 1, 2023) and four per cent month till date, said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd. Market analysts now reckon that the Nifty index will hit the much-awaited 20,000-mark soon given the resilience in markets amid mixed global cues.

Going forward, a buzzing week awaits the primary market with five public issues to be rolled out for bidding and two new listings lined up for bourses. Q1 results lined up next week along with the FOMC meeting outcome will majorly guide market movement next week, according to analysts. 

‘’In the upcoming week, investors will be closely focused on the FOMC meeting. While a 25-basis point (bps) rate hike is widely expected, investors will be more interested in the committee’s commentary on future rate actions, seeking clues for the anticipated future rate pause,” said Vinod Nair, Head of Research at Geojit Financial Services.

Analysts also expect higher volatility in the coming week due to the scheduled monthly expiry of July month derivatives contracts. ‘’However, the prevailing buoyancy on the global front, especially the US markets, would help in keeping the tone positive,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.

Here are the key triggers for stock markets next week:

Q1 Earnings

Investors will be busy analyzing corporate earnings in the coming week as several major Nifty 50 companies are going to announce their Q1FY24 results. However, markets will begin the week by reacting to Reliance Industries’ Q1FY24 results on Monday. 

The diversified conglomerate announced its June quarter earnings post market hours on Friday, reporting a decline of 10.8 per cent in net profit at ₹16,011 crore, compared to ₹17,955 crore in the year-ago period due to weaker oil-to-chemicals (O2C) business. Shares of Reliance Industries slipped around three per cent ahead of the announcement of results and settled 2.48 per cent lower at ₹2,555 apiece on the NSE.

Also, leading private sector banks including Kotak Mahindra Bank, ICICI Bank, Yes Bank, among others announced their Q1FY24 results on Saturday, reporting overall stronger numbers. ICICI Bank’s net profit jumped 40 per cent to ₹9,648 crore, beating market estimates. Some of the prominent companies reporting their Q1FY24 results in the coming week are:

Tata Steel, Asian Paints, Bajaj Auto, Tata Motors, Axis Bank, BPCL, Indian Oil, L&T, Dr Reddy’s Nestle India, Cipla, among others.

5 IPOs, 2 new listings to hit D-Street

In the coming week, five initial public offerings (IPO) and two new listings await the bourses in both main board and small- and medium-sized enterprise (SME) segments. These are as follows:
-Yatharth Hospital IPO will open for subscription on July 26, and close July 28. The company’s shares are likely to be listed on BSE and NSE on August 7.
-Yasons Chemex Care IPO will open for subscription on Monday, July 24, and close on Wednesday. It will be listed on the NSE SME exchange Thursday, August 3.
-Khazanchi Jewellers IPO will open for subscription on July 24, and close on July 28. The share will be listed on the BSE SME exchange August 7.
-Innovatus Entertainment IPO will open for subscription on July 25, and close on July 27. It will be listed on the BSE SME exchange on August 4.
-Shri Techtex IPO will open for subscription on July 26, and close on July 28. The share will be listed on the NSE SME exchange on August 7.

Additionally, integrated services company Service Care get debut on the NSE SME on Wednesday, July 26, while Asarfi Hospital will be listed on the BSE SME exchange Thursday, July 27.

FII Inflow

Sustained inflow by foreign investors backed by positive global trends among the major drivers for the record highs scored by equity markets last week. Foreign institutional investors (FIIs) extended their investment-spree and bought shares worth ₹1372.13 crore during the week. Domestic Institutional Investors (DIIs) were the net sellers last week, as they offloaded shares worth ₹2519.82 crore.

FIIs have pulled off a 700 point rally in the Nifty since the 3rd of this month at the start of the earnings season for the first quarter, according to analysts. Out of 15 trading sessions in July, FIIs were the net buyers in 13 sessions, while DIIs showed a renewed interest in buying for five sessions, but have returned to offloading in markets. 

However, on Friday when markets snapped its six-day winning streak, FIIs turned sellers, while DIIs were net buyers. Going forward, if foreign investors start selling then there could be more selling pressure in markets.

US Fed, Global Central Bank Policies

Analysts reckon that market volatility will increase in the second half of next week as traders and other participants will closely monitor the interest rate decision of several central banks including the US Federal Reserves, European Central Bank, and Bank of Japan.

The US Federal Reserve will start a two-day July policy meeting on Tuesday. While analysts expect a 25 bps rate hike, Fed’s Chair Jerome Powell press conference after the outcome will determine market sentiment in the near-term.

On July 27, the European Central Bank (ECB) will announce its policy decision. According to economists who took part in a poll conducted by news agency Reuters, ECB is likely to raise 25 bps interest rate this month, with a slight majority of them also expecting another hike in September.

Oil Prices

Oil prices rose nearly two per cent on Friday to record a fourth consecutive weekly gain, buoyed by growing evidence of supply shortages in the coming months and rising tensions between Russia and Ukraine that could further hit supplies.

Brent crude futures rose $1.43, or 1.8 per cent, to settle at $81.07 a barrel, with a weekly gain of about 1.2 per cent. US West Texas Intermediate crude ended $1.42, or 1.9 per cent, higher at $77.07 a barrel, its highest since April 25. WTI gained nearly two per cent in the week.

Oil prices have now rallied by around 12-14 per cent in three weeks, primarily in response to supply cuts from top producers Saudi Arabia and Russia. Analysts predict that the price rally could sustain as the oil market is starting to price a looming supply crunch.

Corporate Action

Several companies will trade ex-dividend in the coming week including Sun Pharma, Indigo Paints, Indian Oil corporation, Tata Motors, Aarti Industries, Indigo Paints, Zydus Life, Alembic Pharmaceuticals, Amara Raja Batteries, DLF, Union Bank of India, Deepak Nitrite, UltraTech Cement, Hero MotoCorp, among others. On the other hand, V R Films, NDR Auto Compon, Remedium Lifecare, and Maan Aluminium will trade ex-bonus.

Technical View

Nifty has almost tested the new milestone i.e. 20,000 and gained over seven per cent in the last four weeks, which has pushed the oscillators into the overbought zone, according to analysts. 

‘’It would be healthy if we see some consolidation now, before making further progress. We expect Nifty to respect the 19,300-19500 zone in case of any dip while any attempt to surpass the 20,000-20,200 zone may attract profit booking. Meanwhile, participants should focus on more position management and prefer sectors that are showing relatively higher strength,” said Religare Brokings’ Ajit Mishra.

‘’The sharp dip in IT has derailed the momentum and we could see a breather in auto and FMCG too after the phenomenal surge. However, banking, financials, pharma and metal look promising for further up move so traders should align their positions accordingly,” added Mishra. 

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.

Updated: 23 Jul 2023, 06:07 AM IST