Q2 results, inflation data, global cues to guide market direction this week

Domestic equity benchmarks Sensex and Nifty settled higher in the previous session after the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) maintained a status quo on repo rates and policy stance, in line with Street expectations.

The central bank also retained its policy stance as the “withdrawal of accommodation” with five out of six MPC members voting in favour of this. Apart from this, strong macroeconomic indicators and resilience imparted by domestic investors also boosted sentiments by the end of the volatile week.

Also Read: India’s bond yield posts biggest single-day jump in 17 months; What’s fuelling the rise?

On Friday, October 6, Nifty 50 closed at 19,653.50, up 108 points, or 0.55 per cent while Sensex closed 364 points, or 0.55 per cent, higher at 65,995.63. The BSE Midcap index rose 0.66 per cent while the smallcap index ended 0.56 per cent higher.

Global cues were also positive after a pause in a bond market sell-off. The 10-year US bond yields were near 4.74 when the Sensex closed on Friday. The dollar was steady and looked set to end the week with gains.

For the week, the Sensex rose by 0.25 per cent while the Nifty 50 inched up by 0.08 per cent. On the other hand, the BSE Midcap index fell 0.81 per cent this week while the smallcap index moved up by 0.79 per cent.

India’s 10 year bond yield rose the most in 17 months and stood at 7.32 per cent after RBI Governor announced that the regulator will conduct open market operations (OMO) through auctions to manage liquidity.

‘’The RBI’s hawkish stance, particularly in its management of liquidity to counter inflationary risks, has further impacted the market, leading to an increase in India’s 10-year bond yield. However, the market found some support from strong domestic PMI data and corrections in crude oil prices, which have helped it overcome the weak trend observed in the previous three weeks,” said Vinod Nair, Head of Research at Geojit Financial Services.

Going forward, a buzzing week awaits the primary market on several new listings 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 have shifted their focus to the Q2FY24 results – beginning with IT and banks. 

Overall, analysts expect the market to remain range-bound with a bout of volatility given the uncertainty still looms globally, despite the ease in US 10-year bond yield and a sharp correction in crude oil prices.

Here are the key triggers for stock markets in the coming week:

Q2 Results

In the coming week starting from Monday, October 9, all eyes will be on the beginning of corporate performance for the second quarter of the current fiscal year (Q2 FY24), spanning from July to September.

The anticipation among investors is particularly high as India’s largest software services company, Tata Consultancy Services (TCS), is slated to unveil its Q2 results on October 11, 2023, with HCL Technologies and Infosys following suit on October 12, 2023. TCS board is expected to consider a share buyback at its meeting on Wednesday.

WPI, CPI-based Inflation, IIP Data

On the macroeconomic front, there are important data releases scheduled in the coming week that will shape market direction. On October 12, investors await the release of industrial production and manufacturing production data for August. Simultaneously, the consumer price index (CPI) based inflation rate for September will be announced. 

Lastly, the wholesale price index (WPI) data for September is slated for release on October 13. These macro indicators collectively contribute to the broader understanding of India’s economic landscape during the said period.

1 IPO opens, 14 new listings to hit D-Street

Among initial public offerings (IPO), the SME IPO Arvind And Company Shipping IPO is going to hit primary market on Thursday, October 12 and will open for bidding till October 16, 2023.

Apart from the IPO, as many as 14 companies will get listed in the coming week across the mainboard and SME segments. Plaza Wires will get listed on BSE and NSE on October 13. From the SME segment, Arabian Petroleum, City Crops Agro, Sunita Tools, and 10 others will get listed in the coming week. Check full list here

FII Outflow

Foreign portfolio investors (FPIs) continued their selling streak in the first week of October that started last month, on record-high US bond yields and a stronger US dollar. FPIs have sold ₹7,998 crore worth of Indian equities and offloaded a total of ₹6,024 crore as of October 6, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL ) data.

Foreign institutional investors (FIIs) sold ₹25,000 crore in cash markets in September and continued their selling streak in the first week of October. despite crude price easing to $84 per barrel. Even with the Q2 momentum ahead, analysts reckon that amid high US bond yields and stronger US dollar, FPIs and FIIs may not halt their selling streak.

“Exciting news! Mint is now on WhatsApp Channels ???? Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!

Global Cues

On the global front, US 10-year bond yield hit a 16 year high to 4.78 per cent after employers data showed that it added 336,000 jobs in September well above the expectation which indicates resilience in the job market.

US manufacturing PMI increased in September to 49.8, but the new orders declined for fifth month in a row. US jobless claims came close to recent lows to 2,07,000 for the week ended September 30.

‘’Markets on Monday would react to crucial US non-farm payroll and unemployment data as that could provide an outlook for future US Fed policy stance,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services. 

On the same front, Geojits’ Vinod Nair said that robust job data from the US has raised concerns about a potential rate hike by the Fed, with the surge in US bond yields indicating an impending increase in interest rates.

Global markets are still focusing on US bond yields and the dollar index. These factors will be closely monitored, as they have the potential to influence market sentiment as have significant impact on FII activity, crude oil inventories, movement of rupee against dollar, and gold prices.

Market will take further cues from major global events such as US inflation, Eurozone inflation data, US initial jobless claims, crude oil, OPEC report, UK GDP, Trade balance, China CPI.

Technicals: ‘’Though we have seen a marginal respite, sentiment is still bearish on the global front. Among the key markets, the US indices have been inching gradually lower and its benchmark index, the Dow Jones Industrial Average (DJIA) has breached the crucial support of 33,200,” said Ajit Mishra, SVP – Technical Research, Religare Broking.

‘’We feel oversold indications may prompt some rebound in between but the existence of a hurdle around 33,700-34,000 zone would cap the upside. With no support from the global indices, it would be difficult for our markets to maintain the recovery tone,” added Mishra.

Oil Prices

Oil prices rose in the previous session, yet reported their steepest weekly losses since March, after another partial lifting of Russia’s fuel export ban compounded demand fears due to macroeconomic headwinds.

On Friday, Brent futures settled up 51 cents at $84.58 per barrel. US West Texas Intermediate crude futures settled up 48 cents at $82.79. For the week, Brent posted a decline of about 11 per cent and WTI recorded an over 8 per cent drop, according to news agency Reuters.

‘’Oil prices might try to find floor near $80 per bbl levels, amid lingering supply tightness. Investors might also stay cautious ahead of the US Non farm payrolls data later today, which might provide further cues on the Fed’s policy path,” said Ravindra V. Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities Ltd.

Corporate Action

According to BSE data, no stocks will trade ex-dividend in the coming week. Shares of a few companies including Sigachi Industries, MRP Agro Ltd, among others will trade either ex-split and ex-bonus in the upcoming week, starting from October 9. Check full list here

Technical View

Nifty had failed to cross the hurdle short term moving average (20 EMA) in the recent past and is again hovering around the same area, according to analysts. The index is bouncing back from the 19,333 level after a significant dip. 

‘’The real challenge is surpassing the 20-DMA at 19,800, which also coincides with a high open interest area. Breaking through this level at 19,800 would signal the end of the correction, and Nifty might then aim for the 20,000–20,200 range,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart.

‘’On the other hand, there’s a critical support zone between 19,300 and 19,250. If Nifty falls below this range, it could continue to drop towards 19,000 and 18,800. So, it’s important to keep a close eye on the range between 19,300 and 19,800, as it defines where Nifty is currently trading,” added Gour.

The surge in select IT majors ahead of their earnings is certainly encouraging but others are still not offering any clear signals, according to Religare’s Ajit Mishra. ‘’Besides, we are seeing early signs of exhaustion in the broader indices, especially in the midcap index. Considering all, traders should stay focused on stock selection and prefer index majors over others,” added Mishra.

As for Bank Nifty, it is crucial to keep an eye on the 44,000 level, which is identified as a key support zone, according to analysts. If Bank Nifty manages to stay above this level, there is potential for a rally towards the range of 44,800 to 45,000. 

‘’However, it’s important to note that if Bank Nifty falls below the 44,000 to 43,800 range, the current uptrend in the index may become vulnerable. Market participants should closely monitor these levels to make informed trading decisions in the banking sector,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services.

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.

“Exciting news! Mint is now on WhatsApp Channels ???? Subscribe today by clicking the link and stay updated with the latest financial insights!” Click here!

Updated: 08 Oct 2023, 06:12 AM IST