Q3 results, Ayodhya event, F&O expiry, global cues to drive markets this week
Benchmark indices recorded their worst week in over two months clocking the biggest weekly losses, tracking mixed earnings and muted global cues. After the subdued start, a sharp cut in the middle derailed the momentum however, resilience in the select heavyweights in the final sessions trimmed losses.
Nifty Bank also recorded biggest weekly fall in a year. The biggest contributor to the fall of Nifty 50 and Bank Nifty was HDFC Bank. HDFC Bank, the heaviest-weighted stock on the indexes, tumbled 8.44 per cent on Wednesday — a day after reporting its October-December quarter results – in its biggest one-day slide since May 2020, on worries over its stagnant margins.
The substantial decline in the stock also predominantly triggered the freefall by equity benchmarks Sensex and Nifty 50 -leading to their biggest single-day percentage loss since June 2022 on January 17, dragged by across the board selling amid weak global cues.
The blue-chip index NSE Nifty 50 closed 0.75 per cent higher to 21,622.60 points on Friday, while the S&P BSE Sensex ended 0.7 per cent up to 71,683.23. They lost 1.24 per cent and 1.22 per cent, respectively for the week. The benchmarks tumbled nearly three per cent from Tuesday to Thursday.
Eventually, both the benchmark indices, Nifty 50 and Sensex, lost over a per cent each to close at 21,571.80 and 71,423.65 levels respectively. On the sectoral front, banking, realty and financials were badly hit while energy and IT managed to end in the green. Interestingly, the broader indices outperformed for yet another week however, deterioration in the market breadth showed selective participation.
“Subdued performance was reflected in the market amidst weakening global cues and elevated domestic valuations in mid- and small caps, eroding investor confidence. Strong US retail sales and rising US bond yields diminish expectations of a swift Fed rate cut, redirecting investor focus to safer bonds. In addition, discouraging Chinese economic data further contributed to the lackluster sentiment,” said Vinod Nair, Head of Research, Geojit Financial Services.
‘’While the private banks’ bottom line aligned with market expectations, investors expressed disappointment due to the lesser-than-anticipated growth in deposits and the contraction observed in the NIM. The IT sector’s outperformance on the back of better-than-expected results was not enough to counter the weakness in banking stock during this week,” added Nair.
Also Read: Up 10-60%, smallcaps outperform Sensex as railway PSU stocks lead rally, RVNL up 58% on week
Going forward, a busy week awaits the primary market as some new initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segments. The upcoming week will be crucial from the domestic and technical point of view as investors will closely eye the corporate results announcements along with and macroeconomic and global cues.
Overall, analysts expect volatility to remain high due to the scheduled expiry of January month derivatives contracts and the prevailing earnings season, but expect Nifty 50 to remain range bound with bias on the negative side in the upcoming holiday-shortened week. Experts noted that this sentiment may continue until there is improvement in the banking pack and advise that investors should maintain a stock-specific approach.
Here are the key triggers for stock markets in the coming week:
Q3 Results:
The ongoing Q3FY24 earnings season will be a major factor in driving the market movement. Some major companies will announce their quarterly numbers such as Colgate Palmolive, Coforge, Axis Bank, Havells, Indus Tower, L&T Finance, United spirits, Bajaj Auto, Canara Bank, Ceat, IOC, Tata Steel, TechM, ACC, HPCL, JSW Steel, among others will release their Q3 results this week.
‘’It is expected that the Nifty 50 companies see good Q3FY24 earnings for yet another quarter as the macro factor improves in India. The financial sector is expected to post strong numbers due to robust growth prospects. The Pharma sector is also expected to perform well due to domestic market growth. The chemical sector might not see significant growth,” said Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.
Impact of Ayodhya event on select stocks:
Stocks in the hospitality and travel and tourism sectors, along with public-sector undertaking (PSU) stocks will remain in focus this week in the wake of the much-awaited ‘Pran Pratishtha’ ceremony for Shri Ram Lalla which is set to take place on Monday at Ayodhya’s Ram Mandir in Uttar Pradesh.
Market experts say that Ayodhya will become a major spiritual tourism destination. The potential for tourism-related business is enormous and has attracted investors into hotel, travel and other tourism-related stocks. While appreciating the long-term potential of investment, investors should not go overboard chasing these stocks that have elevated prices, according to analysts.
Also Read: Nifty January series outlook: 4 stocks where investors can park their money; do you own?
‘’Many stocks in this segment have run up too much too fast and have shot up by more than 100 per cent in just few weeks. This is a sentiment-driven rally triggered by retail exuberance. Broadly, the valuation of the mid and small cap segments are too high, unjustified, almost in frothy territory,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
‘’This mid and small cap frenzy is partly driven by the newbie retail investors who are chasing these stocks and partly by mid and small cap mutual funds to which inflows are strong and sustaining. Ayodhya tourism has excellent long-term prospects, investors have to be careful about the valuations. Large caps in IT, capital goods, telecom and selective private sector banks are safer bets now,” added Dr. V K Vijayakumar.
7 new IPOs, 2 listings to hit D-Street:
In the mainboard segment, Nova AgriTech IPO opens for subscription on January 23, 2024 and closes on January 25, 2024. In the SME segment, Brisk Technovision IPO opens for subscription on January 23. DelaPlex IPO and Docmode Health Technologies IPO will open for subscription on January 24. Megatherm Induction IPO and Harshdeep Hortico IPO will open for subscription on January 25.
Among listings, shares of Medi Assist Healthcare will debut on stock exchanges BSE and NSE, while shares of Maxposure will get listed on NSE SME on January 23.
FII Activity:
Foreign institutional investors emerged net sellers for four out of six sessions last week with a total divestment of ₹22,972.66 crore, while domestic institutional investors bought for three out of six sessions with a total investment of ₹10,352.73 crore.
Foreign portfolio investors (FPIs) snapped their buying streak last week and turned massive sellers in Indian markets, driven by global cues. However, FPIs started 2024 on a positive note as investments saw a sharp uptick in December 2023 after FPIs reversed their three-month selling streak in November 2023.
FPIs have sold ₹13,047 crore worth of Indian equities and the total inflow stands at ₹134 crore as of January 19, taking into account debt, hybrid, debt-VRR, and equities, according to National Securities Depository Ltd (NSDL) data. FPIs were big players in financial services and information technology (IT), according to analysts.
Global Cues (ECB, BoJ policy verdicts):
In the coming week, the European Central Bank (ECB) and Bank of Japan (BoJ) are expected to announce their next monetary policy verdicts which will influence the global interest rate trajectory in the next few weeks.
Investors will also keep a close watch on US gross domestic product (GDP) growth, PMI data, and geopolitical developments. The market will also react to global events, foreign investment patterns, US bond yields, the movement of the rupee against the dollar, and crude oil prices
‘’On the global front, indications are mixed however strength in the US markets would continue to offer support. With the end of a month-long consolidation phase, we are eyeing 39,000 in the Dow Jones Industrial Average (DJIA) and the support has shifted to the 37,300-37,700 zone,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
Oil Prices:
Oil prices settled slightly lower in the previous session but recorded a weekly gain as Middle East tensions and disruptions to oil output offset concerns about the Chinese and global economies. In China, slower-than-expected economic growth in the fourth quarter raised doubts about forecasts that demand there will drive global oil growth in 2024.
Brent futures settled 54 cents lower at $78.56 a barrel. US West Texas Intermediate crude fell 67 cents to settle at $73.41. For the week, Brent gained about 0.5 per cent while the US benchmark rose over one per cent, according to news agency Reuters.
The International Energy Agency (IEA) last week raised its 2024 global demand forecast, but its projection is half that of producer group Organisation of Petroleum Exporting Countries (OPEC). The Paris-based agency also said that – barring significant disruptions to flows – the market looked reasonably well supplied in 2024.
Corporate Action:
Shares of some companies, including Wipro Ltd, Angel One, IIFL Finance, Mastek, and few others will others will trade ex-dividend in the coming week, starting from Tuesday, January 23. Some other companies will also trade ex-split while some have announced a buy back of shares next week. Check full list here
Technical View:
From a technical standpoint, Nifty 50 experienced a sharp correction from the 22,124 level, subsequently rebounding from the 21,300 level. ‘’Sustaining above the 20-day moving average (20-DMA) at 21,700 is imperative for any meaningful recovery. Failure to do so may leave Nifty susceptible to further selling pressure within the 21,000–20,800 range,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
Religare Brokings’ Ajit Mishra said that on the higher side, 21,850-22,000 would be tough to cross while the 21,000-21,200 zone will act as a cushion, in case the decline resumes. ‘’Meanwhile, participants should maintain stock-specific approach and focus on sectors other than banking for long trades. Traders can choose selectively from the midcap & smallcap space too and be cautious in stocks that are witnessing excessive momentum,” added Mishra.
Bank Nifty remains a key concern, with the 100-day moving average (100-DMA) at 45,500 serving as immediate support, and the critical support level lying around the 200-DMA at approximately 44,800. ‘’Although the structural integrity is compromised, there is potential for a reversal within the 45,500–44,800 zone. On the upside, the 50-DMA at 46,400 acts as an immediate hurdle, with 47,000 representing the subsequent critical resistance,” added Santosh Meena.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 22 Jan 2024, 06:21 AM IST
