With no major domestic event expected this week, market will focus on the next leg of corporate result announcements
It seems it was a Diwali celebration week for the market as bulls continued to keep tight control on Dalal Street.
Hope of tax relaxation, consistent FII buying, no major disappointment in the September quarter earnings, etc. lifted sentiment during the truncated week that ended on November 1.
The BSE Sensex and Nifty50 gained 2.3 percent each while the BSE Midcap and Smallcap indices rose 2-3 percent. The sectoral trend also remained strong as the BSE Auto, Bank, FMCG, Healthcare, IT, Metal and, Oil & Gas gained 2-6 percent.
After consistent upmove in previous six consecutive sessions, there could be some consolidation in coming week, though overall short to medium term trend is expected to remain positive. Also, as we are near the last leg of the earnings season, stock specific action is likely to continue, experts feel.
"We believe that Mr. Market would turn volatile in the weeks ahead as it will witness profit booking at higher levels, markets will also see a churn out of large caps with inflows in select midcaps. Certainly, the bitten down sectors may witness an upmove and the ones which saw a good rally may linger around at current levels," Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote told Moneycontrol.
Since there is an environment of uncertainty, investors should pick stocks with great caution, he advised.
Initially, the market will react to Yes Bank earnings and better-than-expected US jobs data.
Here are 10 key things that will keep traders busy this week:
With no major domestic events due next week, market will focus on the next leg of corporate result announcements.
Over 650 companies will announce their September quarter earnings in the coming week, including key ones like HDFC, Tech Mahindra, Titan Company, Sun Pharma, PNB, Dabur, Tata Steel, Cipla, Canara Bank, HPCL, BPCL, M&M, Eicher Motors, Ashok Leyland, NTPC, etc.
"Market assessed the ongoing Q2 result as marginally better-than-expected. About 26 companies of Nifty50 indices have declared the result. The outcome is encouraging with a PAT growth of 15 percent on a YoY basis compared to expectation of around 12 percent for the same stocks. For broad indices like Nifty500, 148 stocks have declared results, a similar traction is visible with 15 percent growth in consolidated PAT which is 6.4 percent up on a QoQ basis. This is led by cut in corporate tax and better performance from sectors like banking, cement & FMCG," Vinod Nair, Head of Research at Geojit Financial Services said.
HDFC is likely to report healthy earnings growth during July-September quarter due to HDFC Bank dividend and Gruh Finance stake sale, but deferred tax assets (DTA) adjustment and MTM loss in RBL investment may limit growth. NII and loan growth could remain in double digit around 14-17 percent YoY.
"We expect HDFC to deliver 15 percent growth in loans under management on the back of 17 percent growth in the retail business (17 percent in Q1FY20)," Kotak Institutional Equities said, adding the decline in marginal cost of funds will drive 10 bps QoQ expansion in calculated NIM.
State-owned lenders Bank of Baroda as well as Punjab National Bank (PNB) are likely to report losses in quarter ended September 2019 due to DTA adjustment. But, net interest income and pre-provision operating growth could remain strong in double digit with some volatility on asset quality front.
Utility and tractor maker Mahindra and Mahindra is likely to report double digit decline across parameters with around 100-200 bps decline YoY in operating profit margin during July-September period, impacted by 16.3 percent fall in volumes.
Eicher Motors is expected to see more than 10 percent fall YoY in profit and revenue, and around 30 percent decline in EBITDA with sharp contraction in margin due to weak performance of both Royal Enfield and commercial vehicle segments. But, net realization is likely to improve by around 12 percent YoY due to ABS related price increase and mix improvement.
Commercial vehicle maker Ashok Leyland could report more than 45 percent degrowth YoY in revenue due to 44 percent decline in volume during the quarter ended September 2019. Profit may plunge over 80 percent and EBITDA could see over 70 percent decline YoY with more than 500bps YoY contraction in margin due to higher discounts and operating deleverage.
US-China trade deal
Globally markets remained stable with positive bias after easing of US-China trade tensions following the partial deal between both countries. Now, all eyes are on the signing of that partial deal which could be likely in mid-November.
The talks between ministers from both countries remained positive on November 1 and even the US President Donald Trump said about continued progress on the deal which would be signed this month an 18-month trade impasse between the two economic giants.
"Top Chinese and US trade negotiators have conducted serious and constructive discussions on properly addressing their core concerns and reached consensus on principles," China's commerce ministry said on November 2.
Trump and Chinese President Xi Jinping were expected to ink the agreement at the Asia Pacific Economic Cooperation Summit in Santiago, Chile in mid-November. But, host Chile announced on Wednesday that it was cancelling the event due to ongoing mass demonstrations.
FIIs remained quite supportive during the week, net buying more than Rs 10,000 crore worth of shares and taking total October net inflow to Rs 8,596.66 crore after consistent selling in previous five consecutive sessions.
Domestic institutional investors (DIIs) preferred to book profits by selling more than Rs 800 crore in equity during the week, but they remained net buyers in October to the tune of Rs 4,758 crore, continuing net inflow for sixth straight month.
Hence, the market will closely watch both data points going ahead.
"Better liquidity from FIIs and MFs will maintain a positive sentiment in the domestic market given de-escalation in political risk and focus over upcoming reforms, to revive growth," Vinod Nair, Head of Research at Geojit Financial Services said.
The Nifty50 saw Doji kind of indecisive formation on daily charts for second consecutive session on November 1 and formed large bullish candle on weekly scale.
It is indication that there could be consolidation in near term due to market were at around overbought levels, but the positive momentum may continue in short and medium term, experts feel.
"The Nifty50 is exhibiting a strong uptrend on the weekly charts. If you go by simple price action, which many senior traders do, you can spot higher highs and higher lows. What this essentially indicates is a bullish momentum," Abhinit Kulkarni, Cofounder, Tequity Investing told Moneycontrol.
"The level of 11,985 on the Nifty50 could be one level of resistance that traders should watch for in the next week. If there is a reversal pattern being formed around that level, traders may book profits in their long positions," he said.
Nagaraj Shetti, Technical Research Analyst, HDFC Securities said having moved up sharply in this week and placed near the key overhead resistance, there is a possibility of consolidation or a small range movement in the next week.
Maximum Put open interest was seen at 11,600 followed by 11,500 strike while maximum Call open interest was seen at 12,000 followed by 18,000 strike.
Maximum Put writing was seen at 11,900 and 11,800 strike while Call writing was seen at 11,900 followed by 12,000 strike.
Option data suggests a broader trading range for the Nifty around 11,600 to 12,100 levels in coming days.
"The Nifty witnessed gains of almost 300 points last week from 11,600 making it the highest Put base of the November series. We expect the index to trade with a positive bias above these levels. It is likely to eventually move beyond the highest Call base of 12,000," Amit Gupta of ICICI Direct said.
Volatility has remained almost near 16.5 percent in comparison to last week.
"Despite market upsides, since volatility has not come down, it shows little scepticism among market participants regarding Nifty upsides. This may lead to some consolidation in the near term," he said.
Markit Services PMI data for October month will be released on November 5.
Foreign exchange reserves for week ended November 1, and bank loan and deposits growth for fortnight ended October 25 will be announced on November 8.
Here are corporate actions taking place in the coming week:
Here are key global data points which will be announced this week:Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.