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Last Updated : Jul 26, 2020 08:11 AM IST | Source: Moneycontrol.com

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

FIIs were net buyers during entire week, having bought to the tune of Rs 7,792 crore, whereas DIIs were net sellers for the entire week, having sold worth Rs 5,323 crore.

Sunil Shankar Matkar

Bulls remained in control of the Dalal Street for the sixth consecutive week despite the rising number of COVID-19 cases in the country. The BSE Sensex and Nifty50 gained 3 percent and 2.7 percent respectively during the week ended July 24, driven by banking & financials, IT, infra and auto stocks.

A better-than-expected June scorecard for India Inc (so far), positive FII flows as well as progress in the development of a vaccine kept the party going on D-Street. Positive global cues after a large $858 billion spending package announced by European Union also added to the rally. However, fresh US-China tensions and rise in US jobless claims capped gains.

The broader market underperformed the benchmarks as the BSE Midcap and Smallcap indices gained over a percent each during the week.

Close

Given the liquidity boost, the momentum might continue going forward, experts feel, but they advised remaining cautious as benchmark indices rallied more than 12 percent in six straight weeks, and expect some volatility in the coming week partly due to expiry of July futures & options contracts. On coming Monday, the market will first react to ICICI Bank and ITC earnings.

"Currently, the market is trading ahead of fundamentals. Based on valuation terms, the market is currently above the pre-COVID level. It may be high due to low actual earning of FY20 and lack of growth in FY21. This may be also high due to the performance of a few sets of stocks with high weightage. Still, on a historical basis, we are in the bubble region in terms of valuation and it is advisable to be cautious and place assets in safe categories and sectors," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

Ajit Mishra, VP Research at Religare Broking said in the coming week, schedule derivatives expiry of July month contracts combined with the on-going earnings season would keep the volatility high. Apart from that, global cues and updates related to the COVID-19 will also be on the participants’ radar, he added.

FIIs were net buyers during the entire week, having bought to the tune of Rs 7,792 crore, whereas DIIs were net sellers for the entire week, having sold worth Rs 5,323 crore.

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

Earnings

More than 560 companies will release their quarterly earnings scorecard which also included some March quarter earnings as well but the extended deadline to announce March quarter earnings will end on July 31, while June quarter earnings season will continue.

Reliance Industries, State Bank of India, Bharti Airtel, Kotak Mahindra Bank, HDFC, Maruti Suzuki India, Tech Mahindra, Dr Reddy's Laboratories, Nestle India and IOC will be key earnings to watch out for.

Aptech, Bharat Electronics, Escorts, Havells India, India Cements, Bharti Infratel, Marico, Pfizer, United Spirits, Hexaware Technologies, IDBI Bank, IDFC First Bank, NIIT Technologies, RBL Bank, UltraTech Cement, Ceat, Colgate-Palmolive, GSK Pharmaceuticals, InterGlobe Aviation, Manappuram Finance, TVS Motor Company, Dabur India, Laurus Labs, Max Financial Services, Torrent Pharmaceuticals, JSW Energy, Tata Chemicals, TeamLease Services among others will also release quarterly earnings.

Mindspace REIT IPO

Mindspace Business Parks REIT will open its Rs 4,500-crore initial public offering for subscription on July 27.

The price band has been fixed at Rs 274-275 per share for the public issue which consists a fresh issue of up to Rs 1,000 crore and an offer for sale of up to Rs 3,500 crore by selling unitholders.

Mindspace already raised Rs 2,643.74 crore from strategic and anchor investors, which is 58.74 percent of the total issue size of Rs 4,500 crore, ahead of its issue opening. The last day for subscription would be July 29.

Yes Bank FPO Shares Listing

Shares issued in the follow-on public offer by Yes Bank will be listed on July 27. The share price corrected nearly 49 percent in the last two weeks, which experts feel was warranted given the issue price discount to the market price.

The stock price closed at Rs 13.65 on July 24, falling consistently from July 10 (Rs 26.65 closing price on July 9), while the final issue price has been fixed at Rs 12 per share, at which the bank received maximum bids for its public issue during July 15-17.

Yes Bank raised around Rs 14,270 crore through its FPO, which was lower than actual issue size of Rs 15,000 crore.

Reliance Industries

The key factor to watch out for in the coming week would be Reliance Industries as it would declare its June quarter earnings on July 30. The stock rallied 50 percent in last two months as Reliance became net debt-free well ahead of its target of March 2021, and gained over 16 percent in last one week.

Telecom segment remains the key point to watch out for as brokerages expect average revenue per user at around Rs 135-137 per month with strong EBITDA and profit on a sequential and yearly basis, while on the refining front, Motilal Oswal feels RIL is expected to report GRM at $9.0 per barrel (against $8.9 a barrel in Q4FY20) helped by inventory gain as well as discounts offered to Indian refiners at the beginning of the quarter.

Coronavirus Risk Rising

The country has witnessed a consistent rise in COVID-19 cases with over 40,000 cases coming out each day for the last 4 days.

India has so far recorded 13,36,861 cases, which includes 31,358 deaths. Maharashtra, Tamil Nadu, Delhi and Karnataka have reported the highest number of cases. India's recovery rate stands at 63.5 percent.

Globally, there have been over 1.59 crore confirmed cases of COVID-19. More than 6.43 lakh people have died so far.

 

On the vaccine front, the progress has been at a fast pace with three global companies - Oxford University-AstraZeneca, Sinovac and Moderna Inc - reaching the final stage. Meanwhile in India, Bharat Biotech in collaboration with the National Institute of Virology and the Indian Council of Medical Research have also begun human trials of COVAXIN drug.

Auto Sales

Auto stocks - Escorts, Bajaj Auto, Hero MotoCorp, TVS Motor, M&M, Tata Motors, Eicher Motors, Ashok Leyland etc - are expected to be in focus on coming Friday as July month's sales data will be released by companies on Saturday.

So far, especially after re-opening of the economy in all non-containment zones, there has been an improvement in tractor and two-wheeler segment, and to some extent in passenger vehicles, but commercial vehicle space remained weak.

Technical View

The Nifty50 with a gain of 2.7 percent during the week has seen bullish candle formation on the weekly charts, negating the indecisive pattern formations in previous two weeks, which all indicated that bulls still have upper hand at Dalal Street; though the index has been moving in a range of Wednesday's trade when there was Hanging Man pattern formed.

Experts feel the short to medium trend remains positive but in the near term, there could be some consolidation given the consistent run-up in equities.

"A long bull candle was formed in this week, as per weekly timeframe chart, after the formation of hanging man type candle pattern of last week. Most importantly Nifty formed unfilled opening weekly gap with this candle. This is rare formation and previously in the last two occasions, such weekly opening upside gaps have been filled subsequently in the next week, by intra-week decline. Hence, there is a possibility of profit booking in the next week," Nagaraj Shetti, Technical Research Analyst at HDFC Securities told Moneycontrol.

"The short term trend of Nifty is rangebound with positive bias. Having placed at the hurdle of 11,250, there is a possibility of minor downward correction by early next week. A sustainable move above 11,250-11,300 levels could pull Nifty towards 11,550-11,600 in the next 1-2 weeks. Important lower support is placed at 11,100-11,050," he said.

F&O Expiry

The July futures & options contracts will get expired on coming Thursday and traders will rollover their positions in the next month. Hence, there could be some volatility while the options data suggested that the index could move in the range of 11,000-11,350 in coming days, experts feel.

On monthly option front, maximum Put open interest was at 11,000 followed by 10,000 strike, while maximum Call open interest was seen at 11,500 followed by 11,200 strike. Call writing was seen in 11,200 than 11,300 strike while Put writing was seen at 11,100 then 11,000 strike.

"The coming week has monthly expiry. Thus, the trend will be decided by the closure of Call writing positions, which are placed at the 11,200 strike. Some positions have already shifted to 11,500 strike, which will remain a target for coming weeks," said Amit Gupta of ICICI Direct.

Chandan Taparia of Motilal Oswal feels maximum Put open interest at 11,000 mark suggests medium-term positional support at 11,000 mark while fresh Put writing at 11,100 and 11,000 strikes hints immediate key support at 11,000 zone.

Corporate Action

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

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Infrastructure output and fiscal deficit data for June will be released on Friday, while on same day, deposit and bank loan growth for fortnight ended July 17, and foreign exchange reserves for week ended July 24 will also be announced.

Global Cues

The two-day meeting of the Federal Open Market Committee (FOMC) will be concluded Wednesday tonight. The interest rate is expected to remain steady at 0-0.25 percent, but the commentary will be closely watched by the markets globally as the June meeting had indicated that the federal funds rate is likely to stay at these levels until the economy gets back to normal.

Here are other key global data points to watch out for in the coming week:

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Disclaimer: "Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol."
First Published on Jul 26, 2020 08:11 am
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