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Last Updated : Jul 12, 2020 10:00 AM IST | Source: Moneycontrol.com

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

The novel coronavirus will continue to remain in headlines till we get it under control or the vaccine.

Sunil Shankar Matkar

The market maintained its momentum for the fourth consecutive week ended July 10 despite rising COVID infections and FII-DII outflow. The mood of Dalal Street remained strong largely due to easing tensions at India-China border, the progress in vaccine and encouraging speech by the Prime Minister Narendra Modi at the India global week summit.

The BSE Sensex gained 1.6 percent for the week and the Nifty50 was up 1.5 percent, backed by banking & financials and IT stocks, while the BSE Midcap index climbed 0.8 percent and Smallcap rose 1.6 percent.

The market closed higher over its previous week's closing but overall it has been moving in a narrow range, which is largely an indication of limited cues which can propel the rally further. On the other side, as worst already priced in, the street is closely watching the management commentaries and that could be one of the key reasons that the market has not been seeing any major selling pressure, hence there could be further consolidation with an eye on COVID-19 infections count, experts feel.

Close

"Needless to say, global cues and updates related to COVID-19 will remain on the radar. We have been seeing a gradual recovery, following upbeat global markets and favourable local cues. However, the concern related to rising COVID-19 cases in India and aboard is still lingering, and that, in turn, affecting the pace of economic activities," said Ajit Mishra of Religare Broking who suggests limiting aggressive bets at current levels and awaiting clarity over the next directional move.

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

Earnings

As we enter the second week of the June quarter earnings season, more than 60 companies will declare their quarterly numbers. These include Infosys, Wipro, HDFC Bank, Britannia Industries, HCL Technologies and Mindtree.

Bandhan Bank, Federal Bank, ICICI Lombard General Insurance Company, Larsen & Toubro Infotech, L&T Finance Holdings, L&T Technology Services, Mahindra & Mahindra Financial Services, 5paisa Capital, Century Textiles, Delta Corp, Bajaj Consumer Care, Aditya Birla Money, Cyient, Granules India etc will also announce June quarter earnings next week.

Infosys, HCL Technologies

After TCS' numbers last week, now the street will closely watch Infosys' June quarter earnings (on July 15). The second-largest IT services provider is expected to report around 5 percent sequential decline in constant currency revenue with a cross-currency headwind of 20 bps in Q1 FY21, which could be impacted by retail and banking segments.

EBIT margin could decline 20-40 bps QoQ due to lower revenue and weak operating leverage, while the company is unlikely to provide any full year (FY21) guidance but its commentary about external environment, deal wins, any pricing pressure due to lockdown and vertical impact will be closely watched.

HCL Technologies, which will announce quarterly earnings scorecard on July 17, is likely to report around 8 percent sequential decline in constant currency revenue with around 200 bps fall in EBIT margin for the quarter ended June 2020.

Reliance Industries AGM

One of the key events next week is Reliance Industries' 43rd Annual General Meeting which will be held on July 15. From its last AGM in August 2019, the stock rallied 63 percent and hit a record high with a market cap close to Rs 12 lakh crore now, as the company successfully achieved its debt reduction plan well before its deadline of March 31, 2021, through stake sale in Jio Platforms and rights issue. The rally was also led by a strong performance of telecom business.

Now all eyes on the speech by billionaire Mukesh Ambani, who will address shareholders at 2 PM on Wednesday.

"Given by recent past records, RIL's AGM improves the mood of its stock price and given the huge weight in index, markets too are expected to remain on a higher side unless negative global cues spoil the RIL AGM party. This time it is expected that the AGM would garner maximum viewership given the slew of deals cracked for Jio Platforms," Jimeet Modi, Founder & CEO at SAMCO Securities & StockNote said.

Rossari Biotech and Bharat Bond ETF

Specialty chemicals manufacturer Rossari Biotech will open its nearly Rs 500 crore IPO for subscription on Monday. The price band of the issue, which will close on July 15, is set at Rs 423-425 per share.

It will be the first IPO in nearly four months after the listing of SBI Cards & Payment Services in March.

Also, the second tranche of Bharat Bond exchange traded fund (ETF) will open for bidding between July 14-17, with two more new ETFs maturing in 2025 and 2031.

The Bharat Bond ETF will be managed by Edelweiss AMC and the base size of the ETF issue is Rs 3,000 crore with a green-shoe option of Rs 11,000 crore.

Coronavirus

The country has witnessed a consistent rise in COVID-19 cases with over 25,000 cases coming out each day for the last 4 days.

India has so far recorded 8,20,916 cases, which includes 22,123 deaths. Maharashtra, Tamil Nadu, Delhi and Gujarat have reported the highest number of cases. India's recovery rate stands at 62.78 percent.

Globally, there have been over 1.2 crore confirmed cases of COVID-19. More than 5.6 lakh people have died so far.

FII and DII flow

FIIs, as well as DIIs, turned net sellers during last week raising concerns over the ongoing rally in the equity market which has been rising for four consecutive weeks. The benchmark indices gained 8 percent during four weeks, to hit a four-month high.


FIIs net sold Rs 634.85 crore worth of shares and DIIs Rs 2,609 crore of equities during the week, taking total net outflow so far in July to Rs 2,030.73 crore and Rs 655.20 crore respectively.

Also, the inflow into equity schemes of mutual funds was also not great during June 2020, which in fact has consistently been declining for past few months, coming in at Rs 241 crore against Rs 5,256 crore in June 2019.

Technical View

The Nifty50 closed 1.5 percent higher but overall it continued to move in a narrow range for fifth consecutive trading session on Friday to form Doji kind of pattern on daily charts and witnessed Spinning Top kind of formation on the weekly scale.

The consistent rangebound move after hitting four-month high and the formation of Spinning Top pattern indicated that the market could consolidate with a negative bias in coming session, and the major upside and downside from here on is likely if the index breaks its range of 10,600-10,850 decisively on either side, experts feel.

"Nifty formed a Spinning Top type candle pattern at the swing high of 10,847, as per week's closing. This pattern could be an alert signal for bulls at the higher levels. Normally such patterns at the important swing highs and followed by long bull candles are the candidates for the reversal patterns. Hence, a sustainable move only above 10,850 could open further upside in the market," Nagaraj Shetti, Technical Research Analyst at HDFC Securities told Moneycontrol.

The short term trend of Nifty is rangebound with weak bias and the beginning of decline from the highs is likely to bring bears into action, he said.

F&O Cues

The overall options data also indicated that the Nifty could be in a range of 10,500-11,000 in the coming week.

On the weekly expiry front, the options data indicates that the maximum open interest on the Put side has shifted to 10,000 strike. Fresh Put writing was seen at 10,700 strike which holds the second-highest open interest. The Call writers are scattered amongst 10,800, 10,900 and 11,000 strikes, where 10,800 holds the maximum open interest.

"The writing is seen in 10,900 Call strike of next series, which should check upsides in the coming week. On the lower side, the noticeable Put base is placed at 10,700 and 10,500 strikes. Hence, support should be seen at 10,600," said Amit Gupta of ICICI Direct.

Corporate Action and Macro Data

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

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CPI and WPI inflation for June will be released on July 13 and July 14 respectively, while Balance of trade for June will be announced on July 15. Deposit and bank loan growth for fortnight ended July 3, and foreign exchange reserves for week ended July 10 will be released on July 17.

Global Cues

Here are key global data points to watch out for next 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."

The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jul 12, 2020 10:00 am
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