Dalal Street Week Ahead | Top 10 factors that will keep traders busy

The market extended gains for yet another week ended October 28, though there was volatility and consolidation amid a mixed global mood and favourable domestic cues. Rising hope for a slowdown in the pace of rate hikes by the US Federal Reserve (the Fed), fall in treasury yields, and decent Q2 earnings supported the market.

The BSE Sensex jumped more than 650 points to close near the 60,000 mark, and the Nifty 50 rallied over 200 points to 17,787, while the Nifty Midcap 100 index gained 1 percent and the Smallcap 100 index was up 0.2 percent for the week.

Overall market mood in the coming week is expected to remain positive, with a focus on two key events — the special Monetary Policy Committee (MPC) meeting and the Federal Open Market Committee (FOMC) meet— along with corporate earnings and monthly Purchase Managers' Index (PMI) data. A bit of consolidation and volatility can't be ruled out given that the market is gradually inching higher, experts said.

"We may see further consolidation in the index, and expect a similar trend on the global front as well. After the recent outperformance, banking may take a breather and index majors from other sectors are likely to fill in the gap," Ajit Mishra, VP, Research, at Religare Broking said.

Participants should maintain their focus on sector/stock selection and utilise dips to add during consolidation, the market expert advised.

Here are the top 10 things that will keep traders busy next week:

1) Special RBI Meeting

The Reserve Bank of India (RBI) will conduct a special MPC meeting in the coming week on November 3, as the central bank failed to bring the CPI (Consumer Price Index) inflation below the 6 percent threshold for the third consecutive quarter. Some experts are looking at further rate hikes as the inflation jumped to 7.4 percent in September, from 7 percent in August.

Also read - MC Explains | What prompts RBI to call an off-cycle MPC meet on November 3

"The possibility of further rate hikes given the persistent inflation is something the market is pondering over with caution at this juncture," Dr. Joseph Thomas, Head of Research at Emkay Wealth Management, said.

2) The US Fed meet and global economic data points

Globally, the key event to watch out for is the Fed’s decision on interest rates, scheduled to be released on Wednesday night. Experts largely expect a fourth 75 basis point (bps) interest rate-hike to control inflation. The Fed may later slow down the pace of rate hikes provided there are encouraging data points.

"We expect a few more rate hikes from the Fed. We expect a pause once the data points to a slide in inflation. However, at least for the next few quarters, we don’t expect inflation to fall to a level where the Fed will be comfortable lowering rates," Kunal Valia of Waterfield Advisors said. He added that inflation had remained elevated and the broader economic environment, notably, the US and Europe labour markets, had proved resilient.

US 10-year treasury yields softened from 4.228 percent to 4.018 percent on a week-on-week basis amid hopes that the Fed may slow down the pace of rate hikes at the November meeting. The US Dollar index, which measures the value of the USD against the world's six leading currencies, also corrected from 112.01 to 110.67 on a weekly basis.

Here are the key global economic data points to watch out for:

3) Corporate Earnings

The corporate earnings season will pick up pace in the coming week with more than 350 companies releasing their numbers. Prominent names like the State Bank of India (SBI), Bharti Airtel, Larsen & Toubro (L&T), HDFC, Tata Steel, Adani Ports & Special Economic Zone, Sun Pharma, Tech Mahindra, UPL, Hero MotoCorp, HPCL, Britannia Industries, Cipla, GAIL India, Titan Company, and Power Grid Corporation of India (PGCIL) are all slated to announce their results.

Adani Enterprises, FSN E-Commerce Ventures (Nykaa), Punjab National Bank (PNB), Bank of Baroda (BoB), InterGlobe Aviation, Equitas Small Finance Bank, Fino Payments Bank, Motherson Sumi Wiring India, JK Tyre & Industries, Karnataka Bank, LIC Housing Finance, Macrotech Developers, Varun Beverages, Voltas, Adani Transmission, M&M Financial Services, Amara Raja Batteries, Adani Total Gas, Adani Wilmar, Bank of India (BoI), Devyani International, Vodafone Idea, Indian Bank, Raymond, Sapphire Foods India, Welspun Corp, Cummins India, Marico, Tube Investments of India, TVS Motor Company, and Wockhardt will also announce their quarterly earnings next week.

4) Auto Sales

The auto sector will be in focus as monthly sales numbers will be released next week. The Nifty Auto index has seen a good run up in the second half of October, especially after finding support at around 13,350-13,400 levels, rising 6.7 percent.

All the segments in the auto space, barring tractors, are expected to show an increase in volumes supported by the festive season.

"Channel checks indicate robust double-digit growth in passenger vehicles, commercial vehicles, and three-wheelers, and single-digit growth in two-wheelers, while tractor volumes are likely to decline on inventory de-stocking by dealers," Emkay said.

5) Economic Data Points

On the domestic front, fiscal deficit and infrastructure output data for the month of September will be released on Monday.

The S&P Global Manufacturing PMI data for October will be declared on Tuesday, while the S&P Global Composite and Services PMI data for October will be released on Thursday.

In September, the S&P Global India Manufacturing PMI dropped to a three-month low of 55.1, from 56.2 in August, but factory activity increased for the 15th consecutive month despite a weak global environment. The services industry in India expanded at the weakest pace since March, as the S&P Global India Services PMI fell to 54.3 in September from 57.2 in August, but the expansion continued for the 14th straight month.

Data on bank loan and deposit growth for the fortnight ended October 21, and foreign exchange reserves for the week ended October 28, will be out on Friday. India's foreign exchange reserves for the week ended October 21 fell by $3.85 billion to $524.52 billion, the lowest level since July 2020.

6) FII Flow and Rupee

The FII (foreign institutional investor) inflow turned strong in the passing truncated week as they net bought nearly Rs 4,000 crore worth of shares, reducing the total monthly outflow to around Rs 4,600 crore from Rs 10,000 crore seen in the first fortnight of the current month.

In the week gone by, DIIs (domestic institutional investor) have taken some profit off the table, but they are still big net buyers for the month to the tune of more than Rs 10,000 crore worth of shares, providing good support to the market.

Overall, FII flows will be closely watched due to the volatility in flows in the recent past amid aggressive policy tightening fears by the Fed, and the strengthening US dollar.

Meanwhile, the Indian Rupee appreciated to close at 82.47 against the US Dollar last Friday, after hitting a record low of 83.29 the previous week due to weakness against the greenback.

7) IPOs

The primary market will be in full swing next week as four companies will launch initial public offerings (IPO) worth around Rs 4,500 crore. Electronic sub-systems and cable harness manufacturer DCX Systems will open its Rs 500-crore public issue for subscription on October 31. The offer will close on November 2, with a price band of Rs 197-207 per share.

Click Here To Read All IPO Related News

Financial services firm Fusion Micro Finance will be launching its IPO on November 2, to raise about Rs 1,100 crore. It will close on November 4. The price band for the IPO has been fixed at Rs 350-368 per share.

FMCG company Bikaji Foods International, as well as Global Health, the operator of hospitals under the Medanta brand, will launch their IPOs between November 3-7.

Global Health is planning to raise around Rs 2,200 crore through its public issue at the upper-end of the price band of Rs 319-336 per share, while Bikaji Foods will announce its price band on Monday.

8) Technical View

The Nifty 50 has formed a small-bodied bullish candlestick pattern on the daily as well as weekly charts, and faced a lot of challenges at the 17,800 mark in the passing Diwali week, and found support at 17,600. If these level get decisively surpassed, then the index is likely to reclaim 18,000-18,100 levels in the coming days. Holding on to these levels in the following sessions can help the index move towards record highs, experts said. The index has been trading above all key exponential moving averages (EMA), which may support the momentum.

"Nifty has been consolidating around the 17,800 zone for the last four trading sessions, after witnessing a sharp up-move of more than 800 points in eight sessions," Siddhartha Khemka, Head, Retail Research at Motilal Oswal Financial Services, said.

Strong traction in domestic earnings, FIIs turning net buyers, and positive domestic cues can help the Nifty reach 18,000-18,200 levels over the next few days, he feels.

9) F&O Cues

On the Options front, we have seen maximum call open interest at 18,200 strike, followed by 17,800 and 18,000 strikes, with maximum call (added, please see) writing at 18,200 strike, then 18,500 and 18,300 strikes.

Maximum put open interest was seen at 17,700 strike, which can act as a support next week, followed by 17,500 strike, with maximum put (added, please see) writing at 17,300 strike, then 16,900, 17,700 and 17,800 strikes.

The option data indicated that the Nifty 50 may trade in the range of 17,500-18,200 in the coming days.

"Nifty rollovers were seen at 76 percent, which is in line with the previous three months’ average, and on weekly expiry, put writing was seen at 17,700, thereby adding more than a lakh contracts, which is the immediate support built up for the index," Shilpa Rout, Derivatives Lead Analyst at Prabhudas Lilladher, said.

Call writers’ exposure lies at 17,800-18,000 strikes, with over a lakh contracts each. These are the immediate targets for the index as well, she said.

The Put-Call ratio is way above 1 now, which gives comfort to the bulls, she feels. If Nifty sustains 17,700 levels, then it will see a rally till 18,200, whereas a breach below 17,650 will slide towards 17,200 levels again, she adds.

Falling volatility may also support the momentum in the short-term, Rout said. India VIX, which measures the expected volatility in the market, fell nearly 8 percent to 15.92 levels.

If the fear index falls below 15 and sustains, there could be more stability in the market and support to bulls.

10) Corporate Action

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

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