70 companies will release their quarterly scorecard next week
The market retained uptrend for the second consecutive week ending October 9, backed by positive global cues, a strong start to the September quarter earnings season, and dovish commentary by RBI. Stimulus hopes in India and the US also lifted sentiment.
The Nifty50 climbed 497.25 points or 4.36 percent to 11,914.20, the highest closing level since February 20 this year, while the BSE Sensex rallied 1,812.44 points or 4.68 percent to 40,509.49, but the broader markets underperformed benchmark indices, closing on a flat note.
The rally, which is already on a seven-day streak, may extend further in case the IT companies with earnings and government with stimulus surprise the street. On the other hand, there could be some consolidation given the market is trading at its peak, experts feel.
"Markets are expected to continue their rally in the short-term in anticipation of further measures from the Indian government to provide a bonanza of stimulus ahead of the festive season. Upcoming hearing of moratorium is also expected to drive the domestic market next week," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
Ajit Mishra, VP - Research at Religare Broking feels the recent buoyancy in the banking, financials and IT majors could help the Nifty to retest 12,100 zone ahead. He suggests sticking to the index majors citing the recent underperformance from the broader indices and an expected rise in volatility.
Here are 10 key factors that will keep traders busy next week:
The full-fledged September quarter earnings season will begin from the coming week as 70 companies will release their quarterly scorecard. Overall experts feel the numbers could be better than June quarter given the easing lockdown pressure.
Key earnings to watch out for would be HDFC Bank, Infosys, Wipro, HCL Technologies, Mindtree, Avenue Supermarts, Cyient, Shalby, Karnataka Bank, Tata Steel Long Products, Aditya Birla Money, Tata Elxsi, Tata Steel Bsl, Hathway Cable, South Indian Bank, Trident, Bajaj Consumer Care, Federal Bank, IIFL Securities and Tata Communications.
Infosys, Wipro and HCL Technologies
Overall IT earnings are expected to be strong on the sequential basis given the ramp-up in deals, rising spends by clients and pick in execution along with margin expansion amid cost measures.
TCS already kicked off earnings season on a strong note with better-than-expected numbers along with large Rs 16,000-crore share buyback. Hence, the street will closely watch Infosys, Wipro, HCL Technologies, Mindtree and Cyient numbers.
HCL Technologies is likely to deliver around 5.5 percent sequential growth dollar revenue followed by Infosys (around 4 percent) and Wipro (around 3.5 percent). Wipro is also going to consider the share buyback proposal.
The Supreme Court is scheduled to hear the loan moratorium case on October 13, which is very crucial for banks. Banks, which were reeling under pressure due to fear of additional NPAs, are in a good mood after the Finance Ministry on October 2 had decided to waive compound interest (interest on interest) charged on loans of up to Rs 2 crore for a six-month moratorium from individual borrowers as well as MSMEs.
The Reserve Bank of India in its affidavit filed in the court on October 10 said a long moratorium period could impact credit behaviour of borrowers and increase the risks of delinquencies post resumption of scheduled payments. Also any waiver of interest on interest would entail significant economic costs which can not be absorbed by the banks and would have huge implications for the depositors and the broader financial stability, said the central bank, reports PTI.
State-owned defence major Mazagon Dock Shipbuilders and UTI Asset Management Company are going to debut on bourses on October 12 after fixing issue price of Rs 145 per share and Rs 554 per share respectively.
Mazagon Dock is expected to list with a bumper premium of more than 50 percent given the hefty 157 times subscription to IPO and attractive valuations with the strong order book. However, UTI AMC could list with flat to discount to issue price due to tepid response to its IPO and consistent outflow of money from AUM.
Hyderabad-headquartered oil and gas pipeline infrastructure service provider Likhitha Infrastructure is also expected to list shares on October 15 after closing the Rs 61-crore public issue which was subscribed 9.5 times.
The industrial production data for August and CPI inflation for September will be released on Monday, while WPI inflation for September will be announced on Wednesday.
The industrial production in July had contracted 10.4 percent, which was better than 15.7 percent in June. Economists expect around 6-8 percent contraction in August while CPI inflation is expected to be elevated at around 6.8-7 percent in September against 6.69 percent in August.
Among others, the balance of trade data for September will be released on Thursday and foreign exchange reserves for week ended October 9 on Friday.
After witnessing a peak of nearly 98,000 infections on each day basis on September 17, the daily case count has been declining and fell below 80,000 mark. The recovery rate also jumped to around 85.8 percent this weekend against nearly 84 percent last week and the fatality rate also improved to 1.53-1.54 percent from around 1.56 percent last week, which all seems to be encouraging and boosting market sentiment.
Total infections count crossed 70 lakh with more than 1.07 lakh deaths (as per Johns Hopkins University) so far, while globally there are more than 3.7 crore infections with around 10.7 lakh deaths.
Experts are largely worried about the second wave due to the beginning of the winter season. On the vaccine front, expectations remain the same that the vaccine could get finalised in the first quarter of 2021 as several vaccines are in Phase 2 and Phase 3 of clinical trials.
The Nifty50 gained 80 points on Friday and 4.4 percent for the week, forming bullish candle on the daily as well as weekly charts, which indicated the positive momentum.
The index has also taken out the high of the recent 'Doji' pattern formed on October 8, which negated the sign of bearish reversal. The index has given bullish crossover as 100 DMA crossed 200 DMA from below, which is also signalling strong bullish momentum to continue in mid-term which can even push the index towards 12,150 mark and higher, experts feel.
"At the same time benchmark index has also formed moving average crossover pattern of 5*20 SMA on the monthly time frame and whenever this setup takes place Nifty trades in a new trading zone for a long term which suggests it's buy on dip market for long term investors as well," Shabbir Kayyumi, Head of Technical Research at Narnolia Financial Advisors told Moneycontrol.
But as markets surged almost 1,000 points in the last two weeks, majority of the oscillators and indicators are placed in the overbought zone and one correction as part of the cooling-off process cannot be ruled out, he said.
The option data indicated that the Nifty can see resistance up to 12,100 and the immediate support is placed at around 11,700 mark, which could be its immediate range.
On option front, maximum Put open interest was seen at 11,500 followed by 11,000 strike, while maximum Call open interest was seen at 12,500 followed by 12,000 strike. Marginal Call writing was seen in 12,400 and 12,200 strike while Put writing was seen at 11,500 then 11,800 strike.
"A fresh addition was seen at 12,500 strike, which holds the maximum open interest of 32 lakh contracts. But, we haven't seen any unwinding in the 11,900 strike, which holds the second-highest open interest. So, in the coming week if the Nifty sustains above 11,900, then we can expect some short-covering move towards 12,000 and 12,100 levels," Nilesh Jain of Anand Rathi told Moneycontrol.
"So the overall option data indicates a tug of war between 11,900 Call and Put writers and expect the Nifty to oscillate in the 11,700– 12,100 range in the coming week," he said.
Here are key corporate actions taking place in the coming week:
Any developments over US fiscal stimulus and US presidential elections would be key to watch out for. Apart from that key global data points to watch out for in the coming week would be: