Week Ahead: What’s in store for Sensex, Nifty in upcoming truncated Diwali week?

The Nifty ended at fresh record closing high on Friday as investors cheered macro data, earnings and telcos deals. The rally was driven by banks, telecom and metals stocks, and Reliance Industries. But the broader markets underperformed benchmarks, ending flat.

The 50-share NSE Nifty rose 71.10 points or 0.70 percent to 10,167.50, after hitting a fresh record high of 10,191.90 intraday.

The 30-share BSE Sensex rallied 250.47 points or 0.78 percent to 32,432.69 despite weak market breadth. The index is still 254 points away from its record high of 32,686.48 hit on August 2.

"Corporate results globally are going to be better, the minutes of the last Fed meeting were also dovish. With domestic investors dipping their toes in the equity markets at an accelerated pace, the process of making new highs in the markets is likely to continue beyond the immediate highs," V K Sharma, Head - PCG & Capital Market Strategy, HDFC securities said.

For the week, the Nifty and Sensex rallied 1.9 percent each, continuing upmove for the second consecutive week.

The upcoming week shall be a truncated one, owing to the two-day Diwali break on October 19 and October 20. In the three trading days, the Street could watch out for reactions to Reliance Industries’ Q2 numbers along with slew of other earnings such as Bajaj Auto, Axis Bank and ACC, among others. Along with them, host of other corporate factors and macro data could keep the market on its feet.

Investors will watch out for reactions to the results of Reliance Industries, an index heavyweight, which declared the numbers late on Friday evening. It reported consolidated profit at Rs 8,097 crore for the quarter ended September 2017, a growth of 12.8 percent compared to year-ago quarter but registered a 10.8 percent decline from previous quarter. Numbers except bottomline beat analysts’ expectations.

Revenue from operations grew 5 percent sequentially and 16.5 percent year-on-year to Rs 95,085 crore in second quarter of FY18, driven by growth across segments - petrochemical, refining, organised retail and digital businesses.

Over 60 BSE companies will declare their earnings

The Street will look for cues from the ongoing earnings season, which could set the tone for the market in the upcoming week. As it is a festive-laden truncated week, the number of companies declaring their September quarter results is less in number.

However, there still are some major ones lined up. For instance, 63 companies on the BSE will be declaring their earnings between October 14 and October 21, 2017. The major names among them include Wipro, NIIT Technologies, ACC, Axis Bank, Bajaj Auto, Atul, and ICICI Lombard, among others.

Godrej Agrovet, the diversified agro-business company, will make a Dalal Street debut on Monday, October 16, 2017. The final issue price is fixed at Rs 460 per share, at the higher end of price band.

Analysts expect the listing price to be in Rs 550-600 per share range, given the overwhelming response to the issue and market demand. The Rs 1,157-crore initial public offer was oversubscribed 95.41 times on October 6, the last day of bidding.

Investors will watch out for board meetings and stock-related developments from corporates over the weekend.  VA Tech Wabag could be in focus after the National Company Law Tribunal recalled the initiation of insolvency proceedings on the company. Additionally, apart from the earnings expectations over the next week, companies such as Hindustan Rectifiers and Pokarna could be on the radar of investors ahead of a rights issue and a stock split, respectively.

The Street will continue to monitor the macroeconomic data, which could set the tone for the market. Globally, trends have been on the positive side in the past few sessions, which have been responsible to drive up markets, including India. Back, home, the Street will be watching out for wholesale inflation that will be released next week.

Globally, Europe and China will be declaring data on the inflation front, CPI inflation that could keep investors on the fence ahead of that along with GDP from China later in the week. Additionally, the US would also declare data on industrial production and housing trend, among others.

The Nifty last week created history as the index surpassed its previous record high of 10,178 and hit a fresh all-time high of 10,191.90. The index made a bullish candle on the daily charts for second consecutive day in a row.

The index which now trades above its crucial short-term moving averages is all set to claim new highs towards 1o,200-10400 in the upcoming sessions. Traders should remain long with a stop below 9977 levels.

In the upcoming week, experts believe that momentum indicators i.e. the RSI both on the weekly and daily charts is gaining momentum. This suggests that upside momentum is likely to continue.

"Broadly, we are of the opinion that for current week 9,950 remains crucial support for the ongoing up move. Hence, as long as the Nifty holds the mentioned level, we are likely to witness upside momentum. In such a scenario, there is high probability that Nifty may test 10350-10450 levels in couple of weeks," Arpit Jain, AVP at Arihant Capital Markets said in a statement.

On Friday, put OI of 71.54 lakh contracts was seen at strike price 10,000, which will act as a crucial base for the index in October series, followed by 9,900, which now holds 55.48 lakh contracts and 9,800 which has now accumulated 53.13 lakh contracts in open interest.

Meanwhile, maximum Call open interest (OI) of 39.89 lakh contracts stands at strike price 10,200, which will act as a crucial resistance level for the index in the October series, followed by 10,000, which now holds 31.66 lakh contracts in open interest, and 10,300, which has accumulated 28.89 lakh contracts in OI.

Positive global cues, apart from good macro data back home, drove up the markets in the past few sessions. US markets were at a record high, while markets in Europe and Asia too were on the higher side with some bouts of profit booking.

Geopolitical tensions due to North Korean crisis may keep investors cautious. The rogue nation on Friday raised the threat to launch a ballistic missile toward the US Pacific territory of Guam. It still hasn't followed through on another threat: to conduct an atmospheric hydrogen bomb test.

The new Guam threat comes ahead of planned US-South Korean joint maritime exercises scheduled to start next week in the Asia-Pacific region. A Navy statement issued Thursday indicated exercises will include the aircraft carrier USS Ronald Reagan and at least two destroyer vessels.

Foreign institutional investors (FIIs) sold shares worth Rs 1,698.5 crore, while domestic institutional investors bought shares worth Rs 1,590.13 crore in the Indian equity market on Friday.

As far as monthly trends are concerned, FIIs have been net sellers, but support has been visible from domestic institutional investors. As of October 13, FIIs have net sold Rs 6,476.58 crore worth of shares, while DIIs purchased Rs 7,050.10 crore.