Next week’s events
Next week’s events for the Indian market: manufacturing PMI statistics, July GST collections, major earnings etc.
On July 28, after a week of range bound movement, the market reversed gains for the first time in five weeks. Mixed Q1 profits, rising oil prices, FII outflow, rising US currency and bond yields, and a probable US Federal Reserve rate hike after a 25-bps increase in July policy meeting weighed on mood.
Experts don’t worry since they think it’s just a rush to book profits following a big run-up and stable market breadth. Corporate results, manufacturing indicators, global economic data, oil prices, and monthly auto sales will dominate sentiment this week, as consolidation continues.
After a 1,300-point run in four weeks, the BSE Sensex plummeted almost 500 points to 66,160 and the Nifty50 fell about 100 points to 19,646. However, the Nifty Midcap 100 and Smallcap 100 indices rose 1.5 percent and 0.6 percent, outperforming the frontrunners.
“We expect sectoral rotation in the market, while the index is likely to remain in the consolidation zone with the ongoing result season,” said Motilal Oswal Financial Services Head of Retail Research Siddhartha Khemka. “Global and local manufacturing data will be watched by the market next week.”
Domestic Economic Data
S&P Global Manufacturing PMI data for July will be issued on August 1, followed by Services and Composite PMI data on August 3. Market participants will focus on these numbers.
In June, India’s manufacturing sector PMI decreased to 57.8 from 58.7, but demand for Indian-made items remained strong. The services sector PMI dropped to 58.5 from 61.2.
On July 31, we’ll get June fiscal deficit data, and on August 4, we’ll get July 28 foreign exchange reserves.
The July 26 US Federal Reserve interest rate decision will move markets. Most worldwide analysts expect the Fed to raise the Fed funds rate by 25 bps in July and then stop. As inflation remained above 2 percent and the labor market tightened, most Fed officials supported a rate move.
US inflation dipped to 3% in June from 4% a month earlier. Despite significant base effects, it fell below 4% for the first time in two years. Core inflation fell to 4.8%.
The core at 4.8 percent is still higher than the long-term average of 3.7 percent, but the war against inflation is mostly finished. Disinflation is entrenching. Sandip Bansal, Associate Director at ASK Investment Managers, suggested the Fed may rise once more and then pause.
On July 27 and 28, the European Central Bank and Bank of Japan will publish their interest rate decisions, and global markets will closely watch the first advance projections for US GDP growth for the April-June quarter of 2023 on July 27.
Global Economic Data Points
Globally, investors will watch July manufacturing and services data. US unemployment, non-farm payrolls, and weekly jobs data will help the Federal Reserve decide what to do in September.
Bank of England’s August 3 interest rate decision and Bank of Japan’s August 2 monetary policy meeting minutes will also be watched. To combat high inflation, experts predict the Bank of England to hike rates by at least 25 bps.
Since India is a net oil importer, rising crude prices oblige us to spend more money to buy it, which increases fiscal pressure, inflation, and growth worries.
Local Economic Data
August 1 marks the announcement of July GST collections. S&P will provide manufacturing PMI statistics for major countries, including India.
Services PMI data will be issued this week.
Q1 Results
Maruti Suzuki India, Power Grid Corporation of India, Adani Transmission, Adani Green Energy, Titan Company, Bharti Airtel, Adani Enterprises, Sun Pharmaceutical Industries, InterGlobe Aviation, Ambuja Cements, Gail (India), Bosch, UPL, HPCL, Dabur India, Eicher Motors, Zomato, State Bank of India, Mahindra & Mahindra, Britannia Industries, BHEL, and Delhivery will release their earnings this week.
Companies have reported mostly in-line figures, with some IT industry disappointments.
“With the markets trading at valuations above long-term averages, the key focus would be on the delivery of earnings,” said Shibani Sircar Kurian, senior EVP and Head – Equity Research, Kotak Mahindra Asset Management Co.
Public issues looming
The primary market has been busy with public issues, and the pattern is likely to continue this week.
Concord Biotech’s public issue opens for subscription on August 4, while SBFC Finance’s opens on August 3.
SME firms Oriana Power and Vinsys IT Services will offer their public issues for subscription on August 1, while Yudiz Solutions will open on August 4.
Five Dalal Street IPOs next week will also generate primary market activity. The late big bull Rakesh Jhunjhunwala’s RARE Enterprises-backed Concord Biotech IPO will open on August 4, while SBFC Finance’s Rs 1,025-crore public offering will open on August 3.
In the SME division, Oriana Power and Vinsys IT Services will begin bidding on August 1 and terminate on August 3 and 4, respectively, while Yudiz Solutions will open for subscription on August 4. Zeal Global Services’ public offering ends August 1.
Innovatus Entertainment Networks will list on August 4 and Yasons Chemex Care on August 3.
Crude oil
Brent oil futures, the worldwide benchmark, rose 4% for the fifth week in a row on lower supply, signs of stronger global economy and demand, and hopes that central banks may be reaching the end of policy tightening.
Mohammed Imran, research analyst at Sharekhan by BNP Paribas, is positive on crude oil and expects the OPEC+ meeting on August 4 to announce the continuation of voluntary output reduction.
Technical view
Experts expect the Nifty50 to consolidate near 19,500-20,000 levels in the coming days, since breaking either side can offer the index direction.
Master Capital Services senior vice president Arvinder Singh Nanda says investors will “buy on dip” as market mood remains strong. He believes any collapse near 19,500-19,450 to be an opportunity to establish long positions for 19,870 and 20,000.He predicted a short-term negative reversion if 19,380 falls decisively.
India VIX & F&O
On the Options front, the maximum Call open interest was at 19,800 strike, followed by 20,500 and 19,700 strikes, with meaningful Call writing at 20,200 and 20,500 strikes. The maximum Put open interest was at 19,600 strike, followed by 19,500 strike, with Put writing at 19,600 and 19,500 strikes.
The foregoing data showed that the Nifty may find support at 19,600-19,500 and near-term resistance at 19,700-19,800, which is necessary for a rise toward 20,000.
India VIX, the fear index, recorded a new historic closing low of 10.13 levels, down 11.75 percent, after a sandwich-like candlestick pattern in previous weeks, signifying calm markets.
Auto Sales
Automakers will report July wholesale sales on August 1. Dalal Street investors will watch the sales trend in the next months. Analysts expect it will continue.
Global Markets
No worldwide triggers exist after the US Federal Reserve’s policy decision. Early traders will follow worldwide markets.
FII flows
Foreign institutional inflows decreased last week after high early July flows. Foreign portfolio investors net invested Rs 468 crore in local markets during the week ending July 28, down from Rs 7,804 crore the week before.
Thus, their strategy will be vital to market momentum and indexes rising.
Company Action
Many equities will trade ex-dividend this week. Larsen & Toubro, a significant one, will trade ex-date for Rs 24 dividend payout on August 2.
Hawkins Cookers and United Breweries will trade ex-date for Rs 100 and Rs 7.50 dividends, respectively, on August 2.
AGMs
Several corporations had annual general meetings this week. Titan, Lupin, Delta Corp, DLF, Mahindra & Mahindra, Union Bank, and others will hold AGMs next week.
Technical Indicators
Technical analysts say benchmark Nifty 50 has created a new lower high, indicating a market downturn.
According to HDFC Securities technical expert Nagaraj Shetti, any upside bounce could lead to selling pressure.
Rupak De, senior technical analyst, LKP Securities, expects no directional down move till the Nifty breaks below 19550.
Below 19550, the index may fall below 19300. High-end resistance is 19700.
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