Dalal Street
Dalal Street -Market is projected to be rangebound and volatile this week, with attention on corporate results, Israel-Hamas war developments, and central bank meetings in this week.
Following a sharp fall in recent weeks bears smashed the benchmarks to June levels in the week ended October 27 due to rising West Asian unrest, FII selling in India, rising US bond yields, and weak corporate earnings.
With wounds still fresh, the market is projected to slow within a range in the week commencing October 30, focusing on corporate earnings, Israel-Hamas war developments, and central bank meetings, especially FOMC.
All sectors were in the bear zone as the BSE Sensex fell 1,615 points to 63,783 and the Nifty 50 fell 495 points to 19,047. The Nifty Midcap 100 and Smallcap 100 fell 3% and 2%.
Here are the 10 biggest factors to watch next week.
Global Economic Data, FOMC Meeting
The Federal Reserve’s Federal Open Market Committee (FOMC) meeting on November 1 and Fed head Jerome Powell’s comments will be closely watched by global markets.
Most experts expect the Fed funds rate to remain at 5.25-5.50 percent, but Powell’s comments about the likely last rate hike by year-end (as suggested by the September meeting minutes) and the pause in rate hike cycle are important. The CPI is at 3.7 percent (still above its 2 percent target), economic data is strong, and the labor market is resilient.
The US dollar index closed at 106.58, up from 106.16 due to safe-haven demand and signs of the US economy’s resilience, while the 10-year bond yields cooled to 4.84 percent from 4.93 percent the week before.
Participants will also watch Bank of Japan and Bank of England policy sessions on October 31 and November 2.
Global investors will closely follow the US unemployment rate, non-farm payrolls, manufacturing and services PMI for October, factory orders, and Europe’s Q3CY23 GDP growth rate projections.
Israel-Hamas War
The increasing conflict between Israel and Hamas, which increased concerns about global growth and oil prices, will remain a hot topic worldwide. War-led safe-haven demand drove COMEX gold prices above $2,000 per troy ounce last week.
On Saturday, Israeli Prime Minister Benjamin Netanyahu declared the start of the second stage of the battle against Hamas to destroy their Gazan group after escalating ground operations and bringing hostages home.
Since the fighting has not affected oil supplies, oil prices stayed below $95 a barrel this month. US economic statistics also boosted oil prices.
“We expect crude oil prices to remain volatile for the day and will command risk premiums from prevailing geopolitical concerns in the Middle East,” Sharekhan by BNP Paribas research analyst Mohammed Imran said. Brent crude prices decreased 1.82 percent to $90.48 a barrel last week.
Auto Sales
Domestically, market participants will watch October auto sales statistics at the start of November. Most experts predict corporations to produce solid figures over the festive season, which ends in Diwali. Company product releases, growing production, and robust economic growth are also helping sales. In September, passenger vehicle sales rose 19% and two-wheeler sales 22% over previous year.
Domestic Economic Data
Fiscal deficit and infrastructure output figures for September will be revealed on October 31, and S&P Global Manufacturing PMI for October will be released on November 1.
The October S&P Global Services and Composite PMI, bank loan and deposit growth for the week ended October 20, and foreign currency reserves for the week ended October 27 will be revealed on November 3.
September manufacturing activity was strong for the 27th straight month, while services output rose sharply to its highest level in more than 13 years.
Q2 earnings
The second quarter of FY24 corporate results season is beginning. On October 21, ICICI Bank, Yes Bank, RBL Bank, IDBI Bank, and Kotak Mahindra Bank reported September quarter results. On October 25, Axis Bank and Tech Mahindra; on October 26, Asian Paints. On October 27, Bajaj Finserv, Bajaj Holding & Investment, Cipla, Reliance Industries, Dr. Reddy’s, Maruti, and others will report results.
Earnings season is expected to accelerate in a short week, influencing market trends and global cues.On Monday, investors would react to ICICI and Kotak Bank’s Q2 earnings from the weekend, said Siddhartha Khemka, Head of Retail Research, Motilal Oswal Financial Services.
The IPO Market
Six companies are launching IPOs next week, boosting primary market activity. In the mainboard segment, consumer-ware company Cello World will open its Rs 1,900-crore public issue from October 30-November 1 at Rs 617-648 per share, and Mamaearth parent Honasa Conumer will open its Rs 1,701-crore IPO from October 31 at Rs 308-324 per share. The closing date is November 2.
Transteel Seating Technologies will launch its Rs 49.98-crore SME IPO on October 30 and November 1 at Rs 67-70 per share. The Rs 15.29-crore Vrundavan Plantation IPO would open at Rs 108 per share within the same period.
Mish Designs will bid for Rs 9.76 crore between October 31 and November 2 at Rs 122 per share, while SAR Televenture will be the first public issue to raise Rs 24.75 crore between November 1-3 at Rs 52-55 per share.
Recently, Paragon Fine and Speciality Chemicals, Shanthala FMCG Products, KK Shah Hospitals, and Maitreya Medicare announced closures.
Pharma business Blue Jet Healthcare is expected to list on November 1 on the T+3 timeframe, sources told Moneycontrol, while Rajgor Castor Derivatives’ IPO trading would begin on the NSE Emerge on October 31.
Fii Flow
A strong rise in US bond yields kept FPIs net sellers in the third week of October. As of October 20, FPIs sold ₹12,146 crore in Indian equities and offloaded ₹6,555 crore in debt, hybrid, debt-VRR, and equities, according to NSDL data.
The dramatic jump in US bond rates, which reached a 17-year high of 5% on October 19, drove continuous selling. If the safest asset class in the world, the US bond, yields 5%, FPIs should withdraw money, said Geojit Financial Services Chief Investment Strategist Dr. V K Vijayakumar.
Foreign institutional investors (FIIs) bought ₹13,645.57 crore of Indian equities on Friday, pausing their downward trend. They sold ₹13,189.36 crore, generating ₹456.21 crore. “Above all foreign investors now perceive India as the most stable emerging market with the best growth story,” said Dr. V K Vijayakumar.
“FIIs continued to withdraw funds as the US Fed Chair emphasized the need for continued monetary tightening policy and high interest rates,” said Geojits’ Vinod Nair.
Oil Prices
After Hamas freed two US prisoners from Gaza on October 20, oil prices fell, raising hopes that the Israeli-Palestinian issue may deescalate without affecting oil supply in the Middle East.
Brent futures lost 22 cents, or 0.2%, to $92.16 a barrel. After settlement on Friday, November US West Texas Intermediate oil futures declined 62 cents, or 0.7%, to $88.75 a barrel. The more active December WTI fell 29 cents to $88.08 a barrel.
The session saw both contracts gain more than a dollar a barrel on conflict escalation. Both front-month futures increased over 1% this week, a second straight weekly increase, according to Reuters.
The US wants to buy 6 million barrels of sour crude for the strategic petroleum reserve between December and January. The increased risk premium should keep oil prices up, said Ravindra Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities.
Technical View
Nifty has been trading between 19,300 and 19,850 for almost a month, falling after retesting the upper band. The Nifty reversed from a double top on daily and intraday charts.
The index is trading below the 20 and 50 day SMA, which is negative, after reversal. Weekly charts show a bearish candle, signaling further weakness, said Kotak Securities Vice President-Technical Research Amol Athawale.
Analysts expect new weakness in the financial giants and a global slump to propel the index lower, with 19,200-19,450 remaining a key support zone.
Select auto, FMCG, pharma, and realty heavyweights’ resilience will give purchasing opportunities. Ajit Mishra of Religare advised traders to hedge their bets.
According to analysts, Nifty is currently consolidating, with the 100-DMA of 19,400 as immediate support and 19,250–19,300 as important demand. 19,700 and 19,850 are immediate and crucial hurdles on the upward. Pravesh Gour, Senior Technical Analyst, Swastika Investmart, said only a move over 19,850 can strengthen the market, while a dip below 19,250 can cause selling pressure.
However, the Bank Nifty index has been consolidating for two days due to a bullish-bearish conflict. The index is at a “make or break” point. Analysts say 43,500 is crucial.
A break below 43,500 is expected to increase market selling pressure. However, a large short-covering rally could result if this level holds. Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities, said a rise might target 44,500, where call side open interest is high.
Corporate Action
Dividend Stocks: Infosys, ICICI Lombard General Insurance Company, L&T Tech Services, and others will trade ex-dividend starting Monday, October 23. Next week, few stocks will trade ex-split and ex-bonus. Complete list here.
India VIX F&O Cues
The Options data also predicted that 19,200 will be immediate resistance, followed by 19,500-19,600, and 19,000-18,800 will be broad Nifty50 support.
On the Call side, the maximum open interest was at 19,200 strike, followed by 19,500 strike, with writing at 19,200 strike, then 19,600 and 19,500 strikes. On the Put side, 19,000 strike, 18,800 and 18,900 strikes, with writing at 19,000 strike, then 18,900 and 18,800 strikes.
Despite a dramatic market drop last week, volatility has not changed. The India VIX has remained between 9-13 levels for months, climbing 0.81 percent last week to 10.9 levels.
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