Dalal Street – Yield movement, Q2 Earnings , fund flows among all other factors to haunt Dalal Street investors in this week.
Experts expect the equities market rebound to continue in the following week, but stock-specific movement may increase due to September quarter earnings season.
The market halted a two-week losing trend and closed modestly higher for the week ended October 6 after recovering from a weekly low, possibly due to oversold conditions. Experts said the recovery may continue in the coming week, but volatility can’t be ruled out with more stock-specific action given the start of September quarter earnings season. Participants will also closely watch US and Indian inflation numbers and FOMC minutes.
The equity market uptrend was supported by falling oil prices, healthy domestic PMI data, and the Monetary Policy Committee’s status quo in repo rate, but the RBI still sees inflation as a major risk and was hawkish with its Friday OMO sale to manage liquidity, which raised 10-year bond yield sharply. Gains were limited by FII outflows due to high US bond yields and dollar index.
The week saw the BSE Sensex rise 167 points to 65,996, the Nifty50 rise 15 points to 19,654, the Nifty Midcap 100 index fall 0.6 percent, and the Smallcap 100 index rise 0.7 percent. Technology and real estate companies rose, while auto, banks, energy, pharma, and oil & gas fell.
Next week’s top 10 factors
Yield Movement
The yield on US benchmark 10-year notes reached a 16-year high last week, and those in India rose the most in six months.
Higher yields due to predictions of longer interest rates caused foreign investors to take money from risky assets like equities and park it in bonds.
Shrikant Chouhan, Head of Research (Retail) at Kotak Securities, warned emerging economies like India may lose foreign money as long as US currency and bond yields remain high.
He predicted further sharp intra-day gyration due to negative global conditions and domestic foreign fund outflows.
Macro Data
Both India and the US will disclose September CPI inflation on Thursday. These two will be watched by investors.
Reserve Bank of India Governor Shaktikanta Das predicted lower inflation in September in his monetary policy announcement.
FOMC Minutes
The market will also watch the US Federal Reserve’s last meeting minutes for economic outlook updates. As inflation continues high, the Fed left policy rates unchanged in its recent meeting but left the door open for another rate hike in 2023.
Quarterly corporate earningsÂ
IT giants will start the July-September FY24 corporate earnings season next week with TCS’ scorecard on October 11.
HCL Technologies, Infosys, and HDFC AMC report quarterly earnings on October 12, HDFC Life Insurance on October 13, Avenue Supermarts on October 14, and HDFC Bank on October 15.
Next week, October 11, newly listed Samhi Hotels, Signature Global (India), and Zaggle Prepaid Ocean Services will report numbers.
Most brokerages forecast July-September Nifty50 earnings growth of 21–23%, powered by banks, auto, and oil marketing businesses.
CPI InflationÂ
Along with results, market players will watch September CPI inflation on October 12. Due to dropping vegetable prices and LPG price cuts, MPC-important CPI inflation is projected to fall further.
CPI inflation decreased to 5.3 percent YoY in September from 6.8 percent in August, reverting to the RBI’s 2-6 percent goal after two months outside. The headline rate likely fell due to lower food and fuel prices “Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics at Barclays, added that core inflation likely remained steady, allowing the RBI to maintain policy rates.
On October 13, WPI inflation & balance of trade statistics for September and foreign currency reserves for the week ended October 6 will be revealed, along with August industrial output data.
US InflationÂ
Global markets will examine the FOMC minutes for the September policy meeting on October 11, US inflation on October 12, and Fed members’ speeches next week.
In September, analysts estimate inflation to drop from 3.7 percent in August, but it will still be well above the Federal Reserve’s 2 percent objective. In September, the Fed held rates and signaled that rates may remain higher through 2024, with one more rate hike by 2023. They forecast inflation to reach 2.6 percent by 2024 and rule out significant recession. August core inflation dropped from 4.7 percent to 4.3 percent.
China will disclose September inflation data. August inflation was 0.1 percent.
Fii FlowÂ
Foreign institutional investors sold Rs 8,400 crore worth of cash shares in the truncated week as the US 10-year treasury yield reached a 16-year high and the US dollar index hit its highest level since November. Domestic institutional investors mitigated the FII outflow, but experts predicted it may persist until US bond yields and dollar index fall.
DIIs bought Rs 4,400 crore in equities in the first week of October, when US 10-year treasury yield was 4.8 percent and dollar index was 106.10.
Oil PricesÂ
Since India is a net oil importer, the sudden drop in oil prices from a 10-month high boosted Indian equity markets. Rising US bond yields, a stronger dollar, and global demand concerns affected oil prices this week. International benchmark Brent crude futures fell 8.26% to $84.58 a barrel, the worst weekly fall since March, continuing a three-week slide from $95.96.
Saumil Gandhi, senior analyst – commodities at HDFC Securities, expects crude oil prices to consolidate in a lower-end range with a bearish bias after a strong selloff.
Technical ViewÂ
Nifty50 rallied well after defending 19,300 and breaking two-week losing streak. On weekly charts, the index has created a small-bodied bullish candlestick pattern with extended lower shadow and modest upper shadow, resembling a Hammer pattern at the downtrend. This fueled optimism for a northward move in the coming sessions, which might lead to 19,800-20,000 with critical support at 19,600-19,300, experts said.
After failing to cross the short-term moving average (20 exponential moving average at 19,670), Nifty is again lingering around the same level. Ajit Mishra, SVP – Technical Research at Religare Broking, said a significant closing above 19,670 might help the market rebound into 19,800-20,000.
If a reversal occurs, he expects support at 19,200-19,450.
Indian F&O Cues, VIXÂ
The Options data also showed that the Nifty may meet strong resistance between 19,900-20,000 and important support at 19,600-19,500.
According to weekly options data, the largest Call open interest (OI) was at 20,000 strike, followed by 20,500 and 19,900 strikes, with considerable Call writing at 20,500.
Put side open interest peaked at 19,500 strike, followed by 19,600 and 19,000 strikes, with writing at 19,600 and 19,500 strikes.
In the past week, volatility decreased, comforting bulls. The India VIX, which estimates Nifty50 volatility for the next 30 days, plunged 10% from 11.45 to 10.3, the lowest since July.
IPOÂ
Only one IPO will open for subscription next week, indicating a slowdown in primary market activity. Gujarat-based Arvind and Company Shipping Agency will launch its Rs 14.74-crore SME public offering on October 12-16 at Rs 45 per share, while Committed Cargo Care will finish its IPO on October 10.
According to the IPO schedule, Delhi-based Plaza Wires will list on the mainboard on October 13, Arabian Petroleum on October 9, and E Factor Experiences on October 9.
On October 10, City Crops Agro goes public on the BSE SME, Goyal Salt & Kontor Space on the NSE Emerge, and Oneclick Logistics India and Canarys Automations on October 11.
Vivaa Tradecom will debut on the BSE SME, Vishnusurya Projects and Infra, Sharp Chucks and Machines, and Plada Infotech Services on the NSE Emerge on October 12, and Karnika Industries on October 13.
According to IPO timeline, Sunita Tools will offer shares on BSE SME on October 9, however the exchange has not released a circular.
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