The market not only recovered initial losses but also added hefty gains to end the week up 2.6 percent on July 29, extending northward journey for the second week. The US Federal Reserve’s in-line rate hike of 75 basis points and its hint at slowing the pace of further hikes following declining economic growth lifted sentiment. Reduced intensity of FII (foreign institutional investor) selling, rupee appreciation, and strong quarterly earnings of select companies also supported the rally.
he BSE Sensex rallied nearly 1,500 points to 57,570 and the Nifty50 reclaimed the 17,000 mark by gaining 439 points at 17,158 while the broader space underperformed frontliners with the Nifty Midcap 100 and Smallcap 100 indices rising two and half a percent, respectively.
Sectors saw a mixed trend with metals (up 7.7 percent), IT (up 3.5 percent), and banking (up 2 percent) & financial services (up 3.4 percent) providing strong support whereas auto and FMCG closed in the red.
Positive bias is expected to continue but as we have lot of events lined up like auto sales, India monetary policy, and US unemployment rate, volatility can’t be ruled out with continuing stock-specific action given we are in the second half of the corporate earnings season, experts said.
“Overall we expect the positive momentum to continue in the market with bouts of volatility. Stock- specific action would continue as the busy results season continues,” said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.
While all the sectors are contributing to the move, Ajit Mishra, vice president of research at Religare Broking, believes the focus should still be on the top performers rather than expecting a turnaround in beaten-down names.
Here are 10 key factors that will keep traders busy next week:
1) RBI Monetary Policy
The key event to watch out for next week would be the Reserve Bank of India (RBI) monetary policy scheduled from August 3 to 5. Most experts expect the rate hike in the range of 25-50 basis points as the retail inflation is still above the RBI’s target range of 2-6 percent, but the commentary will be key to watch given falling commodity prices and normal monsoon, and action by global central banks.
“RBI may continue to raise repo rate but in the context of cooling commodity prices as well as normal monsoons so far, it may not be as aggressive as other global central banks,” said Harshad Borawake, head of research and fund manager at Mirae Asset Mutual Fund.
Meanwhile, oil has eased but the rupee continues to remain under pressure. And if RBI does not follow global central banks in the quantum of rate rise, the pressure on the currency will only mount. While RBI has been using forex reserves to prevent rupee volatility, it cannot use them for perpetuity. Hence, both, commodity prices and outlook of global central banks matter for RBI actions, Borawake believes.
Also read – Top 10 FAQs related to income tax returns filing clarified
2) Corporate Earnings
More than 560 companies will release their quarterly earnings in the coming week including important names like ITC, State Bank of India, UPL, Lupin, Britannia Industries, GAIL India, HPCL, Mahindra & Mahindra, and Titan Company.
All Adani Group companies (Adani Enterprises, Adani Power, Adani Transmission, Adani Green Energy, Adani Wilmar, and Adani Total Gas), and new age tech companies One 97 Communications, FSN E-Commerce Ventures, and Zomato will also announce their quarterly earnings.
Apart from that, the following will also be in focus ahead of quarterly earnings next week: Vodafone Idea, InterGlobe Aviation, Indus Towers, Siemens, Dabur India, Bosch, One 97 Communications, FSN E-Commerce Ventures, Zomato, Arvind, Marico, Barbeque-Nation Hospitality, Castrol India, Escorts Kubota, Max Financial Services, Thyrocare Technologies, Bank of India, Deepak Nitrite, Godrej Properties, Lemon Tree Hotels, Thermax, Tube Investments of India, Voltas, Aditya Birla Capital, Devyani International, Godrej Consumer Products, Gujarat Gas, Inox Leisure, KEC International, Paras Defence and Space Technologies, PI Industries, Tata Coffee, Alembic Pharmaceuticals, Balrampur Chini Mills, Berger Paints India, BHEL, Blue Star, Container Corporation of India, Gujarat State Petronet, HCC, ICRA, Kalpataru Power Transmission, Krsnaa Diagnostics, LIC Housing Finance, Manappuram Finance, Praj Industries, REC, Spandana Sphoorty Financial, Suryoday Small Finance Bank, Ujjivan Financial Services, Aditya Birla Fashion and Retail, Alkem Laboratories, Engineers India, IRB Infrastructure Developers, Minda Corporation, NMDC, Petronet LNG, Pfizer, Raymond, Affle (India), and Amara Raja Batteries.
Also read – Bank of Baroda aims to recover bad loans worth Rs 13,000 crore in FY23, says ED
3) Auto Sales
Monthly sales numbers for July will be announced by auto companies next week so Tata Motors, Maruti Suzuki, TVS Motor, Bajaj Auto, Escorts, Mahindra & Mahindra, Ashok Leyland, Eicher Motors, Hero MotoCorp, etc will be in focus.
Passenger vehicle sales numbers are likely to be good given strong demand and improving chip availability while commercial vehicle sales are also expected to be good on a yearly basis, though there could be some seasonal impact on month-on-month numbers due to monsoon. In case of two-wheelers, likely muted demand may impact both yearly and sequential sales data while tractor sales may see seasonal impact, experts said.
“Wholesale numbers for July are expected to improve for passenger vehicles by 10 percent month on month at 3.5 lakh units and for commercial vehicles by 4 percent MoM. Tractors are likely to decline 45 percent MoM due to seasonality and 15 percent year on year, and two-wheelers are set to soften 2 percent MoM and grow 2 percent YoY due to moderation in rural demand,” Elara said in its recent note.
The brokerage further said retail momentum in July has been sub-par for two-wheelers and tractors while passenger vehicles and commercial vehicles are resilient.
Also read – Last minute tax-filing: 5 types of incomes you must not forget
4) Economic Data
The S&P Global Manufacturing PMI (purchasing managers’ index) data for July will be released on Monday while S&P Global Services and Composite PMI data for July will be out on Wednesday.
The preliminary numbers of trade deficit for July will be released on Tuesday. This will be a key thing to watch out for because in June merchandise trade deficit increased to a record $26.1 billion, which was 172 percent higher than the year ago number and even higher than the initial estimates of $25.6 billion by the government.
Apart from that, foreign exchange reserves for the week ended July 29 will be announced on Friday.
5) DIIs Outpace FIIs
Finally the intensity of FII selling reduced in July and the monthly outflow was lower than the DII inflow for the first time in the last 10 months. FIIs turned net buyers in 8 out of 21 sessions in a month for the first time after several months, which ultimately restricted selling to Rs 6,568 crore for July against Rs 58,100 crore in June.
On the other side, DIIs continued pouring in money into equity as they net bought Rs 10,546 crore worth of shares in July against Rs 46,599 crore in the previous month.
Henceforth, the behaviour of FIIs with respect to Indian equities will be closely watched especially after the Fed hinted at less aggression with respect to rate hikes going ahead given declining economic growth.
The Indian rupee also came off its record lows and closed at 79.24 against the US dollar, rising 45 paise on Friday, following FII inflow, weakening US dollar, and positive equity markets.
6) Oil Prices
In the coming week, globally investors will also keep an eye on OPEC meeting outcome which could bring volatility in oil prices. International benchmark Brent crude futures already gained around 7 dollars week-on-week to close at $110 a barrel this week amid supply concerns and weakness in US dollar.
Reuters reported that the next meeting of OPEC and allies led by Russia, together called OPEC+, on August 3 will be key as the producers have now unwound the record 9.7 million barrels per day (bpd) supply cut they agreed in April 2020, when the COVID-19 pandemic slammed demand. OPEC+ sources said the group will consider keeping oil output unchanged for September, but two OPEC+ sources also told Reuters a modest increase would be discussed.
7) Global Data Points
Unemployment rate data in the US for the month of July on coming Friday will also be a key thing to watch out for as the data may give some indication whether the US is facing recession or not. In June 2022, the unemployment rate in the US met expectations, coming in at 3.6 percent, unchanged for the fourth month.
Here are other key global economic data points to watch out for next week:
8) Technical View
The Nifty closing above the psychological 17,000 mark as well as above the 200 day simple moving average (17,033) with continuing sharp uptrend for the third session raised confidence among bulls at Dalal Street. Now the Street is eyeing 17,500 as the next crucial resistance followed by 17,800-18,000 hurdles, but before that, given the consistent run-up in the last few days, some profit booking can’t be ruled out with support at 16,950-16,800 levels, experts said.
The Nifty50 has formed a bullish candle on daily and weekly charts, while there was a bullish engulfing pattern on the monthly scale.
“A long bull candle was formed on the weekly chart, which is back to back for the second weeks. This market action signals an increasing strength of upside momentum in the market after upside breakout, as per smaller and larger timeframe charts,” Nagaraj Shetti, technical research analyst at HDFC Securities, said.
He further said the unfilled opening upside gaps, sharp vertical upside move and decisive upside breakout of significant overhead resistance indicate more upside ahead for the market. “The next upside targets are to be watched around 17,600-17,800 levels in the next few weeks, but minor downward corrections/consolidations in between can’t be ruled out. Important support is placed at 16,950-16,800 levels,” he added.
9) F&O Cues
The August series started off on a positive note, in fact with a strong gap up opening on Friday followed by more than 7 percent run in July series. Hence the Option data indicated that the Nifty50 could trade in the range of 16,500-17,500 levels in coming sessions.
On the Option front, we have seen maximum Call open interest at 18,000 strike followed by 17,000 and 17,500 strikes, with Call writing at 17,100 strike then 18,000 and 17,200 strikes, while the maximum Put open interest was seen at 16,500 strike followed by 16,000 and 17,000 strikes, with Put writing at 17,100 strike then 17,000 and 17,200 strikes.
“On the derivative front, Put writers added hefty open interest at 17,000 strike and held nearly 61 lakh shares. On the flip side, Call writers were seen shifting to higher bands, which points towards strength in the current trend,” SMC Global said.
“The 16,800 would act as a strong support for the index in upcoming sessions. The bias is likely to remain in favour of bulls and we expect Nifty to move towards its next resistance of 17,400 levels in upcoming weeks,” the brokerage added.
The volatility cooled down significantly below 17 levels, falling 24.22 percent in July and declining 0.6 percent week-on-week, making the bulls more comfortable. Further decline in volatility can keep supporting bulls in coming sessions, experts feel.
10) Corporate Action
Here are key corporate actions taking place in the coming week:
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
