Key market triggers this week include Q2 results, US bond rates, and other global indicators

 Key market triggers this week include Q2 results, US bond rates, and other global indicators

The final week of October will provide investors with a plethora of triggers to watch out for, including the upcoming set of fiscal 2023–2024 (Q2FY24) results for the July–September quarter, macroeconomic data, foreign fund inflow, crude oil the costs, and other global cues amid the Israel–Hamas conflict.

In a choppy week, Indian markets lost more than 1% of their value, continuing the current consolidation period. Early sessions had a modestly upbeat tone, but as the days went on, pressure on international markets caused the tone to shift.

On October 20, the domestic market benchmarks Nifty 50 and Sensex closed in the red for the third straight day as nervous investors remained on edge due to expected interest rate rises by the US Federal Reserve and the continuing conflict between Israel and Hamas.

US bond rates increased to a 17-year high of 5% after Federal Reserve Chairman Jerome Powell indicated last week that a strong labor market and the US economy's resilience may need more interest rate increases to bring inflation down to a goal of 2%.

Middle East concerns and high US bond rates drove the market this week toward consolidation. Investors booked gains off the table because of the sluggish start to the earnings season, disappointment in the IT industry, and a mixed bag of results from banks, according to Vinod Nair, Head of Research at Geojit Financial Services.

The Sensex concluded the day at 65,397.62, down 232 points, or 0.35 percent, while the Nifty 50 completed the day at 19,542.65, down 82 points, or 0.42 percent. Mid and smallcap stocks saw greater losses. The BSE Smallcap index declined 0.76 percent and the BSE Midcap index dipped 1.02 percent.

Due to selling pressure, the Sensex lost 1,030 points on Friday while the Nifty lost 268 points. The BSE benchmark fell 885.12 points, or 1.33 percent, on a weekly basis, while the Nifty fell 208.4 points, or 1.05 percent.

Due to worries about the long-term effects of geopolitical tensions in the Middle East, investors are likely to exercise caution in the near future. Although long-term investors may find bargain hunting opportunities owing to an optimistic Q2 FY24 profit projection and a festival-driven demand environment, we anticipate volatility to remain,'' said Nair of Geojits.

The primary market is in for a busy week ahead with five new initial public offers (IPOs) planned for the mainboard and small-and-medium enterprises (SME) sectors. The next week will be critical from a domestic and technical perspective as investors eagerly monitor the Q2FY24 figures now being released. Analysts predict that when the earnings season picks up steam, corporate management comments and a bottom-up investment strategy will have an impact on market mood.

On the whole, experts anticipate further market volatility over the forthcoming holiday-shortened week due to global signals and the planned expiration of futures contracts for the month of October. The movement of the rupee versus the US dollar, the price of crude oil, the Israel-Hamas conflict, and the activities of foreign investors will all be watched by participants.

The following are the major catalysts for the financial markets this next week:

Results for the second quarter of the current fiscal year (Q2 FY24) are now being released. The September quarter results for ICICI Bank, Yes Bank, RBL Bank, IDBI Bank, and Kotak Mahindra Bank were released on October 21. on October 25, Axis Bank and Tech Mahindra, and on October 26, Asian Paints. On October 27, a number of companies, including Bajaj Finserv, Bajaj Holding & Investment, Cipla, Reliance Industries Dr. Reddy's, and Maruti, will release their results.

"We anticipate that the earnings season will pick up steam in a condensed week, which will help to steer the market trend along with global cues."Investors' reactions to the Q2 results of ICICI and Kotak Bank, which will be released over the weekend, would be the focus of the banking industry on Monday, according to Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services.

2 new listings are coming to D-Street, 5 IPOs are open:

The mainboard issue of the Blue Jet Healthcare IPO is available for subscription beginning on October 25 and closing on October 27.

Regarding the SME IPO for Door Concepts: Subscriptions will be accepted between October 23, 2023, and October 27, 2023.

The subscription period for the SME IPO for Paragon Fine and Speciality Chemicals begins on October 26 and ends on October 30, 2023.

The SME IPO of the FMCG product distribution firm, Shanthala FMCG Products, begins for subscription on October 27, 2023, and ends on October 31, 2023.

Maitreya Medicare Limited IPO: On October 27, 2023, the multispecialty hospital's SME IPO will open for subscription. It will end on November 1.

Shares of WomanCart Limited will begin trading on the NSE SME on October 27, while shares of Arvind and Company Shipping Agencies will begin trading on the NSE SME on October 25.

FII Outflow: Due to a strong increase in US bond rates, foreign portfolio investors (FPIs) continued to be net sellers in the third week of October. According to statistics from National Securities Depository Ltd (NSDL), FPIs have sold Indian shares worth $12,146 crore and offloaded a total of $6,555 crore as of October 20 when accounting for debt, hybrid, debt-VRR, and equities.

The steep increase in US bond rates, which sent the 10-year yield to a 17-year high of 5% on October 19, was the main cause of the ongoing selling, according to analysts. It makes sense for FPIs to withdraw money if the US bond market, the safest asset class in the world, returns about 5%, according to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Foreign institutional investors (FIIs) suspended their selling on Friday and collectively purchased Indian shares worth 13,645.57 crore. They generated revenue of 456.21 crore after selling 13,189.36 crore. Dr. V K Vijayakumar said, "Above all foreign investors now perceive India as the most stable emerging market with the best growth story."

According to Vinod Nair of Geojits, "FIIs continued to withdraw funds as the US Fed Chair emphasized the imperative for continued monetary tightening policy and hold interest rates high."

 

Global cues: Due to increased focus on the increasing US bond yield, general economic unpredictability, and the geopolitical concerns associated with the Israel-Hamas war, the world markets are now fragile. These variables will be carefully watched since they have the ability to affect the mood of the global market. For further information on the Fed's interest rate trajectory, investors will also keep an eye on the US GDP report.

The near-term market mood will also be greatly influenced by US jobless claims, macroeconomic data from Asian markets, and another anticipated interest rate decision from the European Central Bank (ECB). Due to the chairman of the US Federal Reserve's hawkish remarks last week, domestic markets experienced pessimism.

"Participants would continue to watch the tone of global indices, especially the US, for cues." The Dow Jones Industrial Average (DJIA) has resumed its corrective tone after the unsuccessful effort to clear the barrier at 34,200. According to signs, the current trend will likely continue. It may test the last swing low at 32,800, which would put pressure on our market and other ones, according to Ajit Mishra, SVP of Technical Research at Religare Broking.

 

Oil Prices: On October 20, oil prices fell with the release of two US hostages held by the Islamist organization Hamas from Gaza, raising expectations that the Israeli-Palestinian conflict would defuse without engulfing the rest of the Middle East and damaging oil supply.

Brent oil futures closed at $92.16 per barrel after losing 22 cents or 0.2%. The price of US West Texas Intermediate oil for November delivery, which had reached its expiration price following settlement on Friday, dropped by 62 cents, or 0.7%, to $88.75 a barrel. Closed 29 cents lower at $88.08 per barrel was the most active December WTI contract.

In response to indications that the situation was becoming worse, both futures had increased by more than $1 per barrel throughout the session. According to news agency Reuters, both front-month futures increased by over 1% for the week, marking the second consecutive weekly increase.

Up to 6 million barrels of sour crude are expected to be purchased by the US and delivered to the strategic petroleum reserve in December and January. We anticipate that the larger risk premium would support oil prices,'' said Ravindra Rao, CMT, EPAT, VP-Head Commodity Research, Kotak Securities.

 

Corporate Action: Dividend Stocks: On Monday, October 23, shares of a number of firms, including Infosys, ICICI Lombard General Insurance Company, and L&T Tech Services, among others, will begin trading ex-dividend. In the next week, a select few equities will also trade ex-bonus and ex-split. See whole list here.

 

Technical Analysis: Nifty has been ranging between 19,300 and 19,850 for about a month and has just retested the upper band. Technically, the Nifty established a double top formation on the daily and intraday charts before reversing. 

The index is now comfortably trading below the 20 and 50 day SMAs, which is mostly bearish after the reversal. On weekly charts, it has formed a bearish candle, signaling more weakening in the short term, according to Kotak Securities Vice President of Technical Research Amol Athawale.

According to analysts, the index may decrease as a result of recent weakness in the world's biggest banks and the continuation of the downturn there. The support range between 19,200 and 19,450 would continue to be an important one. 

"Buying opportunities would continue to be provided by the resilience of a few heavyweights from the auto, FMCG, pharma, and real estate sectors." According to Religare's Ajit Mishra, traders should align their holdings appropriately and favor hedged transactions.

Analysts said that the Nifty was remained in a phase of consolidation, with the 100-DMA at 19,400 acting as an immediate support and the range between 19,250 and 19,300 as a crucial demand zone. The good news is that 19,700 is an imminent obstacle and 19,850 is a significant one. Pravesh Gour, Senior Technical Analyst, Swastika Investmart, said that only a rise over 19,850 may result in market strength, while a decline below 19,250 might result in selling pressure.

The Bank Nifty index, on the other hand, has been engaged in a protracted battle between bullish and negative forces, which has led to a consolidation phase that has lasted for the last two days. The index is at a critical "make or break" moment right now. Analysts believe that the level of 43,500 is a turning point.

 "It is anticipated that a breach below the 43,500 level will increase selling pressure in the market." On the other side, if this level is able to hold until the close, it may trigger a big surge for short-covering. The area around 44,500 is a possible target for such a move since there has been a noticeable buildup of open interest on the call side, according to Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.