NEW DELHI: Domestic equity indices closed another week in the red as they consolidated within a range. Heightened valuations, Q2 earnings and uncertain global cues kept investors on toes. All these factors will also play an important role this week in deciding how the market behaves. Investors will also look forward to the outcome of the US presidential election, whereas quarterly earnings will keep individual stocks buzzing.
“The market will first react to Reliance Industries numbers in early trade on Monday, and then focus would again shift to global cues, thanks to the scheduled US election,” said Ajit Mishra, VP – Research, Religare Broking.
Volatility indicator has also surged, making trading in the current environment risky. “We advise limiting leveraged positions and suggest keeping the existing trades hedged. Defensives like FMCG, IT, pharma, etc tend to do well in such scenarios, but selection of stocks is the key due to the prevailing earnings season,” Mishra added.
Here are key factors that may guide market during the week:
The United States will vote to elect the next President of the country on November 3, which is likely to induce volatility in the market. It should be noted that a large part of the electorate has already voted via mail-in ballots and early voting. Opinion polls have indicated a clear victory for challenger Joe Biden but such polls have often been wrong in the past. Analysts do not expect clarity on the winner for weeks after the voting day as the counting of all votes will take time.
IPO listing: Equitas SFB
Equitas Small Finance Bank is scheduled to be listed on the bourses on Monday. The issue, sold in the Rs 32-33 range, was subscribed merely 1.95 times in the three-day bidding process, with the HNI quota remaining undersubscribed at 22 per cent only, largely because of negligible expectation of listing gains.
Auto sales data
Automobile companies will release their October sales data for the next couple of days. Analysts expect the numbers to be flat as Navratri sales were not as expected due to low discounts.
INS Markit will release Manufacturing PMI data on Monday and Services PMI on Wednesday for the month of October that will give indication of recovery in the demand. Any sharp recovery will be taken positively by the market.
A number of companies are scheduled to come out with their numbers during the week, including Bandhan Bank, NTPC, PNB, OFSS, ZEEL, Dabur, Muthoot Finance, PVR, Sun Pharma, Adani Enterprises, Lupin, SRF, Pidilite, SBI, Emami, Inox Leisure, Trent, Ashok Leyland, BEL, BHEL, Cipla, ITC, MRF, Tata Consumer, Vedanta, Affle India, Divi’s Labs, Ipca Labs and Sobha, among others.
A sharp rise in Covid-19 cases have been reported in the last few days, especially in parts of Europe and the US where a record number of new cases are emerging. Germany is going under a second lockdown from Monday for the whole month, while France is already under a curfew. Investors will track the developments on this front for further cues.
Bank stocks will be in focus during the week as the Supreme Court will hear the loan moratorium case on November 2. Expectations are that the apex court will decide in favour of the banking sector. Last week, the central government asked lenders to credit the difference between compound interest and simple interest for six months of moratorium period on loans up to Rs 2 crore.
Volatility at a high
India VIX surged close to 25 as traders have become wary of the increased uncertainty in the market. The VIX index is registering a breakout from the consolidation zone of three months, said an analyst. Volatility could stay here until there is clarity on Covid and the US election.
Nifty50 closed the week on a negative note posting a bearish candle on account of negative cues from global indices, as well as being overbought in the short term. “We believe a retest of support of the rising channel on the weekly chart is quite probable in the upcoming week and break down below the support will damage the bullish structure of the uptrend and may trigger a fall up to the next major support of 11,350. Immediate support and resistance in the short term are now placed at 11,350 and 11,750, respectively,” said Nirali Shah, Senior Research Analyst, Samco Securities.
Credit: Stocks-Markets-Economic Times