Dalal Street Week Ahead | Corporate earnings, FII funds flow, macro data & all that will dictate D-St next week

NIfty likely to remain in the consolidation zone with the ongoing result season

The market saw reversal of gains for the first time in last five weeks and ended a week of rangebound movement on July 28 on a negative note. Mixed Q1 earnings, increasing oil prices, FII outflow, rising US dollar and bond yields, and another possible rate hike signalled by the US Federal Reserve after a 25-bps increase in Fed funds rate in July policy meeting weighed on the sentiment.

But experts are not worried as they feel that it is just a rush for booking profits after a significant run-up, and a largely stable breadth in the market. They expect consolidation to continue in the coming week, while the sentiment will be driven by corporate earnings, manufacturing numbers, global economic data points, oil prices, and monthly auto sales.

The BSE Sensex fell more than 500 points to 66,160, while the Nifty50 declined nearly 100 points to 19,646 after a rally of 1,300 points in the previous four weeks. However, the broader markets outperformed the frontliners, as the Nifty Midcap 100 and Smallcap 100 indices gained 1.5 percent and 0.6 percent.

"We expect sectoral rotation in the market, while the index is likely to remain in the consolidation zone with the ongoing result season," Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, said. "The market would keep an eye on the manufacturing data to be released next week - both globally as well as locally."

So, what would be the 10 key factors for investors to watch out for next week? Let's check out.

Corporate Earnings

We will enter the second half of corporate earnings season and more than 350 companies will release their June FY24 quarter numbers next week. The prominent names among them to focus on would be State Bank of India, Maruti Suzuki, GAIL, Power Grid, UPL, Titan Company, Adani Enterprises, Bharti Airtel, Eicher Motors, Sun Pharma, and Mahindra & Mahindra.

Among others, Lupin, HPCL, Ambuja Cements, Bank of Baroda, InterGlobe Aviation, Zomato, Adani Green Energy, Adani Transmission, Bosch, Escorts Kubota, PVR Inox, Godrej Properties, Mankind Pharma, Metropolis Healthcare, Adani Power, Cummins India, Dabur India, LIC Housing Finance, Varun Beverages, Alembic Pharma, and BHEL will also be release their numbers next week.

Also read: As a CEO, facing a crisis almost every year for the first decade prepares you for the future: JM Financial's Vishal Kampani

Auto Sales

Auto stocks will be in focus early next week as several companies will announce their July sales numbers, which will see the 2-10 percent growth range compared to a year-ago month.

"Interactions with leading channel partners indicate a sustained recovery in domestic two-wheeler demand in July 2023 as retails are expected to grow 8-10 percent over last year, led by a stable demand in urban markets and a gradual recovery in rural areas. Retails in passenger vehicles are expected to grow 5 percent on-year, led by execution of the order book and an improving supply chain," Motilal Oswal said.

"MHCV (medium and heavy commercial vehicle) retails are expected to improve by 5-7 percent YoY as the CV cycle remains positive," the brokerage added.

Domestic Economic Data Points

The market participants will focus on the manufacturing and services numbers, as S&P Global Manufacturing PMI data for July will be released on August 1, and S&P Global Services and Composite PMI data on August 3.

India's manufacturing sector activity for June dipped to 57.8, from 58.7 in May, but still remained strong, showing robust demand for Indian-made products, while the demand for services continued to remain strong in June, though the sector's PMI dropped to 58.5, from 61.2 in May.

Also read: TCS reverts to vertical-based operating structure, first major change under new CEO

Apart from this, we will have fiscal deficit numbers for June on July 31, while foreign exchange reserves for the week ended July 28 will be released on August 4.

Global Domestic Data Points

On the global front, too, investors will keep an eye on manufacturing and services numbers for July. Further, US unemployment rate, non-farm payrolls, and weekly jobs data will also be important to watch out for as it will help Federal Reserve to decide the next course of action in September policy meeting.

Bank of Japan's monetary policy meeting minutes on August 2 and interest rate decision by Bank of England on August 3 will also be watched. Experts largely expect Bank of England to raise interest rates by at least 25 bps to fight elevated inflation.

Here are key global economic data points to watch out for:

FII Flow

The FII flow will be another key factor to focus on, as we have seen reversal of flow after several weeks, which caused downward move in the equity markets. But, on the contrary, domestic institutional investors have managed to compensate the same by pouring in more amount than FII outflow, capping the markets loss to a major extent.

FIIs have net sold more than Rs 3,000 crore worth shares in the cash segment last week. However, DIIs have net bought over Rs 5,200 crore shares during the week.

Oil Prices

The sharp increase in oil prices also attracted investor attention last week since India is a net oil importer and any rise in crude prices always forces us to spend more money to buy the same, which ultimately increases the fiscal pressure, and raises inflation and growth concerns.

Brent crude futures, the international benchmark, extended the upward journey for the fifth consecutive week with a 4 percent rally, driven by tighter supply and signs of improving global growth outlook and demand amid hopes that central banks may be nearing the end of policy tightening.

"Markets would be looking for the OPEC+ meeting on August 4, for announcements on the continuation of voluntary output cuts," said Mohammed Imran, research analyst at Sharekhan by BNP Paribas, who remains bullish on crude oil.

IPO

We will also see a lot of action in the primary market as five IPOs will be hitting the Dalal Street next week. Non-banking finance company SBFC Finance will open its Rs 1,025-crore public issue on August 3, while the late big bull Rakesh Jhunjhunwala's firm RARE Enterprises-backed Concord Biotech IPO will open on August 4.

Also read: FMCG company Onest files IPO papers, fresh issue at Rs 77 crore

In the SME segment, the bidding for both IPOs by Oriana Power, and Vinsys IT Services will start on August 1, and will end on August 3 and August 4 respectively, while the IPO of Yudiz Solutions will open for subscription on August 4. The public issue of Zeal Global Services will close on August 1.

Yasons Chemex Care will debut on the NSE SME on August 3, while the listing of Innovatus Entertainment Networks will take place on August 4.

Also read: SBFC Finance sets IPO price band at Rs 54-57 per share

Technical View

The Nifty50 is likely to consolidate with crucial support and resistance at 19,500-20,000 levels in coming days, as breaking of the same on either side can give direction to the index, experts said.

Arvinder Singh Nanda, senior vice president at Master Capital Services still believes the overall market sentiment remains bullish, with a prevailing "buy on dip" strategy gaining favour among investors. He expects any fall close to 19,500-19,450 can be seen as an opportunity to build fresh long positions for 19,870 and then 20,000. A short-term bearish reversal can be seen on a decisive fall below 19,380, he said.

F&O Cues

On the Options front, the maximum Call open interest was at 19,800 strike, followed by 20,500 and 19,700 strikes, with meaningful Call writing at 20,200 strike, then 20,500 strike, whereas we have seen the maximum Put open interest at 19,600 strike, followed by 19,500 strike, with Put writing at 19,600 strike, then 19,500 strike.

The above data clearly indicated that the Nifty may take support at 19,600-19,500 area, whereas 19,700-19,800 is likely to be near term resistance, which is expected to be crucial for move towards 20,000.

India VIX, the fear index, hit a fresh historic closing low of 10.13 levels, down by 11.75 percent during the week, after sandwich like candlestick pattern in previous weeks, indicating the stable markets.

Corporate Action

Here are key corporate actions taking place in the coming week:

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