Weak Ahead: Q2 results, Israel Iran war, FII activity, global cues among key market triggers for Nifty, Sensex

The Indian market closed on a lower note for the week on Friday, dragged down by auto and banking stocks. While pharma and metal stocks offered some support, it wasn't enough to push the indices higher. As a result, the Nifty 50 fell by 0.14%, ending below the 25,000 mark for the third consecutive day at 24,964. Similarly, the Sensex dropped 0.28%, closing at 81,381.

In the third week of October, the investors will closely monitor key market triggers such as the first set of July-September quarter results for fiscal 2024-25 (Q2FY25), Israel-Iran war, foreign fund outflows, crude oil prices, global cues, domestic and global macroeconomic data.

During the week, both the Nifty 50 and Sensex ended in the red, with losses of 0.20% and 0.40%, respectively. Investor sentiment was dampened by concerns over the Middle East conflict, continued foreign portfolio investor (FPI) outflows, worries about a potential earnings slowdown, and high valuations.

In October, the Nifty 50 has dropped 3.28%, marking its steepest monthly decline since December 2022. From its recent high of 26,277 points, the index has fallen nearly 5.34%. Similarly, the Sensex has slipped 5% from its recent peak of 85,978 points, with a 3.46% decline this month.

“Nifty 50 started the week with a sharp decline but found support near the Fibonacci 38.2% level, closing down 0.20% from the previous week. The index is attempting to establish a base, with the 24,750-24,800 range acting as crucial support. Also the prices are still above the 21 week EMA indicating positive trend. A breach below these levels may increase selling pressure towards 24,500. Conversely, resistance is noted at 25,250, where buying could trigger a move towards 25,600. Overall, the outlook for the next week appears sideways to bullish, favouring a buy-on-dips strategy,” said Palka Arora Chopra, Director of Master Capital Services Ltd.

“The outlook for the market will be guided by the major domestic and global economic data such India WPI Inflation (YoY) (Sep), India CPI (YoY) (Sep), India Bank Loan Growth & Deposit Growth, Indian companies Q2 results, US Initial Jobless Claims, US Core Retail Sales (Sep), US Industrial Production (Sep) ,China GDP (YoY) (Q3) and UK CPI inflation data,” Chopra added.

Here are the key triggers for stock markets in the coming week:

Q2 Results

Investors are set to focus on analyzing corporate earnings in the coming week, with the second batch of Q2FY25 results scheduled for release. Reliance Industries has scheduled a meeting for October 14, 2024, to review and approve the standalone Q2 results for 2024 of the Sensex heavyweight. Mukesh Ambani-led conglomerate has already notified the Indian stock market exchanges about the board meeting date to announce its quarterly results for Q2 FY25.

Other than RIL, other marquee companies like Infosys, Axis Bank, Wipro, Jio Financial Services, HDFC Bank will also be declaring their Q2 FY25 results next week.

“As we enter the Q2 earnings season, this week will feature numerous earnings reports that could lead to stock- and sector-specific movements. Additionally, our Consumer Price Index (CPI) and Wholesale Price Index (WPI) data will be announced, which will be closely monitored,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

3 new IPOs, 3 listings to hit D-Street

The primary market will witness opening of three new initial public offering (IPOs), one in mainboard and two in small and medium enterprise segment, in the coming week.

Hyundai Motor India is set to make its largest offering in the primary market to date next week, as the automaker plans to raise over ₹27,000 crore through its IPO.

Other than new public issues, the market will also observe listing of three new IPOs in the upcoming week.

FII Activity

On October 11, Domestic Institutional Investors (DIIs) made net purchases of shares amounting to ₹3,731 crore, while Foreign Institutional Investors (FIIs) registered a net sell-off of shares worth ₹4,163 crore, according to provisional data from the NSE.

DIIs bought shares totaling ₹11,907 crore and sold shares worth ₹8,176 crore. In contrast, FIIs acquired shares worth ₹6,220 crore but sold off equities amounting to ₹10,382 crore during the trading session.

"The major trend in foreign portfolio flows in October, so far, has been the sustained selling by FPIs. FPIs have been following a strategy of ‘Sell India, Buy China’ after the Chinese authorities announced monetary and fiscal measures to stimulate the slowing Chinese economy. FPI money has been moving to Chinese stocks, which are cheap even now. Hang Seng index (Chinese H stocks are listed in Hong Kong) is now trading at a PE of about 12 while Nifty is trading at a PE of 23 times estimated FY25 earnings. So more money can move to Chinese stocks. But India has much better growth prospects now compared to China and, therefore, India deserves premium valuations. But the valuation differential is too big now and this can sustain the FPI selling for some more time.

This month, through 11th October. FPIs have sold equity for ₹58710 crores. (NSDL) This massive selling didn’t have a serious impact on the market since the entire FPI selling has been absorbed by DIIs who are receiving sustained fund inflows. This trend of FII selling and DII buying is likely to sustain in the near-term," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Global Cues

Over the weekend, the Chinese Ministry of Finance held a meeting where the market anticipates guidance on future stimulus plans. A positive outcome from China could significantly impact our market, while any disappointment may provide a near-term boost for Indian equities.

The outlook for the market will be guided by the major domestic and global economic data such India WPI Inflation (YoY) (Sep), India CPI (YoY) (Sep), India Bank Loan Growth & Deposit Growth, Indian companies Q2 results, US Initial Jobless Claims, US Core Retail Sales (Sep), US Industrial Production (Sep) ,China GDP (YoY) (Q3) and UK CPI inflation data.

Oil prices

Oil prices dipped on Friday but marked a second straight weekly gain as investors weighed the potential for supply disruptions in the Middle East and the impact of Hurricane Milton on fuel demand in Florida.

Brent crude futures declined by 36 cents, or 0.45%, closing at $79.04 per barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 29 cents, or 0.38%, settling at $75.56 per barrel.

“Geopolitical developments and fluctuations in crude oil prices will also be critical to watch. Moreover, data from the US, along with movements in US bond yields and the dollar index, will be significant factors to consider. Updates from China and Japan, as well as the upcoming European Central Bank (ECB) meeting, will serve as important global triggers,” Meena added.

Corporate Action

Shares of major companies, including Tata Consultancy Services (TCS), Anand Rathi Wealth Ltd, and NRB Bearings Ltd, are set to trade ex-dividend starting Monday, October 14, 2024, as per the Bombay Stock Exchange (BSE).

Technical View

From a technical perspective, the Nifty has formed a near-term bottom around the 24,750 level. To regain momentum, it needs to surpass resistance levels at 25,330 and 25,500. A move below 24,750 could trigger additional selling pressure towards 24,440 and 24,100, according to Santosh Meena.

“In the Bank Nifty, the psychological level of 50,000 is being defended, but the immediate hurdle is at 51,700, followed by a critical resistance at 52,350 for any meaningful recovery. A drop below the 50,000-49,500 range could lead to further declines,” Meena said.

A breach below these levels may increase selling pressure towards 24,500. Conversely, resistance is noted at 25,250, where buying could trigger a move towards 25,600. Overall, the outlook for the next week appears sideways to bullish, favouring a buy-on-dips strategy.