Week Ahead: Q2 Results, FII outflows, F&O expiry, global cues among key market triggers for Nifty 50, Sensex

The Indian stock market was thrown into the deep end and wrought with several challenges throughout October as bears tightened their grip on D-Street amid weak global cues and rising volatility. The battles compelled the frontline indices to enter the bear market just a few days ahead of Diwali'24 and the onset of Samvat 2081. The market is on track to conclude Samvat 2080 in red.

In the last week of October, investors will closely monitor key market triggers, including the next set of July-September quarter results for fiscal 2024-25 (Q2FY25), the scheduled monthly derivates expiry, Middle-East geopolitical tensions, foreign fund outflows, crude oil prices, global cues, US Presidential election polls, domestic and global macroeconomic data.

Also Read: Nifty, Sensex rally 25% in Samvat 2080 on macro trends: What should be your trading strategy for Samvat 2081?

Domestic equity benchmarks Nifty 50 and Sensex logged their worst and longest weekly losing run in 14 months, intensifying a broad-based selloff. Foreign investors continued to offload in Indian equities, and lacklustre corporate earnings further bogged down the sentiment.

The NSE Nifty 50 fell 2.7 per cent this week, and the 30-share BSE Sensex dropped 2.24 per cent, logging losses for the fourth consecutive week and the fifth straight session. The Nifty 50 also swung to the oversold territory, with the relative strength index (RSI) slipping below 30 for the first time in a year ahead of the festive season.

Profit booking, a tepid demand environment, margin pressure, and softer guidance from many companies contributed to the week's fall. Following a subdued start, the market sentiment remained negative throughout the week. As a result, both benchmark indices, the Nifty and Sensex, closed near their weekly lows at 24,180.80 and 79,402.29, respectively.

Sector-wise, realty, metals, and auto experienced notable declines, although IT remained steady. One major concern for traders has been the sharp drop in broader indices, down between 5.75 per cent and 6.45 per cent, following weeks of relative outperformance. The Nifty 50 index has dropped eight per cent since September 27, when it hit record highs. 

Also Read: Bears grip D-Street: Nifty logs worst weekly run in 14 months ahead of Diwali; 5 key triggers for Samvat 2081

Foreign outflows have dragged the index down for the last 19 sessions as investors direct funds to China on Beijing's stimulus measures and cheaper valuations. The India VIX volatility index jumped over seven per cent to reach 15 on Friday and settled at 14.6 (+4.7 per cent). The market is set for its worst month since March 2020, when the COVID-19-led lockdown was enforced.

“A tough week for the market! Investor psychology turned a bit gloomy due to the ongoing geopolitical tensions and a knee-jerk reaction from foreign investors, which dragged the sentiment. Lack of triggers in the domestic market may impact the near-term sentiment in the market,” said Vinod Nair, Head of Research, Geojit Financial Services.

The market witnessed broad-based selling, with consumption, midcap, and smallcap stocks underperforming notably. Foreign outflow and earnings will influence the market sentiment this week. The upcoming expiry of October derivatives contracts is expected to increase the volatility.

Also Read: Diwali 2024 Stock Picks: JSW Energy to Federal Bank—FundsIndia Broking lists top 6 stocks to buy for Samvat 2081

This week, the primary market will witness action as some new initial public offerings (IPO) and important listings are slated across the mainboard and small and medium enterprises (SME) segments. The week will be critical from the domestic and technical point of view as investors will track corporate results, global markets and macroeconomic data.

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

Q2 Results

Shares of ICICI Bank, IDFC First Bank, Yes Bank, JK Cement, REC Ltd, and Coal India will be in focus on Monday, October 28, as these companies declared their Q2FY25 results post-market hours on Friday or Saturday. Adani Power, Bharti Airtel, Federal Bank, RailTel, Tata Technologies, Adani Enterprises, Adani Ports, Maruti Suzuki, Dabur, and JSW Infrastructure, among several others, are scheduled to declare their Q2FY25 results in the coming week.

Also Read: IDFC First Bank Q2 Results: Net profit plummets 73% to ₹200.7 crore, NII up 21% YoY; Asset quality improves

“The quarter results were impacted due to a tepid demand environment and margin pressure, which dragged FMCG, metal, auto, and realty the most. While IT remained relatively flat and contributed less to the overall losses in expectation of a pickup in BFSI spending and a favourable outlook in US spending,” said Vinod Nair of Geojit Financial Services.

No new IPOs, 3 listings to hit D-Street

According to stock exchange data, no new public issues have been listed to open for subscription in the coming week. However, Swiggy IPO and ACME Solar Holdings IPO will likely open for bidding soon. The final dates of these issues were not released at the time of writing this story. Among listings, shares of Waaree Energies, Deepak Builders & Engineers, and Godavari Biorefineries will debut on stock exchanges BSE, NSE this week. From the SME segment, shares of five SMEs will debut on either BSE SME or NSE SME.

Also Read: IPO-bound Swiggy sets valuation target at $11.3 billion to aid retail participation; Issue to open post Nov 6

FII Activity

Foreign institutional investors (FIIs) sold equities worth ₹20,025 crore last week, while domestic institutional investors (DII) bought equities worth ₹22,914 crore. FIIs recorded significant outflows of around ₹1 lakh crore in October, while DIIs bought equities worth approximately ₹97,000 crore. 

While DIIs continue to support the market, the market direction largely depends on FII flows, earnings outcomes, and the global geopolitical landscape. DIIs attempted to offset FII outflows, but analysts observed that selling pressure is beginning to emerge from retail and high-net-worth individual (HNI) traders.

Also Read: FPIs offload ₹85,790 crore in Indian equities: Sell-off hits 10-month high on shift to China stocks; What next?

Foreign portfolio investors (FPIs) extended their robust selling streak in the Indian market, taking a sharp U-turn in October to turn net sellers amid the ongoing geopolitical tensions and cheaper valuations in the Chinese stock market.

FPIs offloaded ₹85,790 crore worth of Indian equities, and the net outflow stood at ₹89,977 crore as of October 25, taking into account debt, hybrid, debt-VRR, and equities. October's FPI outflow hit a 10-month high, the highest sell-off from the Indian market year-to-date (YTD). In October, the total debt investment is ₹410 crore.

Global Cues

Despite lacking alignment with global markets, US market performance will remain relevant, particularly with continued speculation on rate cuts and the upcoming presidential election. Over the past week, the Dow Jones Industrial Average (DJIA) declined by over 2.5 per cent, while the S&P 500 and Nasdaq Composite showed mixed trends, ending flat to marginally lower.

Follow Live Updates With Mint: US Presidential Elections 2024 Live

"On the global front, geopolitical developments, particularly the Iran-Israel situation, will be closely monitored for their potential impact on crude oil prices. Markets worldwide may adopt a cautious "wait-and-watch" stance ahead of the US presidential election," said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Key macroeconomic data releases—such as the US jobs report, GDP data, and China’s PMI manufacturing data—will be important indicators, alongside the US Core PCE Price Index release on October 31, the US Federal Reserve's preferred inflation gauge. The Bank of Japan will announce its interest rate decision on October 31.

Oil Prices

International crude oil prices settled higher in the previous session, gaining four per cent in the last five days as investors are taking stock of the ongoing geopolitical conflict in the Middle East, which is leading to crude supply concerns, ahead of the high-stakes US presidential elections next month.

Brent crude futures settled $1.67, or 2.25 per cent higher, at $76.05 a barrel. US West Texas Intermediate (WTI) crude settled up $1.59, or 2.27 per cent, to $71.78. Both benchmarks fluctuated, rising on Monday and Tuesday before falling on Wednesday and Thursday due to the Middle East risk expectations.

Brent settled four per cent up on the week, while WTI settled 3.7 per cent higher in the last five sessions. Back home, crude oil futures settled 2.18 per cent higher at ₹6,040 per barrel on the multi-commodity exchange (MCX).

Also Read: Oil gains 4% in five days over Middle East conflict ahead of US presidential elections; Brent at $76/bbl

Corporate Action

Shares of several major companies will trade ex-dividend in the coming week, starting from Monday, October 28, such as ICICI Lombard General Insurance Company Ltd, Infosys Ltd, Mazagon Dock Shipbuilders Ltd, among others. Some companies have also announced corporate actions such as share buybacks, bonus issues, and stock splits. Check full list here

Technical View

After four weeks of decline, the Nifty index is approaching support near the 24,000 level. According to Ajit Mishra – SVP, Research, Religare Broking Ltd, a break below this could further weaken sentiment, potentially pushing the index toward the 200-day exponential moving average (DEMA) around the 23,450 mark. 

On a rebound attempt, resistance could emerge first at the 100 DEMA near 24,500 and then around 24,850. Although most sectors, except IT, remain under pressure, oversold conditions might trigger selective rebounds.

“Traders should continue with a “sell on rise” strategy and exercise extra caution, especially with midcap and smallcap stocks. Amid the prevailing negativity, investors may consider gradually accumulating high-quality stocks with a long-term investment horizon,” said Mishra.

Santosh Meena of Swastika Investmart added that Nifty has broken down from a head-and-shoulders pattern, increasing the likelihood of a test at its 200-day moving average (DMA) around the 23,400 level. Intermediate support is at 24,000-23,900, while 24,600-24,700 remains an immediate resistance zone, with 25,000 as a significant hurdle on the upside.

Bank Nifty has declined over 7.5 per cent from its all-time highs and fell by 2.51 per cent this week, closing below the 51,100 mark and the 21-week EMA, signalling increased selling pressure. This downturn follows disappointing Q2 results from AU Bank, IndusInd, and Kotak Bank. 

“Immediate support is positioned at 50,200; breaching this level could extend the decline to 49,600. Conversely, the 51,100 EMA will serve as resistance, with a strong close above it potentially inviting buying interest towards 51,800,” said Palka Arora Chopra, Director of Master Capital Services Ltd.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.