The market continued to close higher for yet another week that ended on November 8. However, there were moderate gains due to selling pressure on Friday.
Overall, it was a consolidation week after Sensex hit a record high of 40,749.33 on optimism over signs of progress in the US-China trade deal and reforms for realty sector. But the downgrade of India's outlook to negative by global rating agency Moody's made bulls cautious towards the end of the week.
The Nifty50 gained 0.14 percent, but settled way below psychological 12,000 levels. The BSE Sensex was up 0.39 percent. However, the broader markets underperformed frontliners as the Nifty Midcap index fell a percent and Smallcap index shed 0.8 percent.
As most of earnings season, which was slightly better-than-expected, seems already priced in by the market (gained over 4 percent since the beginning of Diwali and nearly 13 percent upside since September 20), the current consolidation and some amount of profit booking was warranted, and that this is expected to continue in coming sessions, experts feel.
"Valuations are back to premium levels specifically for large and blue-chip stocks which could have some impact in the trend of the market in the short term. But outlook for equity market has improved a lot for long term gains," Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.
The Q2 results provided hope that earnings growth in the second half of FY20 will expand due to more reforms, government stimulus, improvement in the global economy, post-monsoon season and cut in interest rates, he said.
The market will remain shut on November 12 for Guru Nanak Jayanti.
Here are 10 key factors that will keep traders busy this week: Earnings
As we are in the last week of the September quarter earnings season. More than 2,700 companies will announce their results in just four days.
It includes larecaps like Coal India, Hindalco, Britannia Industries, Aurobindo Pharma, Bharti Airtel, ONGC, Grasim Industries, Motherson Sumi Systems, Oil India, Cadila Healthcare, ABB India, NALCO, etc.
Among others, Metropolis Healthcare, General Insurance Corporation, Mahanagar Gas, Symphony, IRCTC, Thermax, Blue Star, Coffee Day Enterprises, Bata India, Vodafone Idea, Glenmark Pharma, Dish TV, Page Industries, Dilip Buildcon, etc. will also be closely watched by the Street.
The company had postponed results announcement date by over two weeks to November 14 as it sought more clarity and "support" from the government on Rs 42,000-crore statutory dues it owes to the exchequer following the Supreme Court of India's judgement on annual adjusted gross revenue.
Hence, Airtel and competitor Vodafone Idea, which will also announce results on same day, will be closely watched.
Bharti Airtel, country's third largest telecom operator by subscriber base, is expected to report more than Rs 1,300 crore loss in quarter ended September 2019 with sequential decline in India wireless business and 2-3 percent QoQ fall in ARPU but this could be a steady quarter for its Africa segment, brokerages said.
"We expect a 1.5 percent QoQ decline in India wireless revenues partly due to the seasonal weakness. EBITDA for the segment will likely be down 5.5 percent QoQ. We are building a 3.3 percent QoQ decline in average revenue per user (ARPU) to Rs 127 per month," said Kotak Institutional Equities which expects loss at Rs 1,329.3 crore for the quarter.
The brokerage expects a steady quarter for the Africa business with 2.5 percent QoQ growth in revenues and marginal uptick in EBITDA margin sequentially.
US-China trade deal
An end to the 16-month trade war between the world's two biggest economies, which has slowed economic growth around the world, seems unlikely to end soon especially after US President Donald Trump's comments on November 8, and that could impact global markets.
Trump said he has not agreed to rollbacks of tariffs on Chinese goods. "China would like to get somewhat of a rollback, not a complete rollback, ‘cause they know I won’t do it. I haven’t agreed to anything," he said.
The US president also said that the trade deal with China, if completed, would be signed in the United States.
Officials from both countries on November 7 said China and the United States had agreed to roll back tariffs on each others’ goods in a 'phase one' trade deal. But the idea of tariff rollbacks met with stiff opposition within the Trump administration, a Reuters report suggested later that day.
Industrial output for September
Industrial production data for September, which will be released on November 11, is expected to see further contraction despite festive season.
Industrial output in August had contracted by 1.1 percent against 4.8 percent growth in same month last year as manufacturing output, which accounts for more than three-fourths of the entire index, showed a decline of 1.2 percent in August, against a 5.2 percent rise in in the same period a year ago.
According to Geojit, the IIP is expected to decline to 2.3 percent in September despite the festive season, as per estimates.
Experts feel the economy to pick up could take more time, though government announced several measures since August.
CPI inflation for October
CPI inflation to be announced November 12 is also expected to climb above the RBI's targeted 4 percent levels in October due to rise in vegetable prices.
"India's CPI inflation is expected to be on the higher side at 4.3 percent due to rise in vegetable prices as per consensus estimates. Both the data (IIP and CPI) released is expected to put pressure on rate sensitive stocks," said Vinod Nair.
Even a Reuters poll of economists showed that Indian retail inflation probably exceeded the Reserve Bank of India (RBI)'s medium-term target of 4 percent in October for the first time in 15 months, mainly because of rising vegetable prices.
Prices of most vegetables climbed during the month as monsoon downpours delayed harvests and disrupted supplies. That was despite a government ban on onion exports, a key component in the Indian diet. Overall food prices -- the biggest chunk of the consumer price basket -- also rose in October.
WPI Inflation for October will be released on November 14, which is expected to be flat, the lowest in nearly three and a half years.
The WPI inflation rate dropped to 0.33 percent, the lowest in 39 months, from 1.08 percent in same period last year.
Apart from that, Balance of Trade for October and foreign exchange reserve for week ended November 8 will be announced on November 15.
Foreign institutional investors (FIIs) continued to pour in money into India since trade issues between the US and Europe and Brexit has reduced and interest rate stance has upgraded from neutral to dovish.
Additionally, the economies of the US and Europe have stability which may have a positive effect on Asian countries' economies as well. FIIs are considering shifting from safe-haven assets like gold, US Dollar, US debt and equity assets to riskier emerging markets.
FII equity inflows in India turned positive from October to around Rs 15,000 crore and are likely to be positive further, led by reforms and an upsurge to the economy in the future.
But, they will be watchful due to weak financial position of the government due to cut in corporate tax cut and a slow economy. The government is hoping that divestment, spectrum sales and dividends will be an important source of income for the rest of the year.
The Nifty50 finally saw much-awaited correction on November 8, forming bearish candle on daily charts while on the weekly scale, it witnessed Doji kind of pattern formation which suggests indecisiveness among participants.
Hence, experts feel the market could see rangebound trade in coming week before moving towards its earlier record high of 12,103 seen in June.
"The overall structure indicates some rangebound trade from 11,780-12,050 in the coming truncated week. Now, any breakout from this range will provide further direction," Nilesh Ramesh Jain, Manager - Equity Research at Anand Rathi told Moneycontrol.
"We expect tepid start on Monday with some rangebound trade. The momentum might slow down as RSI which stood at 64 has reversed from overbought territory of 72 and giving a sense of caution to the bulls," he said.
Maximum Put open interest was seen at 11,600 followed by 11,500 strike while maximum Call open interest was seen at 12,000 followed by 12,300 strike.
Put writing was seen at 11,900 and 11,700 strike while Call writing was seen at 12,300 followed by 12,200 strike. Option data suggests the Nifty could be in a broader trading range of 11,800-12,200 levels in coming days.
Continuous call writing at 12,000 strike in the weekly as well as monthly expiry is hinting that upside is capped, Nilesh Jain said.
Amit Gupta of ICICI Direct said in the Nifty, the highest Put base is placed at 11,600 and a move below last week's low of 11,850 may elongate the profit booking trend towards this highest Put base, which becomes a positional buy again.
Volatility is still near elevated levels of 16 percent, which means market participants are still feeling left out and are skeptical in the current Nifty upmove; this is the factor that may keep the Nifty uptrend continued, he added.
Corporate action Here are corporate actions which will take place in coming week: Global Cues Globally, following data points will be closely watched in coming week: