Market momentum in the earning season will be decided by outcomes of quarterly earnings and management commentary on recovery. Sectors like IT, Pharma and Realities have started showing increased buying interest in anticipation of strong quarterly earnings.
“We expect this sector-specific momentum to continue during the weeks ahead. However, lacklustre global market and FII net sellers are likely to increase volatility in the market,” said Vinod Nair, Head of Research at Geojit Financial Services.
Here are the key factors that may steer the market going ahead:
Q1 earnings: The June quarter earnings season will gather pace now. A number of large companies from banking, auto and IT sector will announce their numbers this week. They include HCL Tech, Bajaj Finance, Asian Paints, Bajaj Finserv, Jubilant Foods, HUL,
, Bajaj Auto, IndiaMART, , JSW Steel, YES Bank and .
IPO listing
Two companies–road sector contractor GR Infraprojects and specialty chemical company Clean Science & Technology–will debut on Monday. Both names generated huge interest from primary investors during the book building round. Their shares are trading at around 55-60 per cent premium in the grey market, signaling strong listing gains.
Besides, shares of Zomato will be allotted to investors during the week. Apart from that, bidding for the issue Tatva Chintan Pharma Chem will also generate investor interest, It has already been fully subscribed on the first day of bidding.
FPI flow: The flip-flop from FII investors continues. In July, they have emerged as net sellers of Indian equities so far, As per NSDL data, FPIs sold equity worth Rs 4515 crore for the month, as of July 16. FPI activity has been hugely volatile so far in 2021. They were aggressive buyers in Jan, Feb and March. But on concerns of the adverse impact of the second wave of the pandemic, FPIs sold in April & May. But having missed the rally, came back in June and started buying. But at higher levels, they have again started selling in July.
“Since valuations are high and FIIs are sitting on big profits they can be expected to sell at higher levels. This is the reason why the retail activity is now focussed on mid and small-cap space where FPI activity is insignificant,” said VK Vijayakumar, Chief Investment Strategist at Geojit financial services.
Interest rate decisions
The next week will also see European Central Bank holding its policy rate meeting. Though no change is expected, its decision on the bond buying programme and commentary will be keenly watched. Besides, the Bank of Japan will also release its minutes from the last policy meeting. Any indication that a rate hike is imminent may change the direction of equity markets.
Technical outlook
The Nifty 50 index closed positive for the week, however, the market is now constrained within a small range of 400 points and is struggling to take a decisive direction. Markets are trading overbought in the short term and the majority of this rally has come on a slowed-down momentum as compared to the major uptrend, said analysts.
“15,600 zone has been established as a strong support and until that breaks we suggest traders to maintain a cautiously bullish outlook. A decisive close above 15,950 may trigger a test of 16,200 on the higher side, said Nirali Shah, Head of Equity Research, Samco Securities. .
