Inflow of foreign funds continued with heavy buying seen in IT, banks and financial stocks during the past week, and hence the outperformance. Media, auto and telecom stocks were the laggards.
With massive strides, Nifty is now trading at 3.4 times its book value, which is closer to its long term average of 3.5 times, said analysts. This outlines how expensive the market has become.
“We believe markets are in a correction phase due to a quick bounce to near the pre-Covid level. It has brought some volatility, which may stay for some more time. The market will look forward, with high hopes on Q2 results, an end to the moratorium saga and update on stimulus plan. IT, telecom, pharma and banks will be the sectors under focus with positive bias,” said Vinod Nair, Head of Research at Geojit Financial Services.
Here are key factors that will guide markets next week:
Earnings season will be in full flow this week. Britannia, ACC, HDFC Life Insurance and Rallis India will come out with their earnings on Monday, followed by Bombay Dyeing, HUL, Granules India, Hindustan Zinc, IEX and Kajaria Ceramics on Tuesday. Bajaj twins, GMM Pfaudler, JK Tyre, UltraTech Cements and VST Industries are scheduled to declare their earnings report on Wednesday, while Asian Paints, Bajaj Auto, Bajaj Holdings, Biocon, Coforge, HDFC AMC, Mphasis, SBI Cards and Ambuja Cements will announce the same on Thursday. Atul, ICICI Lombard, JSW Steel, Nestle India, Tech Mahindra and Persistent Systems will come out with their numbers on Friday followed by Polycab India on Saturday.
IPO: Equitas Small Finance Bank
The initial public offering (IPO) of Equitas Small Finance Bank will open for subscription on October 20, Tuesday. The bid will close on October 22. The issue, while has got a number of ‘subscribe’ ratings from brokerages, is trading at a tepid grey market premium, indicating listing premium is not likely to be too much. The expected date of the listing has been fixed for November 2.
FII flows remain robust
The rally in the market has been supported by robust foreign institutional flows. In the previous week, foreign fund managers poured in Rs 3,243 crore, taking net investments for October to Rs 8,488 crore. Investors will keep an eye on the flows to get a cue on how the market will behave.
Investors will also track the reemergence of Covid-19 in the developed world. Many countries have reported higher counts of patients, leading to increased restrictions. Meanwhile, the US Midwest is experiencing a record number of cases, putting authorities on the highest level of alerts. In India, the patient count is nearing the 75 lakh mark but the number of daily reported cases are coming down.
The Reserve Bank of India (RBI) will release bank credit and deposit growth data for the fortnight ended October 9 on Friday, which will be eyed by investors of bank stocks. It will also release forex reserve data for the week ended October 16 on the same day, which will show how much greenback the central bank has been buying.
Nifty50 posted another big bearish candle during the week. Key indices are still trading within the rising channel on a weekly chart and need to close below the channel support to confirm the beginning of a bearish trend. “Traders are advised to maintain a cautious stance and be observant of the market’s response to the channel support. Support and resistance in the short term are placed at 11,300 and 11,900,” said Nirali Shah, Senior Research Analyst, Samco Securities.