India Inc. witnessed a big setback in the preceding week. The clock stopped ticking - the Titan left us. It is hard to believe that Ratan Tata is no more amongst us. He was a beacon of integrity, ethical leadership and philanthropy.
A person who has imprinted an indelible mark on the world of business and beyond, this is a loss not just to India Inc., but to humanity as well. He will forever soar high in our memories, and in the countless hearts he has touched.
Markets in a Nutshell
A lot happened on the Indian equity markets in the past week. The two key highlights for the week, which kept the indices volatile, and investors on their toes, were:
The RBI remained status quo on rates, and
SEBI issued a circular discontinuing all weekly derivative contracts except Nifty 50 and Sensex
The markets ended the week marginally lower, taking a pause from the sharp decline seen previously. The week started on a negative note due to continued selling pressure from foreign investors, but strength in select heavyweight stocks helped limit losses in the latter sessions.
By the end of the week, both benchmark indices, Nifty and Sensex, recorded modest losses, closing at 24,964 and 81,381, respectively. The midcap index though showed some strength after a significant fall in the previous week, and ended in the green.
There was also some strength seen in the sectors of Pharma, Auto, and IT. Broader indices continued to show relative outperformance for the second consecutive week, gaining over a percent each.
The Two Big Events
Two big events that drove volatility for the markets were:
RBI’s status quo
The markets had been anticipating a 25 bps rate cut in repo rates. Expectations heightened especially after the US Fed cut rates - with inflation under control, and the jobs market showing weakness in the US
However, considering the current liquidity scenario, inflation levels and risks to inflation, the RBI left rates unchanged, while upping its stance to Neutral, with just one member on the panel voting for a rate cut
We continue to maintain our expectation - there is still some time before the RBI cuts rates
Discontinuation of Weekly Derivatives Contracts by SEBI
SEBI came out with a circular, and discontinued all weekly derivative contracts other than the Nifty 50 and Sensex, as a measure to strengthen the equity index derivatives framework for increased investor protection and market stability
Weekly contracts that will be discontinued for BANKNIFTY, MIDCAP NIFTY and FINNIFTY. As per the circular the last trading date for weekly index options for BANKNIFTY, MIDCAPNIFTY and FINNIFTY will be November 13, November 18 and November 19, 2024 respectively
We reckon this would help curb a lot of the volatility seen on the expiry date, especially in options trades, where smaller retail players were getting affected significantly
All Eyes on Earnings
In the coming week, the market’s direction will largely hinge on corporate earnings, with major companies like Reliance, Infosys, HDFC Bank, Axis Bank, and HCL Tech set to release their results, among others.
TCS reported a weak set of numbers with miss on both revenue and margins. While the revenue miss was just a tad below our estimates, the company’s margins performance surprised us negatively. Some more notable points from the results were:
The total contract value (TCV) of deal wins at US$ 8.6 billion was below our expectations, with the 8 quarter average standing at ~US$ 9.6 billion
On the positive side, employee headcount increased by 0.9% QoQ - the second consecutive quarter of growth
Revenue from the BFSI vertical was up 1.9% Q-o-Q in US$ terms, higher than the company average growth
With the Fed easing rates and stable macro prints, the growth-recovery narrative still holds true for TCS, and the IT sector as a whole - stepping into the second half of FY25 and the whole of FY26. We have a positive view on TCS.
What Next?
For the coming week, there are three key buckets which are likely to grab headlines, and drive sentiment on the markets.
Inflation
Key domestic economic data, including CPI and WPI inflation, are scheduled for release, which could influence market sentiment
The Big IPO
Hyundai Motors India is tapping the primary market floor in the coming week (October 15, 2024 to October 17, 2024). With a price band of Rs 1865 -1960, the company is planning to raise Rs 27,870 crore
The automobile space is a vibrant one and we opine a lot of interest will be there for the IPO. The oversubscription being witnessed for IPOs these days can be expected to get replicated for the Hyundai IPO as well
While we have been of the opinion that IPOs are usually overpriced, and that these shares can be acquired even after the listing, those looking at investing from a long-term perspective can opt for the Hyundai IPO
Global markets
The US markets have remained resilient, continuing their upward trend despite mixed cues. However, this positivity has yet to spill over to the Indian markets
On the other side, anticipation of more stimulus measures from China may continue to support the demand for metal stocks
Investors are also likely to closely track updates on geopolitical tensions - particularly their impact on crude oil prices, and foreign fund flows. While the DIIs are buying the FIIs are constantly seen as net sellers. We expect FII outflow to continue till Diwali
India Equity - Institutional Funds Flow (Rs. crore)
From a technical perspective, Nifty's bias is expected to remain negative unless it decisively reclaims the 25,350 level, representing its 20-day exponential moving average (DEMA).
On the downside, immediate support is seen at 24,700, with major support at 24,400, the 100-day DEMA. However, the easing of the volatility index, India VIX, offers a positive sign.
Sector-wise, IT, pharma, and metals continue to be preferred, while other sectors may experience mixed participation.
Traders are advised to align their strategies accordingly, favoring hedged positions to navigate the markets.
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