Q3 earnings to steer mkt direction

Boosted by the earnings-led rally in technology stocks, the domestic stock markets ignored higher-than-expected US inflationthat may delay US Fed decision to start cutting interest rates and geo-political tensions in the Red Sea area; markets closed at new record highs for the week ended. NSE Nifty rose 184 points to 21,895 points, and BSE Sensex jumped 542 points to 72,568 points. In the broader market, the Nifty Midcap-100 and Smallcap-100 indices underperformed benchmarks, rising only 0.25 percent and 0.7 percent respectively. After airstrikes by the US & UK in the Houthi-controlled areas of Yemen, tensions in the Red Sea area have escalated and all focus will be on international crude oil prices in coming weeks. Experts feel the geo-political tensions will keep supporting the oil prices. Concerns about a broader conflict in the Middle East and potential direct involvement by Iran posed threats to output and flows in a region responsible for a third of the world’s crude production.

Nearly 200 companies will be releasing their December quarter numbers during the coming week with a major focus on RIL, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Hindustan Unilever, Asian Paints, LTI Mindtree, InduSind Bank, Ultratech Cement, and Jio Financial Services.Among others, Angel One, Federal Bank, ICICI Lombard, Jindal Saw, L&T Tech, Union Bank of India, Credo Brands Marketing, Network18 Media & Investments, TV18 Broadcast, ICICI Prudential Life Insurance, InnovaCaptab, Jindal Stainless, Polycab India, Poonawalla Fincorp, Hindustan Zinc, One 97 Communications (Paytm), RBL Bank, and IREDA will also announce numbers in the coming week. US markets are closed on Monday on account of Martin Luther King Day. On an average annual basis, the Indian market, as represented by all stocks on the National Stock Exchange (NSE), crossed a market cap-to-GDP ratio of 100 per cent for the first time in 2020-21. It is now 118 per cent on estimated 2023-24 GDP, an all-time high. For real returns to continue at historic levels from here, the economy will have to start delivering profit without so much government help, or valuations will have to rise even higher—both big asks. This doesn’t mean stock prices are sure to fall, or that the India will break its long-term record of no real losses over two decades. But even bulls should plan for lower returns ahead. Stocks Are Forever. That Doesn’t Mean Now Is the Time to Buy.

F&O / SECTOR WATCH

On the back of better than expected Q3 performance from IT majors and sector rotation by market players; the derivatives segment witnessed a brisk trading. On the weekly options front, the maximum Call Open Interest was seen at 22,500 strike, followed by 22,300 & 21,900 strikes. On the Put side, the 21,700 strike owned the maximum Open Interest, followed by 21,000 & 21,800 strikes.The Bank Nifty index displayed strength by overcoming the initial hurdle at 47,500, signalling potential upward movement towards the 50,000 mark.

In the past year, stock markets have risen with the help of technology stocks. This has seen a rebound in many market giants like NSE Nifty, which was 184 to 21,895 points, and the BSE Sensex rose from 542 points to 72,568 points.

(The author is a senior maket analyst and former vice- chairman, Andhra Pradesh State Planning Board)