Week Ahead: Q1 Results, Budget updates, global cues among key market triggers this week; Nifty eyes 25,000

Indian stock market continued its record bull run picked up since June-end led by return of foreign inflows, albeit few phases of consolidation with the new earnings season. Bulls have tightened their grip on D-Street after a spectacular month-opening ahead of the Union Budget 2024 scheduled for later this month.

In the third week of July, investors will keenly eye any Union Budget-related or government policy announcements as they may result in stock-specific action. The next set of April-June quarter results for fiscal 2024-25 (Q1FY25), domestic and global macroeconomic data, corporate announcements, foreign fund inflow, crude oil prices, and global cues will drive market movement this week.

Indian markets experienced one of the best weeks of 2024 after domestic equity benchmarks Sensex and Nifty 50 extended their gains for the sixth consecutive week, jumping to record closing highs in the previous session. IT stocks joined an over month-long record-breaking rally after market-leader Tata Consultancy Services (TCS) Q1 results signalled early signs of recovery in the sector.

Despite a subdued start, the Nifty remained range-bound for most of the week, with buoyancy in the final session leading to decent gains. Both indices hit fresh record highs, with Nifty closing above the 24,500 mark for the first time. The Nifty IT index emerged as one of the top performers, driven by robust earnings from TCS, resulting in a weekly gain of approximately 3.5 per cent.

US rate-sensitive IT stocks surged 4.5 per cent jump, also boosted by rising hopes of a Fed interest rate cut in September after consumer prices fell in June. IT companies earn a significant share of their revenue from the US.

Sectorally, FMCG, IT, and pharma were top performers, while metal, realty, and auto sectors saw profit-taking. The broader indices paused after their significant performance and settled flat. On a weekly basis, the BSE benchmark jumped 522.74 points or 0.65 per cent, while the Nifty climbed 178.3 points or 0.73 per cent.

The broader rally started in early June after the Lok Sabha election results ensured policy continuity and over strong economic growth prospects, record-high inflows from mutual funds and the return of foreign investors.

The Nifty 50 has surged around nine per cent in that period, hitting all-time highs numerous times and taking its gains for the year to about 13 per cent, outperforming other emerging markets and even most major stock markets.

Besides quarterly earnings, analysts say the next key event is the Union Budget on July 23, 2024, which will be of particular relevance for capex-linked infrastructure, capital goods, manufacturing and consumption-linked sectors.

"There is a mix of anxiety and excitement in the market due to the muted Q1FY25 earnings forecast and the expectation of a growth-oriented budget. On the other hand, the guidance of a strong GDP for FY25 evoked investor sentiment,'' said Vinod Nair, Head of Research, Geojit Financial Services.

‘’We expect stock-specific moves to gain traction due to the ongoing earnings season; indeed, IT will be in the limelight due to the good start to the earnings and outlook. The good progress in the monsoon and expectations of an uptick in volumes aided FMCG stocks to outperform the main indices,'' added Nair.

In the coming week, primary markets will witness usual action as some new initial public offerings (IPO) and listings are slated across the mainboard and small-and-medium enterprises (SME) segments. The holiday-shortened week will be critical from the domestic and technical point of view as investors will track corporate results, Budget-related updates, and macroeconomic data.

Overall, market analysts say that despite the overall positivity, increased volatility during the earnings season is normal. Nifty 50 could aim for 25,000 if it can sustain the current pace, while profit-booking is possible. Experts advise traders to concentrate on stock selection and adopt a hedged approach.

Here are the key triggers for stock markets in the coming week:

Q1 Results, Budget 2024 Updates In the coming week, attention will be on earnings and Union Budget updates, likely increasing volatility, as per market experts. Investors will be busy analyzing corporate earnings in the coming week as the next batch of Q1FY25 results are set to be released.

IT majors Infosys and Wipro will unveil their June quarter results on July 18 and 19. Heavyweights Reliance Industries, Asian Paints, UltraTech Cement, Persistent Systems, L&T Technology Services, among several other companies will report their Q1FY25 results this weeḳ.

Finance Minister Nirmala Sitharaman will present the highly anticipated Modi 3.0's first Union Budget on July 23, 2024. President Droupadi Murmu approved a proposal to summon both houses of Parliament between July 22 and August 12 for the Budget session. This will be the first budget presented by the PM Modi-led government since it was re-elected for a record third term in June.

‘’India’s union budget in July is a key event, with hopes pinned on growth-oriented policies and the development of the monsoon season, which will also be significant points of interest for investors and traders,'' said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.

4 new IPOs, 1 listing to hit D-Street

In the mainboard segment, Sanstar IPO will open for subscription on July 19. From the SME segment, Tunwal E-Motors IPO will open for bidding on July 16. Also, Kataria Industries IPO and Macobs Technologies IPO will open for subscription on July 16.

Among the ongoing issues, Sahaj Solar IPO will close for bidding on July 15. Aelea Commodities IPO, Sati Poly Plast IPO, Prizor Viztech IPO, and Three M Paper Boards IPO will close for subscription on July 16.

Among listings, shares of Sahaj Solar will get listed on NSE SME on July 19.

FII Activity The foreign institutional investors (FIIs) extended their buying last week, as they bought equities worth of ₹3,844 crore, while domestic institutional investors (DII) bought equities worth ₹5,390 crore. Foreign portfolio investors (FPIs) also extended their buying streak and pumped ₹15,352 crore in equities this month. The net investment value including debt inflow stands at ₹19,631 crore.

"The most significant feature of institutional equity flows into the Indian market is the erratic nature of FII flows and the steady growth nature of DII flows. DIIs have been sustained buyers in all months of CY 24 so far whereas FIIs alternated between buying and selling,'' said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

FIIs were sellers in January, April and May (cumulative selling of ₹60,000 crore) and buyers in February, March and June (cumulative buying of ₹63,200 crores ). The reason for the divergence is that FII activity is influenced by external factors like US bond yields and valuations in other markets while DII activity is largely driven by domestic flows in the market, as per the analyst.

‘’Inflows into DIIs like mutual funds are now on an upward trajectory and this will keep the markets resilient. FII flows will continue to be erratic influenced by global factors. Better-than-expected results from IT majors who have come out with results so far indicate potential for FII buying in these stocks where valuations are not excessive,'' added Dr. V K Vijayakumar.

According to Manoj Purohit, Partner and leader - FS Tax, Tax and Regulatory Services, BDO India, "The net FPI inflows has turned green this month, both in the equity and debt segment. The reason for a quick rebound in capital markets can be attributed to the positive sentiments, stable government’s assurance on continuity of reforms, tepid US Fed rates and a strong domestic demand.''

‘’The recent announcements in IFSC Gift City for wide participation for foreign and Indian investors has also diverted the international players to allocate a substantial portion of their global portfolio to India markets,'' added Purohit.

Global Cues The global market ended the week on a positive note with US and UK indices closing at (+1.59 per cent) 40,000 and (+0.60 per cent) 8,252 respectively. The global markets ended in green as US Federal Reserve Chairman Jerome Powell indicating "modest" progress in reining in inflation.

‘’On the global front, the release of softer-than-expected US inflation to a one-year low added fresh levers of optimism. This has raised the probability of a September US Fed rate cut to 90 per cent, which is evident in the fall of the dollar index,'' said Geojits' Vinod Nair.

On the global front, China will be a significant focus. The country is scheduled to announce its gross domestic product and industrial production numbers. There is also speculation about a major economic stimulus announcement, which could keep the metal sector in the spotlight, according to analysts.

Other global factors to watch include the speech by the US Federal Reserve Chairman, US retail sales figures, EuroZone inflation, European Central Bank and macroeconomic data from Japan. These developments are likely to influence market movements and investor sentiment.

Oil Prices International crude oil prices settled slightly lower in the previous session after investors weighed weaker US consumer sentiment against fresh hopes for a US Federal Reserve interest rate cut in September. Recent US inflation data led Wall Street experts to lift bets for rate cuts this year. Most analysts see two rate cuts in 2024 if the inflation cooling trajectory stays on the current pace.

Brent crude futures settled 37 cents lower to $85.03 per barrel. US West Texas Intermediate (WTI) crude futures dropped 41 cents, or 0.5 per cent, to close at $82.21 per barrel. On the week, Brent futures fell over 1.7 per cent after four weeks of gains. WTI futures posted 1.1 per cent weekly decline.

Corporate Action A slew of companies will declare dividends this week and shares will trade ex-dividend between July 15-19. Some of these upcoming ex-dividend stocks include Dr. Reddy's Laboratories, Tata Consultancy Services (TCS), Kotak Mahindra Bank, Nestle India, Dabur India, Life Insurance Corporation (LIC) of India, JSW Infrastructure, IDFC Bank, among several others. Check full list here

Technical View According to Ajit Mishra – SVP, Research, Religare Broking Ltd, ‘’Having surpassed the 24,500 hurdle, the Nifty could aim for the 25,000 mark if it can sustain that level. In the event of profit booking, we expect the index to respect the 23,900-24,250 zone. Despite the overall positivity, increased volatility during the earnings season and budget-related discussions are normal.''

‘’Hence, a hedged approach is advisable, especially for overnight leveraged positions, along with careful monitoring of position sizes. We recommend focusing on IT, energy, FMCG, and pharma for long trades. For themes like railways, defense, and other select PSUs, which have seen significant recent gains, traders should maintain extra caution and suggest trailing stop losses on the rise,'' added Mishra.

Santosh Meena, Head of Research, Swastika Investmart Ltd also agreed that the Nifty 50 index is exhibiting strong momentum and is fast approaching the psychological mark of 25,000 on the technical charts, as of now.

‘’While some momentum indicators are signaling overbought conditions, the market may remain overbought for a while longer. An intermediate hurdle is expected around the 24,700 level. On the downside, immediate support is around the 10-day moving average (10-DMA) at 24,300, while the 20-day moving average (20-DMA) at 24,000 will be a key support level,'' said Meena.

On the daily chart analysis, Nifty has exhibited a breakout from the psychological resistance level of 24,500, indicating that the bullish trend is likely to continue into the next week, according to Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd.

‘’The outperformance of IT stocks has reinforced the market's bullish undertone. Despite this positive trend, buying on dips is expected to provide resilience to the market. However, strong upward movements may attract profit booking, making a sustained rally challenging,'' said Nanda.

Bank Nifty experienced a robust breakout from a falling wedge pattern, closing of the session above the critical 52,000 level, suggesting a continuation of its bullish trend into the upcoming week. ‘’To confirm an upward movement towards the 54,000 level, the index must decisively break the 53,000 mark. Support is firmly established in the 52,200-52,000 zone, a break below this range could trigger further downside movement towards 51500 and 51,000,'' said Nanda.