• Tue. Feb 27th, 2024
The trajectory of Nifty 50 will depend on the reaction to Reliance and ICICI Bank earnings

All eyes will be on the US Federal Reserve this week as the US Federal Reserve policy meeting takes place from July 25. Traders are pricing in a 99.2 percent chance the Federal Reserve will raise interest rates by 25 basis points, according to the CME Fed Watch tool.

The Nifty 50 will have to wait for the date to cross 20,000 as the index snapped a six-day winning streak on Friday. Heavyweights such as Reliance Industries and Infosys and other IT stocks were under pressure on Friday’s retreat. Although the index posted its biggest one-day decline in four months, it managed to find support at the 19,700 mark.

19,700 will emerge as a critical level to watch as the July series expires this week. Before Friday’s decline, the Nifty 50 had risen over 1,000 points in the July series. However, it’s still on track for a fourth consecutive F&O Series win. If that happens, it will be the first time since December 2016 to May 2017 that the index has had four consecutive positive F&O series.

Nagaraj Shetty of HDFC Securities said a short negative candle has formed on the daily chart of the Nifty 50, indicating a short-term top reversal pattern. But it requires follow-through weakness to call it a downward reversal pattern. According to Shetty, the Nifty 50 has a tough resistance at the 20,000 mark.

“The 10-day exponential moving average is at 19,650 level and the important 20-day exponential moving average support is at 19,425. Hence, an upside bounce is likely from those levels,” he said. On the upside, 19,850 – 19,900 will act as an immediate barrier.

Nifty Bank cooled off Friday’s highs and closed lower. But the index managed to outperform the benchmark index and close above 46,000. All Nifty Bank reactions on Monday will depend on how it reacts to the quarterly results of index constituents like ICICI Bank, Kotak Mahindra Bank and RBL Bank.

In the July series, Nifty Bank rose nearly 1,700 points. This is also the fourth consecutive positive F&O series for the index. The last time this happened was between October 2017 and January 2018.

Options data on Nifty Bank suggests the index will remain range-bound due to significant option selling on at-the-money strikes, said Kunal Shah of LKP Securities. Support below the index is seen at 45,900, which also happens to be Friday’s low, while resistance above the index is seen at 46,350 – 46,400 levels.

Reliance Industries will be the stock to watch today as it reacts to quarterly results to be reported after market hours on Friday. The reaction seen in Reliance will determine the future path of the Nifty 50. During the quarter, strong contribution from consumer, upstream business offset decline in O2C business. However, the company’s Global Depository Receipt (GDR) fell nearly 6 percent on Friday.

“I have been positive on Reliance for some time and I maintain my view that the opportunity to unlock value within Reliance Industries is huge. We have seen the Jio financial unbundling happen now, but the big thing for investors will be the unbundling of Jio platforms and retail. For a long-term investor, Reliance should definitely be in his portfolio,” said Sudeep Bandopadhyay of Inditrade Capital. CNBC-TV18.

What do F&O queues indicate?

July futures of the Nifty 50 fell 7.5 percent or 8.09 lakh shares in open interest on Friday. They are now trading at a premium of 31.4 points compared to the earlier discount of 8.95 points. On the other hand, Nifty Bank’s July futures were down 6.8 percent or 1.54 lakh shares in open interest. Put-call ratio of Nifty 50 is 0.91 from 1.44 earlier.

RBL Bank is off the F&O ban list from today’s session, while PNB, Balrampur Chini, L&T Finance Holdings, Manappuram Finance, Indiabulls Housing Finance and Delta Corp remain under the ban period.

Nifty 50 Expires on July 27:

As the weekly and monthly options expire this Thursday, the Nifty 50 call added strikes to open interest between 19,800 and 19,900, with the 19,900 strike call getting the maximum open interest additional.

Struggle OI change Premium
19,800 58.68 lakhs added 97.75
19,900 74.34 lakhs added 59.5
19,850 38.03 lakhs added 76.7

Nifty 50 Expires on July 27:

On the put side, strikes between 19,600 and 19,750 were seen in excess of open interest. 19,650 puts has seen maximum open interest addition to expiry this Thursday.

Struggle OI change Premium
19,650 32.14 lakhs added 58.3
19,600 18.53 lakhs added 46.2
19,750 6.33 lakhs added 98.7
19,700 5.73 lakhs added 77.6

Let’s look at the stocks that saw short covering on Friday, meaning a rise in price but a fall in open interest:

store up Price change OI change
Indian Oil Corporation 0.45% -32.57%
United Spirits 6.35% -23.32%
Atul 7.04% -21.01%
PI Industries 0.82% -20.97%
Laboratories of Divi 0.35% -12.83%

Let’s look at the stocks that saw a long unwinding on Friday, meaning a decline in both price and open interest:

store up Price change OI change
Bajaj Finserv -0.29% -10.21%
REC -0.03% -10.05%
M&M Finance -2.92% -10.00%
Escorts Kubota -0.16% -9.83%
Sale -0.06% -9.37%

Here are the stocks to watch ahead of Monday’s trading session:

  • ICICI Bank: Business momentum continues strong in the June quarter. Best investment growth in nine quarters. Return on Assets (RoA) was an all-time high of 2.39 percent. Both gross and net NPAs are at an eight-year low. Net interest income and net profit are higher than CNBC-TV18 poll.
  • Kotak Mahindra Bank: Investment growth of 22 percent year-on-year is the best in 16 quarters. Net interest margin was down at 5.57 per cent sequentially, but the highest among large banks. A CNBC-TV18 poll on NII in-line said net profit was ahead of expectations.
  • Paytm: Net loss widens sequentially to Rs 358.4 crore, while gross income remains flat. EBITDA at Rs 359 crore, up 53.4 per cent sequentially, against an EBITDA loss of Rs 275 crore year-on-year. GMV grew by 35 percent year-on-year. Average monthly users grew 23 percent year-on-year to 9.2 crore.
  • Yes Bank: Weak credit growth leads to the weakest NII growth in nine quarters, while the slippage ratio is at a seven-quarter high. Gross NPA was 2 percent from 2.17 percent sequentially and net NPA was 1 percent from 0.83 percent sequentially.
  • DLF: Sales driven by existing projects, no big launches in June quarter. After the stellar March quarter, the booking trend normalizes. The company re-enters the Mumbai market with net debt at its lowest level in years.
  • Vedanta: Net profit for the June quarter fell to Rs 2,640 crore from Rs 4,421 crore in the same period last year. Despite an exceptional gain of Rs 1,780 crore, there was a decline in net profit. As of the June quarter, the company’s net debt stood at Rs 59,192 crore from Rs 45,260 crore in the March quarter and Rs 26,799 crore in the June quarter last year.
  • What do global indicators indicate?

    US markets were mixed on Friday as traders continued to assess the latest round of corporate earnings. The Dow Jones edged up 2.5 points, extending its winning streak to a 10th straight session.

    This is the longest winning streak in the 30-stock index since August 2017. The S&P 500 added 0.7 percent for the week, while the Dow rose 2.1 percent. The Nasdaq was down 0.6 percent for the week.

    All eyes will be on the US Federal Reserve this week as the US Federal Reserve policy meeting takes place from July 25. Traders are pricing in a 99.2 percent chance the Federal Reserve will raise interest rates by 25 basis points this week, according to the CME Fed Watch tool.

    Foreign investors were net sellers in the cash market on Friday, the first selling number in several sessions, while domestic investors were net buyers.

    Nifty 50 has crucial support at 19,700 level as it has significant put writing, while top resistance is seen at 20,000 mark, LKP Securities Rupak D said. If the index falls below 19,700, it could lead to a significant correction, he said.

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