Sensex, Nifty continue to scale back to pre-covid levels; here’s what drove stock markets this week

TCS reported its June quarter numbers this week and as expected profits slipped by 13.8%.

Domestic benchmark indices despite ending this week’s last trading session in the red gained half a percent during the course of the week with volatility coming back to haunt investors. With this, Sensex and the 50-stock Nifty are now up over 41% from their March lows. In the coming week, markets are expected to react to June quarter results of listed companies, global stock markets and not to forget the AGM of Reliance Industries. Analysts are still betting on stock-specific actions to steer the market with domestic factors not posing any grave threat in the coming weeks.

Foreign and domestic investors: Foreign Institutional Investors (FII) sold domestic stocks worth Rs 1,031 crore on Friday and Domestic Institutional Investors (DII) followed them selling Rs 431 crore worth stocks. During the week FIIs were net sellers of domestic shares along with DIIs, who sold every day. 

Results season back in focus: TCS reported its June quarter numbers this week and as expected profits slipped by 13.8%. On Saturday Radhakishan Damani’s Avenue Supermarts reported a 88% fall in net profit. DMart is expected to have been hit the least. “Q1FY21 results are a bit slow but will be important to assess the impact of post lockdown scenarios and the extent of demand uptake in the economy. Nonetheless, results are expected to be exceptionally weak but commentary is expected to be strong enough which would keep the prices where they are in a narrow range,” said Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote. Wipro, Mindtree, LTI, Bandhan Bank, Cyient, LTTS, HCL Tech, HDFC Bank, Mahindra Finance, Federal Bank will announce results in the coming week.

Global Markets: Rising number of coronavirus cases and the incoming macro data is keeping stock markets across the globe on the edge. US markets remained flat but new claims for unemployment benefits continued to remain near the record high. “The European markets ended lower due to the rising tensions between the US and China and also due to the higher coronavirus cases in the USA. In a positive development, the borrowing cost in the Eurozone has fallen below the Pre-Covid levels, signifying success of the European Central Bank and other policy makers in restoration of confidence among investors,” said ICICI Securities.

RIL AGM: Mukesh Ambani’s Reliance Industries will hold its AGM this week and investors will be all ears to the man who managed to erase the net debt of his firm during the coronavirus pandemic. “Given recent past records, RIL’s AGM improves the mood of its stock price and given the huge weight in index, markets too are expected to remain on a higher side unless negative global cues spoil the RIL AGM party,” Jimeet Modi said.

Technical outlook By ICICI Securities:
In the coming week we expect index to undergo healthy consolidation in the broad range of 10900-10600 amid stock specific action as we enter the Q1FY21 result season. We expect index to consolidate based on following thesis:

Past four weeks 14% up move (from June low of 9544) helped the Nifty to approach in the vicinity of 200 days SMA, placed at 10885. However, such as sharp up move hauled weekly stochastic oscillator in overbought territory (currently placed at 93), indicating impending breather at higher levels, that would make market healthy. Over past quarter, we have observed significant jump in daily cash turnover. As compared to April average ~49000 cr., current turnover stands near 60000 cr. An increasing trend suggests growing appetite for equities which augurs well from medium term perspective.