Sensex, Nifty back at pre-COVID level this month; will markets start November with gains?

Indian share markets ended the month of October with over 2 per cent gain even as investors reacted negatively to the second wave of the COVID-19 cases in Europe and other countries which led to a lockdown for the second time. The major event lined up for next week is US presidential election 2020, which analysts believe will induce more volatility in the stock market. On the last trading day of the month, Sensex and Nifty slipped for the third consecutive day. Sensex ended 135 points down at 39,614 while Nifty 50 closed at 11,642 mark.

Key things to know before going into trade in November-

RIL shares in focus: In Monday’s trade, Reliance Industries Ltd share will be in focus. The company announced its July-September quarter earnings after market hours on Friday. Mukesh Ambani-led firm reported a net profit of Rs 10,602 crore in the second quarter, which is 6.6 per cent lower than the corresponding quarter of the preceding fiscal.

SC verdict on loan moratorium: The Supreme Court is expected to pass its verdict on the much-awaited moratorium case which could be in favour of the banking sector. Indian markets are also awaiting major economic data points such as Purchasing Manager Index (PMI), Banking business data etc, next week, which are expected to be positive as recovery is seen across sectors. “The possibility of a short term correction due to increasing global uncertainties is high,” said Vinod Nair, Head of Research at Geojit Financial Services.

Buyback to offer support: The Indian Government is trying to revive the pandemic-stricken economy but lacks the firepower, their long term goal of strategic disinvestment to fund the deficit has gone into disarray, so now to compensate, PSUs have started resorting to the age-old tool of share buybacks which would help return some money to shareholders including their major beneficiary the government. “This move would possibly provide an effective exit strategy to the shareholders and increase their liquidity buffers. The buyback season is expected to offer support to markets especially the PSUs which would find buyers at lower levels,” said Nirali Shah, Senior Research Analyst, Samco Securities.

Heightened volatility: According to Joseph Thomas, Head of Research – Emkay Wealth Management, the raging pandemic in the US, and the second wave in Europe, and its likely impact on the economy and economic activity, as some of the countries are moving into a more rigorous lockdown, the probable outcome of the US elections and its consequences for the economy and the markets, and the continuing build-up of aggressive postures between India and China, are all factors that are at the heart of the high level of volatility in the equity markets.

Technical talk: The short term trend of Nifty continues to be range-bound with a weak bias. The lower support of 11600-11550 is going to be crucial for the bulls to hold on their defence. “A decisive move below this support is expected to open further weakness down to 11200 levels in the next few weeks. Immediate resistance to be watched for the next week is at 11750-11800 levels,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.