Earnings season, trade talks to drive indices

Hans India

11 hours ago

Underthe shadow of mixed global cues and the impending US tariff deadline; renewed selling from FIIs and profit booking at higher levels led to modest decline in the benchmark indices.
For the week ended, the Sensex shed 626.01 points or 0.74 per cent to close at 83,432.89, and the Nifty fell 176.8 points or 0.68 per cent to end at 25,461. Broader markets were mildly better with the BSE Mid-cap Index adding 0.6 per cent and the BSE Small-cap index rising 1 per cent. Investors were seen adopting a wait-and-watch approach. FIIs sold equities worth Rs 6,604.56 crore. On the other hand, DIIs continued their buying in 11th consecutive week with purchases worth Rs 7,609.42 crore. FIIs have turned cautious amid elevated market valuations and mixed global cues.
However, DII fund managers say India's market momentum is 'structural, not cyclical,' driven by long-term factors such as political stability, rising domestic consumption, favorable demographics, and stable inflation. The Indian rupee extended the gains for the second week ending marginally higher at 85.39 per dollar.
OPEC which produces about half of the world's oil, has reversed its earlier stance this year by agreeing to increase output and expand its market share. The additional production is expected to prevent any sharp spike in oil prices. The trajectory of crude oil prices remains critical to the global inflation outlook and for large importers like India.
SEBI order barring US-based Jane Street Group from participating in the Indian stock market and ordering it to disgorge unlawful gains of Rs4,843 crore for allegedly manipulating stock indices through derivative positions; likely to have repercussions on the way F&O markets operate in coming days. manipulating index levels in the stock market to earn illegal profits, primarily through the highly liquid Bank Nifty and Nifty index options segments.
According to securities lawyers, Sebi's interim order has all characteristics of a final order as it came after detailed investigations. On whether Jane Street's strategies constituted market manipulation, some observers say taking large positions in cash and option segments is merely a strategy and could not be termed as manipulative.
People with deeper pockets will always be in a position to manipulate. Such orders intervene with the free spirit of the market in a disclosure-based regime like India. The discretion to trade after disclosure should be left with the individual investor.
In the near term, direction of the market will be dictated by the outcome from the US-India trade negotiations and Q1 results. With no word still on India-US trade deal and the US President Donald Trump stating that he is not considering an extension and saying that US has begun process of sending letters regarding reciprocal tariffs to 12 countries has added 'suspense' to trading environment for coming days.
With Union Commerce Minister stating that India will negotiate from a position of strength and not under deadlines; observers feel that the interim deal will involve only goods and a decision on services and labor issues will be taken later.
Investors in trade-sensitive sectors such as IT, pharma, and Auto need to closely track developments as the deadline for the pause on Trump-era tariffs ends on Wednesday, July 9.
The Q1 earnings season kicks off this week with 42 BSE-listed companies set to announce their April–June quarter results. IT bellwether Tata Consultancy Services (TCS), Avenue Supermarts (DMart), Anand Rathi Wealth, and Tata Elxsi are among the key names to watch in coming week.
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FUTURES & OPTIONS / SECTOR WATCH
Derivative market remained cautious due to uncertainty around the India–US trade deal and the SEBI order on Jane Street. Largely range-bound, stock specific moves were observed. Both the Nifty and the Bank Nifty ended the week with small losses of about 0.70 per cent. In the options market, prominent Call open interest for the Nifty was seen at the 25,500 and 25,700 strike, while the notable Put open interest was at the 25,000 and 25,400 strike. For the Bank Nifty, the prominent Call open interest was seen at the 57,000 and 57,500 strikes, whereas notable Put open interest was at the 56,000 strike. Implied volatility (IV) for Nifty's Call options settled at 11.67 per cent, while Put options concluded at 12.27 per cent. The India VIX, a key market volatility indicator, closed the week at 12.39 per cent. The Put-Call Ratio Open Interest (PCR OI) for the week was 1.19. Techies identify 25,300 as key support for the Nifty. As long as the index remains above this level, bullish sentiment is expected to persist, with the potential for a swift rebound. On the higher side, the index could advance towards 25,800–26,100 in the near term. Immediate resistance is placed at 25,500, and a breakout above this level could further strengthen the upward momentum. If the Nifty slips below 25,300 that, it could head toward 24,800. As long as the indices stay above these levels, the market is likely to remain in a 'buy on dips' mode. Nifty futures saw rollover around 25,200–25,300, while for the Bank Nifty, it was in the 56,600–56,700 range. With the start of the Q1 earnings season, focus will be on stock specific action. Track the management commentary of TCS because it will be the first 'biggie' to announce results and give an inkling on the ongoing tariff turmoil.
Stocks looking good are Aurobindo Pharma, Biocon, BDL, Hero Motocorp, HAL, JSW Steel, JIO Financial and Fortis Health. Stocks looking weak are Cholamandalam Finance, CG Power Jindal Steel, Nykaa, RVNL, TI India and PFC.
(The author is a senior maket analyst and former vice-chairman, Andhra Pradesh State Planning Board)