Trade Setup: Bears Tighten Their Grip As Bulls Struggle: What To Expect In Trade Today; Key Triggers?

The Indian equity market witnessed another rough day as bears continued to dominate, making it four consecutive days of decline for the Nifty. Bulls seemed to lose their confidence, with the benchmark index failing to gain momentum at higher levels. Despite initial signs of resilience, the markets faltered, pointing towards another potential weekly loss. Here's a comprehensive look at the ten key developments shaping the market as we head into the final trading session of the week.

The Nifty index has been on a steady decline, making lower highs and lower lows for three straight sessions. Over the course of this week, it has dropped by 1.8%, showing no signs of recovery. Thursday's session was particularly lacklustre, with the Nifty struggling to surpass the intraday level of 24,500 and reversing course after reaching 24,480. The bearish sentiment now places the index in danger of recording its fourth consecutive weekly loss.

For the Nifty to end the week on a positive note, it would need to close above 24,854 on Friday, a daunting task given that it ended Thursday's session well over 400 points below that level. This ongoing decline marks a sharp contrast to the earlier part of 2024, where the Nifty had managed to avoid consecutive weekly losses until the last week.

The broader markets are also exhibiting signs of unease. The Nifty Midcap and Smallcap indices initially hinted at nervousness on Wednesday when they sold off from highs to finish with modest gains. By Thursday, both indices were firmly in the red, even though they started the session with a glimmer of hope, trading in the green.

The underperformance of the Nifty on Thursday was led by two FMCG heavyweights-Hindustan Unilever (HUL) and ITC. HUL's stock tumbled 6%, driven by disappointing earnings results and weak management commentary. The company's volume growth fell short of expectations due to challenging macroeconomic conditions, making it the Nifty's earnings disaster of the day.

ITC stock dropped nearly 2%, reacting to HUL's dismal performance and in anticipation of its own quarterly results, which were announced after market hours.

The earnings season continued to create significant volatility in the broader markets. KPIT Tech experienced a steep 13% decline following a management announcement of project delays. The company downgraded its growth forecast for the year, citing concerns that growth would be closer to the lower end of its 18%-22% guidance range.

On the flip side, some companies posted stellar earnings, leading to sharp upward moves. Piramal Pharma surged 18%, while Aster DM Healthcare soared by 10%, both driven by solid quarterly financial performances. Earnings reactions are likely to remain a key driver of stock movements in the coming sessions.

Friday's trading session will witness several heavyweight companies releasing their quarterly results, which are expected to impact market sentiment. The likes of JSW Steel, Shriram Finance, InterGlobe Aviation, BEL, Bandhan Bank, and Bank of Baroda are among the major names set to announce their financials.

Additionally, companies like BPCL, DLF, GMR Power, Go Fashion, HPCL, IDBI Bank, Inox Wind, Inox Green Energy, JM Financial, Phoenix Mills, and Mahindra Holidays will also report their results, adding to the potential for market volatility.

The banking sector provided a rare glimmer of hope for the markets. The Nifty Bank index outperformed on Thursday, driven by strong performances from HDFC Bank, SBI, and Axis Bank. However, the gains in banking stocks were not enough to offset the broader selling pressure in FMCG names like HUL and ITC, as well as metals giant Hindalco.

The Nifty Bank traded within a range of 600 points during the day, briefly testing levels around 51,800 before retreating. Despite the sector's resilience, the broader market trend remains bearish.

Foreign institutional investors (FIIs) have remained net sellers in the Indian equity market, continuing their selling spree throughout October. The relentless selling by FIIs has exceeded $10 billion for the month, raising concerns about the sustainability of the market's recent gains. On the other hand, domestic institutional investors (DIIs) have been net buyers, providing some cushion to the market.

Several stocks are expected to be in focus on Friday based on recent earnings reports and other developments:
PNB Housing Finance: The company posted a 22.7% rise in net profit, reaching Rs 471.7 crore. Net Interest Income (NII) also saw a modest 2.7% increase.
JSW Energy: The company's net profit rose by 2.3%, although revenue declined by 0.7%. EBITDA also fell by 10.4%, reflecting margin pressures.
United Breweries: Reported a 23.4% increase in net profit, with revenue growth of 12%. EBITDA surged 23%.
Aarti Drugs: The company's net profit and revenue both declined, with a 12.3% drop in EBITDA.
Shriram Properties: The company reported that its office premises were searched by the Enforcement Directorate (ED) in connection with an ongoing investigation.

Global Market Sentiment
Global markets presented a mixed picture. In the US, the S&P 500 and Nasdaq Composite ended Thursday's session in positive territory, buoyed by Tesla's post-earnings rally. However, Dow Jones futures remained largely unchanged, reflecting the cautious sentiment among investors.

Meanwhile, European markets posted marginal gains, with the pan-European Stoxx 600 inching up 0.06%. However, concerns about sluggish economic growth in Europe, especially in the face of ongoing geopolitical tensions, continue to weigh on investor sentiment.

Oil prices declined by nearly 1% in Thursday's session, driven by concerns over slowing economic growth in Europe. Brent crude and West Texas Intermediate (WTI) both saw drops of 0.77% and 0.82%, respectively. While geopolitical tensions in the Middle East remain a key factor, the immediate focus has shifted to the upcoming US presidential election and its potential impact on energy demand.

On the bond front, the yield on the US 10-year Treasury slipped slightly, easing from three-month highs reached earlier in the week. Traders are closely watching for any indications of the Federal Reserve's stance on future interest rate cuts.

Asia-Pacific markets mostly rose on Friday, driven by optimism ahead of Japan's general election and the release of Tokyo's October inflation numbers. Japan's inflation data is widely seen as a leading indicator of nationwide trends, and the Bank of Japan is expected to hold a key monetary policy meeting on October 30 and 31. The benchmark Nikkei 225 fell 0.85% following the inflation report, while the broader Topix index was down 0.89%, marking its fifth consecutive day of losses.

South Korea's Kospi gained 0.30%, although the small-cap Kosdaq reversed earlier gains to drop 0.85%. Australia's S&P/ASX 200 managed a 0.39% rise, while Hong Kong's Hang Seng rebounded by 0.65% after a previous session decline. Mainland China's CSI 300 showed only marginal gains.

As of Friday morning, GIFT Nifty trading was flat compared to Thursday's close of Nifty Futures, indicating a muted-to-negative start for the Indian markets. With mixed global cues and persistent domestic challenges, investors are likely to remain cautious as they head into the final trading session of the week.