Trade Setup: Bulls Charge Ahead In Market; Nifty Hits Record High, 25,000 Soon? What To Expect?

The Indian stock market witnessed a strong Friday session, as the Nifty 50 surged to a record high, driven by strong performances from key heavyweight stocks. The question on everyone's mind was whether the bulls had the conviction and strength to push the Nifty back to the levels seen on July 19, above the 24,800 mark.

The Nifty 50, India's premier stock market index, closed at a new record high of 24,861, kicking off the August Futures and Options (F&O) series with a 400-point surge. This dramatic rise was primarily fueled by stellar performances from industry giants such as Reliance Industries, Infosys, TCS, and ITC. Unlike previous instances where the index struggled to maintain momentum, this time it ended the day near its peak.

Reliance Industries, Infosys, TCS, and ITC were among the top performers, showcasing robust growth and lifting the overall market sentiment. Infosys, in particular, stood out as it traded at its highest level in two years, nearing an all-time high. The IT sector, coupled with the strong performance of Reliance, has been a consistent contributor to the market's upward trajectory.

Adding to the bullish sentiment was a strong recovery in the banking sector. The Nifty Bank index rebounded nearly 900 points from its intraday lows. Most constituents of the index, except for HDFC Bank, participated in this rally, reinforcing the market's strength. The recovery in banking stocks, alongside the robust performance of IT and Reliance, was pivotal in pushing the Nifty to its new record high.

Historically, August has been a favourable month for the Nifty 50. Excluding a 400-point drop last year, the index gained nearly 600 points in 2022 and an impressive 850 points in 2021. With Friday's surge, the Nifty is now just 165 points shy of the 25,000 mark. If the index crosses this milestone on Monday, it would have taken just 21 sessions from June 27, when it breached the 24,000 mark, to climb an additional 1,000 points.

Monday's trading session is poised to be highly reactive, with several key earnings reports influencing market movements. IndusInd Bank, Bandhan Bank, Power Grid, KEC International, and Kaynes Tech, among others, are expected to respond to their earnings results announced post-market hours on Friday. However, the market's primary focus will be on ICICI Bank, which reported its earnings on Saturday. The reaction to ICICI Bank's results will be crucial in determining whether the Nifty can scale the 25,000 mark.

Additionally, stocks like PNB, Anant Raj, MCX, Spandana Sphoorty, Dr Reddy's Laboratories, and Genus Power are expected to react to their earnings. Monday will also see significant earnings announcements from ACC, BEL, Adani Total Gas, CSB Bank, Data Patterns, HPCL, Kansai Nerolac, Strides Pharma, and Kalpataru Projects, making it a critical day for market watchers.

Both foreign and domestic institutional investors were net buyers in the cash market on Friday. This buying activity, potentially skewed due to a block deal in Sobha, added to the market's bullish momentum. The Nifty Bank index's recovery above the 51,200 mark and its aim to breach the 51,500 resistance level on Monday will also be closely monitored.

The Nifty 50's August futures saw a significant increase of 9.5% in Open Interest, translating to 12.42 lakh shares, and are trading at a premium of 187.8 points. Similarly, the Nifty Bank's August futures added 4.9% in Open Interest, equivalent to 90,420 shares. The Put-Call Ratio for the Nifty 50 is at 1.36, up from 1.21, indicating a bullish sentiment.

For the August 1 expiry, the Nifty 50 strikes between 24,800 and 25,000 have seen considerable Open Interest addition on the Call side. On the Put side, strikes between 24,500 and 24,800 have seen increased Open Interest, suggesting strong support at lower levels.

As the stock market gears up for another week of trading, several major companies have reported their earnings and strategic moves, setting the stage for potentially significant market movements. Here's a detailed look at some of the key stocks to watch out for ahead of Monday's trading session.

ICICI Bank: ICICI Bank's latest financial results indicate a robust performance with significant year-on-year growth. The bank reported a deposit growth of 15.1%, bringing total deposits to Rs 14.2 lakh crore. Advances grew by 15.7% to Rs 12.23 lakh crore. The Net Interest Income (NII) rose by 13.1% to Rs 23,460 crore, and net profit increased by 10% to Rs 11,696 crore. Despite a slight increase in slippages to Rs 5,916 crore, the bank managed to reduce its watchlist by 4.4% to Rs 5,286 crore, and provisions surged by 88.6% sequentially to Rs 1,316 crore.

UltraTech & India Cements: UltraTech Cements has announced a strategic acquisition, buying a 28.42% stake from promoters and an additional 4.3% from other associates of India Cements at Rs 390 per share, amounting to Rs 3,954 crore. Additionally, UltraTech has launched an open offer for a 26% stake in India Cements at the same price, a 4% premium to Friday's closing price. This acquisition follows UltraTech's previous 22.7% stake acquisition in India Cements via block deals in June.

Punjab National Bank (PNB): PNB reported positive financial metrics with deposit growth of 8.5% year-on-year to Rs 14.08 lakh crore and advances growth of 14% to Rs 9.83 lakh crore. The NII increased by 10.2% to Rs 10,476 crore, while net profit saw a remarkable 159% rise to Rs 3,251 crore. The bank's asset quality improved with Gross NPA reducing to 4.98% from 5.73% in March, and Net NPA down to 0.6% from 0.73%. Slippages decreased by 20.4% to Rs 1,755 crore. PNB revised its Gross NPA guidance to approximately 4% for FY25 from the earlier 5% and its credit cost guidance to below 0.5% from 1%.

Dr Reddy's Laboratories: Dr Reddy's Laboratories posted strong revenue growth of 14% to Rs 7,672.7 crore, surpassing estimates. The EBITDA margin was 28.2%, slightly above the estimated 27.4%, but lower than last year's 31.7%. The company's US sales surged by 20% year-on-year and 18% sequentially to Rs 3,846.2 crore. In India, sales increased by 15% year-on-year and 18% sequentially to Rs 1,325.2 crore. The upcoming Nicotinell transaction and a joint venture with Nestle India, are set to be operational by Q2 FY25, along with the proposed stock split.

REC Limited: REC Limited reported a 48.5% increase in sanctions to Rs 1.12 lakh crore and an 18.2% rise in disbursals to Rs 43,652 crore. The company's Assets Under Management (AUM) grew by 21.8% to Rs 5.29 lakh crore. The NII was up by 31.5% to Rs 4,479.2 crore, and net profit stood at Rs 3,442.5 crore, aided by a substantial increase in other income. Despite higher provisions of Rs 472.6 crore, REC managed to improve its Gross NPA to 2.61% from 2.71%, and Net NPA to 0.82% from 0.86%.

IDFC First Bank: IDFC First Bank showed impressive growth in deposits, up 41.2% year-on-year to Rs 2.09 lakh crore, and advances, up 24.5% to Rs 2.02 lakh crore. The NII grew by 25.4% to Rs 4,694.9 crore, though net profit declined by 11% to Rs 680.7 crore. The bank's Gross NPA slightly increased to 1.9% from 1.88%, while Net NPA remained stable at 0.59%. The rise in slippages to Rs 1,657 crore and a slight increase in retail gross and net NPA indicate some challenges, but overall growth remains strong.

MCX: Reported a 29% sequential revenue increase to Rs 234.37 crore, with significant growth in commodity futures and options trading.

KEC International: Revenue grew by 6.3% to Rs 4,511.9 crore with a 10.6% increase in EBITDA. The company also announced fund-raising plans.

Power Grid: Despite revenue and EBITDA being lower than estimates, the company has set a robust capex plan for FY25.

Global Market Cues
US stock futures rose modestly on Sunday evening as Wall Street braces for a busy week of corporate earnings, following a volatile week in the stock market. Futures tied to the Dow Jones Industrial Average climbed 87 points, or about 0.2%. S&P 500 futures gained 0.2%, while Nasdaq 100 futures added 0.3%. This uptick in futures suggests cautious optimism among investors ahead of key earnings reports and economic data releases.

The previous week saw mixed performance across major indices. The S&P 500 dipped 0.8%, primarily driven by declines in technology stocks, with the tech-heavy Nasdaq Composite falling 2.1%. In contrast, the Dow Jones Industrial Average rose 0.8%, buoyed by gains in traditional blue-chip stocks, and the small-cap Russell 2000 surged 3.5%, reflecting investor confidence in domestic economic growth.

On Friday, US Treasury yields fell after the Federal Reserve's preferred inflation gauge matched expectations, suggesting that inflationary pressures might be stabilizing. The yield on the 10-year Treasury fell 6 basis points to 4.193%, while the 2-year Treasury yield decreased by over 5 basis points to 4.385%. This decline in yields indicates investor anticipation of the Federal Reserve's upcoming monetary policy meeting, where further insights into interest rate adjustments are expected.

European markets closed higher on Friday, with the pan-European Stoxx 600 up 0.9%. Nearly all sectors and major bourses across the region traded in positive territory, as investors reacted positively to US inflation data, which eased fears of aggressive monetary tightening.

In Asia-Pacific, markets climbed on Monday, led by Japan's Nikkei 225, which rose 2.26% following the US inflation report. The broad-based Topix also gained 2.02%, potentially ending an eight-day losing streak. South Korea's Kospi increased by 1.3%, and the smallcap Kosdaq rose by 0.59%. Hong Kong's Hang Seng index climbed 1.1%, though mainland China's CSI 300 slipped slightly by 0.14%. Australia's S&P/ASX 200 was up 0.84%, and Taiwan's Weighted Index rebounded by 1.04% after a steep decline last Friday, following a market closure due to a typhoon.

Oil prices rose on Monday, recovering some losses from the previous week, driven by fears of a widening conflict in the Middle East. Brent crude futures gained 20 cents, or 0.3%, to $81.33 a barrel, and US West Texas Intermediate crude futures climbed 9 cents, or 0.1%, to $77.25 a barrel. The price increase comes after a rocket strike in the Israeli-occupied Golan Heights, which was blamed on the Lebanese armed group Hezbollah. Last week, Brent crude fell 1.8%, and WTI dropped 3.7% due to concerns over Chinese demand and hopes for a Gaza ceasefire agreement.

GIFT Nifty was seen trading above the 25,000 mark. This marks a premium of more than 100 points from Nifty Futures Friday close, indicating a gap-up opening for the Indian market.