Trade Setup: Fed Outcome Turns Global Markets Positive; Is Nifty Eyeing To Hit 25,000 On Expiry Day?

The stock market has always been a test of patience, often requiring investors to wait years for significant milestones. However, in the volatile market we've experienced over the last few months, even a wait of a few days can test the nerves of the most seasoned traders. Currently, all eyes are on the Nifty 50, which is tantalizingly close to the 25,000 mark-a psychological and strategic landmark that traders have been anticipating.

As of Wednesday, the Nifty is a mere 49 points away from reaching 25,000. It came agonizingly close on Monday, Tuesday, and Wednesday, with highs of 24,984, yet it failed to breach this critical level. This has created a palpable tension in the market, with Thursday's session now becoming a crucial test.

Adding to the anticipation, the US Federal Reserve's latest decision has provided a mixed bag of signals. The Fed kept interest rates unchanged, but Fed Chair Jerome Powell hinted at the possibility of a rate cut in September, contingent on encouraging economic data. This optimism was well received by Wall Street, with the S&P 500 enjoying its best day since February and the Nasdaq surging over 2%.

Nifty closed July with a respectable gain of 3.9%, following a 6.6% rise in June. With the exception of May, when it dipped by 0.3%, and January's slight negative return, Nifty has posted gains every month in 2024. Historically, August has been a favourable month for the index, showing positive returns in three out of the last four years, including an 8.7% gain in 2021.

The first trading day of August also coincides with the weekly options expiry for Nifty 50 contracts, adding another layer of intrigue to Thursday's session. Several major companies are scheduled to report their earnings, including Coal India, Tata Steel, Bank of Baroda, Prestige Estates, Phoenix Mills, and Relaxo Footwear.

In addition, Thursday's session will see results from significant players like Adani Enterprises and Adani Ports, along with Sun Pharma, ITC, Tata Motors, Dabur, Kalyan Jewellers, Thermax, Tube Investments, HPL Electric and Power, and Godrej Agrovet.

Foreign institutional investors (FIIs) continued their trend as net sellers in the cash market on Wednesday, while domestic institutional investors (DIIs) were net buyers. The Nifty Bank index showed sluggishness on its weekly options expiry day, trading within a narrow 300-point range. However, a late-session recovery saw the index finish above 51,500. Whether this level can be sustained will be a key focus in Thursday's trade.

The futures and options (F&O) data provide further insights. Nifty 50's August futures saw a 5.5% increase in open interest on Wednesday, trading at a premium of 62 points, down from 71.8 points earlier. In contrast, Nifty Bank's August futures saw a 3.88% drop in open interest. The Put-Call Ratio for Nifty 50 has risen to 1.28 from 1.23, indicating a slight increase in bullish sentiment.

Granules India has now joined India Cements in the F&O ban list.

For the weekly expiry on August 1, the Nifty 50 call strikes between 25,050 and 25,150 have seen an increase in open interest, while the 24,900 strike has seen a reduction. On the put side, strikes between 24,800 and 24,950 have seen an increase in open interest, indicating support levels for the index.

As we approach Thursday's trading session, the stock market is buzzing with anticipation. Several key stocks have made headlines with their latest financial results and updates, setting the stage for a potentially volatile day. Here's a detailed look at the stocks to watch and the factors influencing their performance.

Tata Steel: Tata Steel has reported mostly in-line financial results. The company posted a revenue of Rs 54,771 crore and an EBITDA of Rs 6,694 crore, resulting in an EBITDA margin of 12.2%. However, net profit fell short due to exceptional items related to payments towards the Electoral Fund in India and increased redundancy provisions at Tata Steel UK. On a brighter note, the India business reported an EBITDA per tonne of Rs 13,667, while Tata Steel Europe recorded its lowest EBITDA per tonne loss since Q2 FY23 at -$28, better than the expected -$36. Additionally, EBITDA per tonne in the Netherlands turned positive, signalling improvement in the region.

Infosys: The Karnataka State GST authorities have issued a pre-show cause notice for the payment of GST worth Rs 32,403 crore for Infosys. This notice pertains to expenses incurred by the company's overseas branch offices between July 2017 and March 2022. A similar notice has also been issued by the Director General of GST Intelligence.

Bank of Baroda: Bank of Baroda has shown steady performance with an 8.9% year-on-year increase in deposits, reaching Rs 13.06 lakh crore, and an 8.1% rise in advances to Rs 10.71 lakh crore. However, both metrics were slightly down sequentially. The bank's Net Interest Income rose by 5.5% year-on-year to Rs 10,996.7 crore, and net profit increased by 9.5% to Rs 4,458.15 crore. Notably, the Gross NPA stood at 2.88%, down from 2.92% in March, while the Net NPA was at 0.69%, marginally up from 0.68% in March. Slippages decreased to Rs 3,018 crore from Rs 3,200 crore in March, and write-offs were higher at Rs 2,322 crore compared to Rs 1,673 crore in the previous quarter.

GE T&D: GE T&D India reported a 34% increase in revenue to Rs 958.3 crore and a staggering 259% rise in EBITDA to Rs 182.2 crore, with the EBITDA margin expanding to 19% from 7.1% last year. The net profit also surged to Rs 134.54 crore from Rs 28.2 crore a year ago. Despite these strong financials, the company faced a decline in order bookings for the second consecutive quarter, with the order backlog remaining flat quarter-on-quarter but up 59% year-on-year.

Aster DM Healthcare: Aster DM Healthcare reported a net profit of Rs 5,152.2 crore, boosted by the separation of its GCC business, which resulted in a dividend of Rs 5,569.96 crore from its Mauritius Arm, Affinity Holdings. Affinity also redeemed preference shares held by the company for Rs 1,828.52 crore. The company recorded an exceptional gain of Rs 372.7 crore, and EBITDA rose by 22% to Rs 101.3 crore.

Bharat Forge: Bharat Forge announced that its arm, Kalyani Strategic Systems Ltd., has been granted a defence license by the Department for Promotion of Industry and Internal Trade (DPIIT) to manufacture various defence products at its Jejuri unit. This development opens up new opportunities for Bharat Forge in the defence sector, potentially leading to increased revenue and diversification of its business portfolio.

Global Market Cues
Stock futures rose in overnight trading on Wednesday, driven by a mix of robust corporate earnings and positive signals from the Federal Reserve. Investors are gearing up for a dynamic Thursday session, with an eye on several key stocks and macroeconomic indicators.

S&P 500 futures climbed 0.5%, while Nasdaq-100 futures surged nearly 0.9%. Futures tied to the Dow Jones Industrial Average also saw gains, adding 65 points, or 0.1%. These movements were influenced by strong earnings reports from major corporations.

In extended trading, Meta Platforms saw a rally of 7% after reporting stronger-than-expected second-quarter results and issuing upbeat guidance. Conversely, Arm Holdings faced a 10% decline due to an underwhelming forecast for the current quarter.

The positive sentiment followed a winning session where the S&P 500 jumped 1.58%, marking its best day since February. The Nasdaq Composite soared 2.64%, and the Dow Jones Industrial Average added 99.46 points, or 0.24%. These gains were fueled by Federal Reserve Chair Jerome Powell's hints at a potential rate cut in September, provided that economic data continues to support the narrative of easing inflation.

The Federal Reserve's decision to hold interest rates steady was accompanied by Powell's statement that a rate cut could be "on the table" at the next meeting if inflation data remains encouraging. This dovish stance from the Fed led to a drop in US Treasury yields. The yield on the 10-year Treasury fell nearly 5 basis points to 4.092%, while the 2-year Treasury yield dropped 4 basis points to 4.315%.

European markets also closed higher on Wednesday, maintaining their positive momentum despite an unexpected rise in eurozone inflation. The Stoxx 600 index closed 0.79% higher, with technology stocks jumping 2.62%. Dutch chip firm ASML led the gains, rising as much as 10% following a Reuters report suggesting the company might be exempt from expanded export restrictions on chipmaking equipment to China.

Oil prices rose in early Asian trading on Thursday, extending gains from the previous session. The increase was driven by heightened geopolitical tensions following the killing of a Hamas leader in Iran and signs of strong oil demand in the US Global benchmark Brent crude futures rose 67 cents, or 0.8%, to $81.51 per barrel, while US West Texas Intermediate crude futures climbed 69 cents, or 0.9%, to $78.60 per barrel.

Asia-Pacific markets largely rose on Thursday in response to Powell's comments. However, Japan's Nikkei 225 was a notable outlier, tumbling 3.32%, while the Topix index plunged 3.72%. This decline followed the Bank of Japan's decision to raise its benchmark interest rate to "around 0.25%", the highest level since 2008. The yen strengthened 0.9% against the dollar, currently trading at 148.61.

Australia's S&P/ASX 200 reached new all-time highs, gaining 0.52%. South Korea's Kospi climbed 0.26%, with the small-cap Kosdaq up 0.86%, buoyed by a report from Reuters indicating that the country's exports rose at the fastest pace in six months in July. Despite the year-on-year increase of 13.9% to $57.49 billion, the figure was below the 18.4% increase expected in a Reuters survey of economists.

In Hong Kong, the Hang Seng index was up 0.2%, while the CSI 300 in mainland China saw a marginal decline.

The GIFT Nifty, trading at a premium of more than 60 points from Wednesday's Nifty Futures close, indicates a positive start for the Indian market on Thursday. Investors are likely to focus on several key stocks and earnings reports, which include Tata Steel, Infosys, Bank of Baroda, GE T&D, Aster DM Healthcare, and Bharat Forge.

As the market opens on Thursday, traders and investors will be closely watching whether the Nifty can finally cross the elusive 25,000 mark. The outcome will not only influence short-term trading strategies but also set the tone for market sentiment in the coming weeks. With major earnings reports and crucial economic signals in play, the stage is set for a potentially pivotal day in the market.