Trade Setup: Market Likely To See A Muted Start Ahead Of Union Budget And US Fed Decision This Week

The Nifty index experienced a turbulent trading session, surrendering more than half of its gains from Monday and teetering on crucial support levels. The market, initially showing promise by crossing 21,800 points, succumbed to a sharp sell-off in the second half. These abrupt fluctuations set the stage for a nerve-wracking two days, with the Union Budget and the US Federal Reserve's interest rate decision looming large as potential game-changers.

The Nifty's retreat was exacerbated by the absence of follow-up buying on Reliance Industries, a major contributor to Monday's gains. Profit booking at higher levels prevented the index heavyweight from reaching the ₹20 lakh crore market capitalization milestone, leaving investors on edge.

Foreign investors continued to be net sellers in the cash market on Tuesday, while domestic investors took the opposite stance, becoming net buyers. These divergent trends added an extra layer of complexity to an already unpredictable market scenario.

While the Nifty grappled with downward pressure, the Nifty Bank experienced its own set of swings. Despite attempting to breach the 45,700 mark intraday, the index fell short, concluding the day 300 points below the peak. However, the Nifty Bank found support in PSU Banks, marking a new high on Tuesday.

To sustain an upward trajectory, the Nifty Bank must convincingly overcome the immediate resistance at 45,500. Failure to do so could intensify selling pressure, potentially leading to a drop towards 44,700 - 44,500, with immediate support at 45,000.

In the options market, Nifty 50's February futures witnessed a 9.2% reduction and an 11.3 lakh shares decrease in Open Interest. The futures are currently trading at a premium of 108.4 points, a slight dip from the previous 117.65 points. Nifty Bank's February futures experienced a marginal 0.3% decline in Open Interest. Nifty 50's Put-Call Ratio stands at 0.82, down from 1.2. Zee Entertainment returns to the F&O ban list.

For the upcoming Thursday's weekly expiry, Nifty 50 Call strikes between 21,600 and 21,800 witnessed Open Interest addition. On the Put side, the Nifty 50 strikes between 21,500 and 21,700 saw an Open Interest addition for the same expiry.

Larsen & Toubro (L&T) projects a robust end to the year, expecting a 20%+ growth in order inflow, surpassing earlier guidance for the financial year 2024. Despite mixed frontline numbers, including net profit below estimates, the company anticipates high-teen revenue growth, possibly exceeding the upper end of the 12% to 15% guidance. The order inflow for the quarter surged by 25% to Rs 76,000 crore.

Dr Reddy's Laboratories reported a 7% increase in revenue to Rs 7,214.8 crore, Dr Reddy's Labs exceeded estimates across the board. The US sales outperformed, reaching $403 million, beating both estimates and the previous quarter. With a 9% growth in North America and a 15% increase in European business, the pharmaceutical giant demonstrated a strong performance.

Blue Star, the air conditioning and refrigeration company, posted impressive results, surpassing expectations. With a 24% revenue increase to Rs 2,241 crore and a 48% surge in EBITDA to Rs 155 crore, Blue Star's profits and margins also outshined estimates. The company remains optimistic about a robust demand for room AC and commercial refrigeration products in the upcoming summer season.

PB Fintech reported a net profit after tax of Rs 37 crore, a significant shift from the Rs 87 crore loss last year. Total revenue surged by 43% year-on-year to Rs 871 crore, and the company achieved an adjusted EBITDA profit of Rs 39 crore. Both core and new initiatives' EBITDA margins showed marked improvement.

Astral reported a dip in revenue to Rs 1,371 crore, below estimates, and reported a 12.8% increase in EBITDA to Rs 204.6 crore. The plumbing segment saw a 7.1% growth, while paints and adhesives revenue rose by 10.7%. Challenges in the PVC and CPVC divisions resulted in inventory losses, but overall pipe sales volume increased by 15% to 52.7 kt.

M&M Financial's quarterly earnings exceeded expectations, the management revised its guidance downward in the earnings call. The RoA target of 2.5% by the financial year 2025 appears challenging due to weak NIMs. Despite improvements in NPA figures, NIMs fell 60 basis points year-on-year and 30 basis points sequentially to 6.8%.

Tata Consultancy Services (TCS) extended its partnership with Aviva, sealing a new 15-year agreement in the UK, indicating a strengthening bond between the two entities. Star Health Insurance's net earned premium increased by 15% to Rs 3,294 crore, aligning with the industry's 25% average growth. Underwriting profit dipped 9% to Rs 114 crore.

Aarti Drugs initiated commercial production of a Dermatology product at its new facility in Tarapur, Maharashtra, aligning with plans to strengthen its presence in the skincare segment. Ganesha Ecosphere launched a QIP issue to raise funds, with a floor price of Rs 995.06 per share, indicating a 5.7% discount to Tuesday's closing price.

Coromandel International approved the setup of new phosphoric acid and sulphuric acid plants at Kakinada in Andhra Pradesh, with an investment of Rs 1,029 crore. Ramkrishna Forgings increased its corporate guarantee from $2 million to $3.5 million for its subsidiary, Ramkrishna Forgings LLC, to meet working capital requirements.

In the Asia-Pacific region, markets opened lower ahead of the US Federal Reserve's interest rate decision. The Nikkei 225 and Topix in Japan, along with Kospi and Kosdaq in South Korea, all showed negative trends. Futures of the Hang Seng indicated a flat start to the trading day.

In the US, markets exhibited mixed results on Tuesday, with the S&P 500 ending flat, the Nasdaq falling 0.8%, and the Dow Jones gaining 0.3%. The market will react to the financial results of Alphabet and Microsoft, reported after Tuesday's closing bell.

The GIFT Nifty, trading at a premium of nearly 10 points from Nifty Futures Tuesday close, suggests a muted start for the Indian market as it navigates through global uncertainties and prepares for a challenging trading session on Wednesday.