Trade Setup: Market Looking Ahead For Recovery From Last Week; Will Nifty Reclaim 25,000 Today?

The Indian stock market recorded its third consecutive weekly loss, marking the longest losing streak of 2024. Despite Friday's rally, where banking majors surged, both the Nifty and Sensex posted declines over the week, closing at 24,863.40 and 81,224.7, respectively. Friday's recovery in banking and financial stocks helped reduce some of the week's losses, but sectors like auto, metals, and FMCG took significant hits, contributing to the broader market's negative sentiment.

While the banking, financial, and realty sectors posted decent gains during Friday's session, it was not enough to offset losses in the auto, metals, and FMCG sectors, which were the worst performers throughout the week. The broader indices reflected this mixed trend. The midcap index ended the week nearly 1% down, while the smallcap index managed to stay marginally in the green, suggesting a split in investor sentiment between larger and smaller companies.

With no significant economic triggers in sight, market participants are expected to shift their focus to the upcoming corporate earnings announcements for direction. A slew of heavyweight companies are set to report their results next week, including UltraTech Cement, Hindustan Unilever, Bajaj Finance, Bajaj Finserv, SBI Life, ITC, Bharat Electronics, BPCL, HPCL, Coal India, JSW Steel, Shriram Finance, and ICICI Bank.

Shares of HDFC Bank, Kotak Mahindra Bank, and Tech Mahindra, which released their earnings over the weekend, will also be in the spotlight as investors assess their performance. In addition to earnings, key economic indicators like the HSBC Composite PMI, HSBC Manufacturing PMI, and HSBC Services PMI are set to be released, which could provide further insights into the economic climate and market trajectory.

Foreign and Domestic Investor Activity
Foreign investors continued to sell Indian equities in the cash segment, offloading shares worth Rs 21,823 crore over the week, contributing to the market's downward pressure. October 2024 saw an unprecedented outflow of Rs 77,701 crore from foreign portfolio investors (FPIs), marking the highest monthly outflow ever recorded in the Indian stock market. This massive exit reflects growing concerns about the Indian market's near-term prospects amidst global uncertainty.

In contrast, domestic institutional investors (DIIs) maintained their buying momentum, purchasing Rs 16,384 crore worth of shares, cushioning some of the downward pressure from FPI selling. This divergence in foreign and domestic investor activity highlights differing outlooks, with domestic investors showing more optimism about the market's long-term potential.

Nifty Bank
The Bank Nifty index opened weak but showed a strong recovery during the session, ending the day at 52,094, a 1.57% gain (+805 points). This recovery was driven by a strong rebound in banking stocks from lower levels. The index maintained a bullish tone throughout the day, with no hourly candle closing below the previous lows. On the daily chart, Bank Nifty managed to engulf the previous day's selling pressure, signalling renewed buying interest among investors.

Stocks to Watch for Monday's Trading Session

Alembic Pharma: The company received US FDA approval for Diltiazem Hydrochloride extended-release capsules, a medication used to treat high blood pressure and prevent chest pain. This approval could drive positive sentiment around Alembic Pharma's stock, given the potential for increased revenue from the US market.

HDFC Bank: HDFC Bank is in focus due to its plans to sell equity shares worth Rs 10,000 crore through an offer for sale (OFS) as part of its subsidiary, HDB Financial Services Ltd.'s much-anticipated IPO. The bank also reported solid second-quarter earnings, with a 5.3% increase in profit and a 15.1% year-on-year growth in deposits.

MCX: The stock could see action following the company's stellar second-quarter earnings. MCX posted a net profit of Rs 153.6 crore, a sharp turnaround from a loss of Rs 19 crore in the same period last year. Its revenue grew by 73%, and EBITDA margins expanded to 62.8%.

Global Market Cues
In the US, stock futures ticked higher Sunday night, signalling a potential continuation of the positive momentum seen last week. The Dow Jones Industrial Average, S&P 500, and Nasdaq all posted gains, with the S&P 500 registering its best weekly performance of the year, up 0.85%. The Dow also saw a strong week, closing up 0.96%, while the Nasdaq rose 0.80%. US Treasury yields eased slightly, with the 10-year Treasury yield dropping 2 basis points to 4.079% and the 2-year yield falling 3 basis points to 3.953%, as investors weighed recent economic data and its potential impact on Federal Reserve policy.

European markets followed suit, closing higher on Friday, led by gains in tech and luxury stocks. The pan-European Stoxx 600 index posted its second consecutive week of gains, rising 0.21%. Tech stocks gained 2%, while mining and luxury stocks also performed well, with Kering, owner of Gucci, jumping 3.5%. European Central Bank's decision to cut interest rates by 25 basis points also buoyed investor sentiment.

Oil Prices and Asian Markets
Oil prices steadied on Monday after last week's sharp declines. Brent crude futures rose by 0.11% to $73.14 a barrel, while US West Texas Intermediate (WTI) crude gained 0.14% to $69.32 a barrel. Last week, concerns over demand from China, the world's largest oil importer, and reduced supply risks in the Middle East led to steep declines in oil prices, with Brent losing over 7% and WTI dropping around 8%.

In Asia, markets were mixed as traders digested China's loan prime rate cuts and looked ahead to Japan's upcoming general election. China's central bank reduced both the one-year and five-year loan prime rates by 25 basis points, signalling further easing measures to boost economic growth.