Trade Setup: Market Starts The Week Strong, Nifty Back Above 25,000; Will The Momentum Sustain?

The Nifty has kicked off the week on a positive note, as the index comfortably closed above the 25,000 mark on Monday, signalling renewed optimism among traders. However, despite this encouraging start, the index couldn't surpass last week's high of 25,234, capping its upward movement. The Nifty settled near Thursday's high of 25,134, closing near the day's peak.

While Monday's performance was promising, the market has seen a pattern of follow-up buying struggles in recent sessions. One day of gains is often followed by profit booking the next, a trend that has plagued both the Nifty and Nifty Bank indices. As we move into Tuesday's trading session, it coincides with the Financial Services expiry.

A crucial factor that could determine whether the Nifty can continue its upward trajectory on Tuesday is the market's reaction to the Q2 earnings of index heavyweight Reliance Industries. The conglomerate posted mixed results after the market closed on Monday, and investors will monitor the impact on the index.

Reliance Jio, the company's telecom arm, reported strong earnings growth thanks to recent tariff hikes, which buoyed its performance. However, Reliance's Oil-to-Chemicals (O2C) business continued to face headwinds due to lower petrochemical margins, putting pressure on the company's overall profitability.

Aside from Reliance, other companies such as HCLTech, Angel One, and Sterling & Wilson also released their earnings post-market hours on Monday. Their results will likely influence market movements in Tuesday's session as investors react to key data points.

Hyundai Motor's IPO
Adding to the excitement is the opening of the highly anticipated Hyundai Motor IPO, the largest in Indian history, with a size of over Rs 27,000 crore. This IPO is expected to attract significant investor attention, potentially influencing broader market trends. The company has set its price band between Rs 1,865 and Rs 1,960 per share, and the decision to subscribe or sit out this massive public offering will likely be a key focus for market participants on Tuesday.

Earnings to Watch
Tuesday will be another busy day for earnings, with several high-profile companies from both the Nifty and broader markets set to release their quarterly results. Notably, HDFC Life, a Nifty constituent, will be reporting its earnings. Other companies in the broader market, such as HDFC AMC, KEI Industries, Bank of Maharashtra, Newgen Software, PVRInox, and Rallis India, are also scheduled to release their financial performance.

Foreign and Domestic Institutional Activity
Foreign institutional investors (FIIs) continued to be net sellers in the cash market on Monday, though their selling volume was notably lower compared to previous sessions. On the flip side, domestic institutional investors (DIIs) were net buyers, providing some support to the market.

Nifty Bank
The Nifty Bank index also ended Monday at a pivotal level, closing above both its 50-day and 100-day moving averages. The index settled just shy of the 51,800 level, a resistance point that has previously proven challenging to break. Should the Nifty Bank manage to sustain itself above this level, it could open the door for further gains, potentially pushing the index towards 52,000 and beyond.

F&O Cues
Turning to the derivatives market, the Nifty 50's October futures saw a 2.3% decline in open interest on Monday, shedding 3.2 lakh shares. However, the premium on these contracts increased slightly to 93.55 points from 85.3 points. In contrast, Nifty Bank's October futures shed a more substantial 7.2% in open interest, losing 2.2 lakh shares.

The Nifty 50's Put-Call Ratio has moved to 0.99 from 0.84, indicating a slightly more balanced market sentiment heading into Tuesday's session.

F&O Ban Stocks
Several stocks have entered the F&O ban list as of Monday, including IEX, NALCO, and Tata Chemicals. Meanwhile, familiar names like Chambal Fertilisers, GNFC, Granules India, Hindustan Copper, IDFC First Bank, PNB, Manappuram Finance, RBL Bank, and SAIL continue to remain under the F&O ban. Traders will need to keep an eye on these stocks, as any movement could lead to sharp price actions once they exit the ban.

In terms of levels to watch for the Nifty 50's October 17 expiry, open interest accumulation has been observed on the call side between the 25,150 and 25,600 strikes. Meanwhile, the 25,000 strike has seen a reduction in open interest. On the put side, strikes between 24,500 and 25,100 have seen open interest additions, indicating a potential range for the market over the next few days.

Here are the stocks to keep an eye on ahead of Tuesday's trading session:

Reliance Industries: Q2 consolidated net profit stood at Rs 16,563 crore, down from Rs 17,394 crore a year ago. Consolidated revenue remained flat at Rs 2.32 lakh crore. EBITDA dropped by 4.7% to Rs 39,058 crore, with an EBITDA margin of 16.9%, down from 17.7%. The O2C (Oil-to-Chemicals) business saw a revenue increase of 5.1%, reaching Rs 1.56 lakh crore, but its EBITDA fell by 23.8% to Rs 12,413 crore, with a margin of 8%, compared to 11% last year. The Oil & Gas segment posted a 6% decline in revenue, down to Rs 6,622 crore, while Reliance Retail saw a 1% dip in revenue to Rs 76,325 crore.

HCLTech: The company reported a net profit of Rs 4,235 crore and constant currency revenue grew by 1.6%. For FY25, HCLTech raised its revenue growth guidance to 3.5%-5%, while maintaining its margin guidance at 18%-19%. The total contract value for the quarter was $2.21 billion, with all three geographical regions reporting sequential growth. Signs of recovery are evident in the BFSI (Banking, Financial Services, and Insurance) sector.

Angel One: The company posted a 39.1% increase in net profit, reaching Rs 423.4 crore. Revenue surged by 44.5% to Rs 1,514.7 crore, while EBITDA grew by 51.5% to Rs 671.9 crore. The EBITDA margin improved to 44.4% from 42.3% in the previous year. The company also saw a 15.9% sequential increase in gross client acquisition, with its overall equity market share rising by 42 basis points to 19.3%.

Lyka Labs: The company received approval from the Central Drugs Standard Control Organization (CDSCO) to manufacture and market Pregabalin Gel 8% in India. Pregabalin Gel is used to treat neuropathic pain.

JSW Infrastructure: JSW Infra received a Letter of Intent (LoI) from the Maharashtra Maritime Board for the development, operation, management, and maintenance of an all-weather, multipurpose port in Palghar, Maharashtra.

Sterling & Wilson Renewables: The company secured new orders worth Rs 823 crore on Monday, bringing the total order inflow for Q2 to Rs 2,050 crore. Its unexecuted order book has reached an all-time high of Rs 10,500 crore. All the orders received in this quarter were domestic.

Can Fin Homes: The company will consider a plan to raise up to Rs 4,000 crore through bonds on October 22, 2024.

Global Cues
Globally, markets are providing a mixed but largely positive backdrop for Indian equities. US futures pointed to a flat to slightly higher start after both the Dow Jones and S&P 500 closed at record highs on Monday. Information technology stocks led the charge, with Nvidia surging to a record close, contributing to the upward momentum.

In the bond market, US Treasury yields dipped below 4.10% following inflation data that came in cooler than expected. The 10-year Treasury yield hovered around 4.088%, while the 2-year Treasury yield dipped to 3.949%. These lower yields are a positive signal for equities, as investors search for higher returns in the stock market.

In Europe, markets closed higher on Monday, with the pan-European Stoxx 600 climbing 0.5%. Tech stocks were the biggest gainers, while travel and leisure stocks lagged behind. Investors in Europe, much like their counterparts in the US, are keeping an eye on a busy earnings season, as well as potential stimulus measures out of China.

Oil prices, however, took a hit, falling over $2 in early Asian trade on Tuesday. This came after OPEC lowered its demand forecast for 2024 and 2025, and reports surfaced that Israel may be willing to strike Iranian military targets. Brent crude futures were down 2.7%, trading at $75.35 per barrel, while US West Texas Intermediate crude fell to $73.76 per barrel.

On the domestic front, GIFT Nifty was seen trading at a premium of nearly 15 points compared to Monday's Nifty Futures close, suggesting a subdued opening for the Indian market.