Trade Setup: Nifty Bank’s Strong Recovery Propels Market Higher; Likely Direction Of Sensex & Nifty Today?

Tuesday's trading session belonged unequivocally to the banking sector. After recent volatility, the Nifty Bank index staged a robust comeback, boosting investor sentiment and lending critical support to the broader Nifty 50 index. ICICI Bank led the charge for a second consecutive day, with significant contributions from PSU banks like Canara Bank and Indian Bank, whose solid earnings encouraged positive sentiment toward sector heavyweights like SBI. This banking-led revival lifted the Nifty 50, pushing it well above Monday's low of 24,135.

Banking stocks dominated the top gainers on the Nifty 50 index, with prominent players like HDFC Bank and Axis Bank securing their spots among the best performers. Meanwhile, conglomerate L&T also made notable gains ahead of its quarterly results on Wednesday.

With Wednesday marking the monthly expiry for Nifty Bank, investors are bracing for the index's trajectory. Despite Tuesday's 1,000-point rally, the Nifty Bank remains down by 2,000 points for the series, having experienced a notable drop of 4,000 points from its record high of 54,467. Some market participants remain cautious, questioning whether this recovery is sustainable or merely a temporary respite amid ongoing volatility.

Following Tuesday's after-hours earnings reports from major companies, the stage is set for a busy trading session on Wednesday. Quarterly results are expected from industry giants including L&T, Biocon, Tata Power, Dabur, IRB Infra, P&G Hygiene and Healthcare, New India Assurance, and TTK Prestige.

Foreign Institutional Investors (FIIs) were net sellers in the cash market on Tuesday, though the net outflow was contained below the Rs 1,000 crore mark. Domestic Institutional Investors (DIIs), on the other hand, were net buyers but in relatively small quantities. This cautious trading behaviour among institutions signals a nuanced outlook, where incremental buying and selling reflect a broader uncertainty about market direction amid sector-specific volatility.

The derivatives market offers a glimpse into the current sentiment for both the Nifty 50 and Nifty Bank indices. On Tuesday, Nifty 50 futures saw a 5.1% decline in open interest across the series, with rollovers remaining low at 5.6%. October futures for the Nifty 50 are trading at a slight premium of 10.85 points, an increase from 9.3 points earlier.

In contrast, the Nifty Bank futures saw a 5.2% increase in open interest across series, with rollovers currently at an impressive 79%. The Put-Call Ratio (PCR) of Nifty 50, a crucial sentiment indicator, has moved up from 0.96 to 1.02, indicating a slightly bullish outlook among traders.

Ahead of Thursday's monthly expiry, the open interest (OI) data across call and put options offers insight into possible support and resistance levels. For the October 31 expiry, on the call side, the 24,650 and 24,700 strike prices have witnessed a significant build-up in open interest, while strikes at 24,500 and 24,400 have seen some unwinding. This positioning points to potential resistance at the higher levels as traders hedge against possible reversals.

On the put side, open interest has increased between the 24,300 and 24,400 strikes, along with the 23,700 strike, suggesting support zones where the Nifty could stabilize if faced with downward pressure.

Wednesday's session will feature several stocks that could move sharply based on recent results:
Marico: The FMCG major reported a net profit increase of 20.3% to Rs 433 crore, surpassing expectations of Rs 384 crore. Revenues rose by 7.6% to Rs 2,664 crore, aligning with estimates. EBITDA, however, came in below forecasts at Rs 522 crore against an anticipated Rs 631 crore, with a slight drop in EBITDA margin to 19.6%.

Voltas: The air conditioning leader posted a net profit of Rs 134 crore, meeting analyst expectations. Revenue surged by 14.2% to Rs 2,619 crore, and EBITDA of Rs 162 crore was in line with estimates, while the EBITDA margin held steady at 6.2%, an improvement from last year's 3.07%.

Godrej Agrovet: The agribusiness reported a 7.9% decline in net profit to Rs 95.8 crore, while revenue dropped 4.6% to Rs 2,448.8 crore. However, EBITDA showed a healthy 13.2% increase, leading to an improved margin of 9.1% from 7.7% last year.

GSK Pharma: The pharmaceutical giant saw a 16.1% rise in net profit to Rs 252.5 crore, with a revenue uptick of 5.6% to Rs 1,010 crore. EBITDA rose by 11.2%, and the EBITDA margin expanded to 31.8%.

MTAR Tech: A leading engineering firm, MTAR Tech's net profit dropped by 8.3% to Rs 18.7 crore, despite a 14% rise in revenue to Rs 190 crore. The EBITDA margin declined to 19.2%.

Kaynes Tech: The electronics solutions provider reported a robust 86.4% rise in net profit to Rs 60.2 crore, with revenues up 58.6% to Rs 572.1 crore. Their order book stands strong at Rs 5,423 crore.

Torrent Pharma: Promoter Torrent Investments has announced plans to sell up to a 2.9% stake via block deals, valued at up to Rs 3,000 crore.

Global Market Cues
On the international front, US equity futures saw gains in anticipation of quarterly earnings from Big Tech companies. Alphabet's robust performance, with a significant surge in cloud revenue, has bolstered confidence, pushing Nasdaq futures up by 0.3%. Meanwhile, AMD's lower-than-expected guidance led to an 8% drop in its shares post-market.

The Nasdaq Composite closed 0.78% higher on Tuesday, reaching a fresh record as investors eyed results from Meta, Microsoft, Apple, and Amazon throughout the week. The S&P 500 edged up by 0.16%, while the Dow Jones Industrial Average fell slightly by 0.36%.

In commodities, US crude oil experienced a slight decrease, following Monday's 6% drop, amid reduced supply concerns over tensions in the Middle East. The benchmark West Texas Intermediate December contract closed at $67.21 per barrel, down 0.25%, with Brent crude following suit at $71.12 per barrel.

US Treasury yields remained stable, with the 10-year yield closing at 4.268%, down 1 basis point, following earlier intraday highs. The yield movements reflect caution ahead of upcoming economic data releases.

The Asia-Pacific markets rallied in step with Wall Street's gains. Japan's Nikkei 225 gained 0.77%, while South Korea's Kospi edged up by 0.21%. Hong Kong's Hang Seng Index was up 0.35%, though mainland Chinese stocks underperformed with the CSI 300 down by 1%.

In Europe, the Stoxx 600 index fell by 0.59%, with losses across most sectors, while banks and mining stocks offered some resilience. European markets, like their global counterparts, are focusing on corporate earnings reports and economic updates from major economies.

With monthly expiry looming and heavy earnings lined up, Wednesday's session could see high volatility, particularly in the banking sector. As investors continue to dissect the impact of recent earnings on broader market performance, the Nifty and Bank Nifty indices are poised for potentially sharp movements. The resilience of the banking sector, alongside F&O cues and institutional trading behaviour, will likely determine the direction and sustainability of this rally.