Trade Setup: Nifty Bulls Eye Comeback As Green Flickers After 4 Weeks Of Sell-Off; Key Triggers Today?

After enduring a relentless sell-off that led to over 2,000 points of correction, the Nifty 50 index finally showcased a green tint on Monday, hinting at a potential relief rally. But the question lingers-will this be an exit point for weary bulls, or can this recovery hold its ground through the ongoing Samvat?

The market action was intense, with Nifty trading within a wide range of 360 points. The session began in the red, echoing the losses seen last Friday. However, as the day progressed, a robust recovery followed, propelling the index to test the 24,500 mark, though it ultimately ended around the 24,350 mark, some 160 points off its daily high.

In tandem with Nifty's comeback, midcap and smallcap indices also rebounded, buoyed by positive earnings surprises. Interglobe Aviation was the notable exception, dipping 8%, while PSU Banks, particularly Bank of Baroda and Indian Bank, received favourable responses from investors due to their positive earnings.

Tuesday will be a pivotal day for the markets as it coincides with the monthly expiry for the Financial Services index, likely placing Nifty Bank in the spotlight. The index's ability to defend the 24,000 level remains crucial; a dip below could potentially trigger a more extensive downside. On the upside, bulls will be hoping for a firm hold above 24,500 to sustain any meaningful bounce.

The focus on Tuesday will also include a series of major earnings reports from market heavyweights such as Bharti Airtel, Tata Technologies, Federal Bank, and Indian Oil Corporation. This lineup includes high-profile players like Adani Enterprises and Adani Ports, alongside Nifty mainstays Cipla, Maruti Suzuki, and several mid-cap names like APL Apollo, Canara Bank, and Marico.

Foreign institutional investors (FIIs) continued their selling streak on Monday, while domestic institutions were net buyers, albeit without enough volume to counteract the FIIs' influence.

A significant contributor to Nifty's rally on Monday was the performance of the Nifty Bank, which saw robust movement despite tepid action from heavyweights like HDFC Bank and Axis Bank. The rally was primarily driven by ICICI Bank's solid quarterly results, with additional support from lenders like Bandhan Bank, Yes Bank, and Bank of Baroda. However, the banking index also struggled to sustain its highs, managing to close near the 51,250 mark after nearing the 51,600 level.

Nifty's futures contracts across the series saw a notable 12.1% surge in Open Interest, with rollovers still moderate at 5.3%. October futures were trading at a slight premium of 9.3 points, up from 11.95 points earlier. Open Interest in Nifty Bank futures rose 8% across the series, with rollovers at 58%. The Put-Call Ratio for Nifty 50 was up from 0.87 to 0.96, indicating a slight uptick in positive sentiment.

In terms of specific stocks, PNB has entered the F&O ban list, while Aarti Industries, Bandhan Bank, and NMDC are now free from the ban. Other stocks like Dixon Technologies, IDFC First Bank, L&T Finance Holdings, IndiaMART, Manappuram Finance, RBL Bank, and Escorts Kubota remain under the F&O ban.

Stocks To Watch for Tuesday
Bharti Airtel: The telecom major reported revenue growth of 7.7%, led by a 10.3% increase in Indian mobile revenues driven by recent tariff hikes. However, consolidated net profit dropped by 13.6% to Rs 3,593.2 crore due to a significant currency devaluation impact in Africa.

Spandana Sphoorty: This microfinance institution's disbursements were down 40% year-on-year to Rs 1,514 crore, while its AUM grew 7.7% annually. Spandana reported a net loss of Rs 204 crore, reversing from a net profit last year.

Federal Bank: Strong growth in Net Interest Income (NII) at 15.1%, with net profit rising 11% year-on-year. Provisions saw a steep 260.7% increase, while the Gross NPA ratio held steady.

Tata Technologies: A modest quarter-on-quarter growth in US Dollar revenues was impacted by clients' cautious approach towards long-term projects, especially with the ongoing geopolitical tensions and economic uncertainty.

Suzlon Energy: Net profit nearly doubled, with a 96.1% surge to Rs 200.6 crore, while revenue grew 48%. The company's order book reached an all-time high.

LIC Housing Finance: The housing finance firm's disbursements rose 12.3%, while its AUM expanded by 6% annually. However, NII declined by 6.3% despite a 12% growth in net profit.

Global Market Cues
US stock futures remained relatively stable on Monday night as investors geared up for a slew of major earnings announcements. Notable moves included a 6% dip in Ford Motor after it issued cautious guidance and a 23% rise in VF Corp following a positive earnings surprise. The Dow Jones Industrial Average also ended its five-day losing streak, while the tech-heavy Nasdaq recorded gains.

The US Treasury yields continued their upward climb, with the 10-year yield reaching 4.274%, its highest since July. Meanwhile, crude oil markets saw a sharp pullback, with West Texas Intermediate futures dropping by over 6%, triggered by developments in the Middle East and lower-than-expected damage to Iranian facilities.

Asian markets witnessed gains on Monday, led by Japan's Nikkei, which closed 1.82% higher on the back of a weaker yen. The Topix index and South Korea's Kospi also posted gains, while Hong Kong's Hang Seng and China's CSI 300 indices ended slightly higher. However, concerns over China's latest industrial profit figures, which showed a 27.1% year-on-year plunge in September, may continue to weigh on sentiment.

European markets closed higher on Monday as well, with the pan-European Stoxx 600 rising by 0.47%. Gains were led by media and construction stocks, while oil and gas sectors lagged due to a significant drop in crude prices.

GIFT Nifty futures are currently trading at a premium, indicating a positive opening for Indian markets on Tuesday. This optimism, combined with key earnings releases and the monthly expiry of Financial Services futures, could set the stage for an eventful trading day.