Trade Setup: Nifty Continues Winning Streak Ahead of April F&O Expiry, Q4 Earnings In Focus

The Nifty index maintained its winning streak for the fourth consecutive day, showcasing a pattern of reaching intraday highs before retracting slightly but remaining resilient above crucial support levels. As the market braces for the April Futures and Options (F&O) series expiry on Thursday, investors are eyeing a volatile session, considering the index's roller-coaster ride throughout the month.

Despite encountering strong resistance between the 22,400 to 22,500 range, the Nifty has managed to cling above the lower end, indicating a bullish sentiment. Throughout the series, the Nifty witnessed significant fluctuations, hitting record highs before retracing over 1,000 points and now inching back towards recovery, marking an overall gain of 80 points so far.

One of the optimistic signs is the Nifty's consistent formation of higher highs and higher lows over the past four trading sessions. While it struggles to sustain these levels, the index's gradual ascent towards the 22,500 mark is evident, albeit with intermittent corrections.

However, Nifty's journey on the monthly expiry day may face hurdles due to the performance of key constituents. Hindustan Unilever's quarterly results, meeting already subdued expectations, are unlikely to sway market sentiments drastically. Conversely, Kotak Mahindra Bank's performance will draw significant attention, especially in light of recent RBI actions.

Among other companies, Axis Bank, LTIMindtree, Dalmia Bharat, and Indian Hotels are expected to witness market reactions based on their quarterly results. Additionally, a slew of heavyweight stocks, including Nestle India, Tech Mahindra, and Bajaj Finance, are slated to report their earnings, further influencing market sentiment.

In Wednesday's trading, foreign investors continued their selling spree in the cash market, while domestic investors remained net buyers, indicating mixed sentiments among market participants.

The Nifty Bank, mirroring the Nifty's positive trajectory, surged for the fourth consecutive day, closing above the 48,000 mark for the first time since April 12. With Axis Bank and Kotak Bank in the limelight alongside IndusInd Bank's earnings report, the banking index remains a focal point for investors.

Examining the F&O cues on the eve of expiry, Nifty 50's futures witnessed a notable 2.9% increase in Open Interest, with current rollovers standing at 56%. Conversely, Nifty Bank's futures added 2.9% in Open Interest, boasting a rollover rate of 74%. Notably, the Nifty 50's Put-Call Ratio stands at 1.04, signalling mixed sentiments among options traders.

As the series draws to a close, Aditya Birla Fashion & Retail and SAIL find themselves in the F&O ban list alongside Hindustan Copper, while Vodafone Idea and Zee Entertainment exit the ban.

Looking at specific strike prices for the April 25 expiry, the Nifty 50's Call side between 22,450 and 22,550 witnesses Open Interest addition, while the 22,300 strike experiences a decline. On the Put side, strikes between 22,300 and 22,500 observe Open Interest buildup, reflecting divergent expectations among traders.

As investors gear up for Thursday's trading session, a myriad of corporate developments and earnings reports are poised to sway market sentiment. Here's a roundup of stocks to keep an eye on:

Kotak Mahindra Bank: The Reserve Bank of India (RBI) directive has cast a shadow over Kotak Mahindra Bank, as it faces restrictions on new customer onboarding via online and mobile banking platforms. Additionally, the bank has been barred from issuing fresh credit cards due to serious deficiencies observed by the RBI, spanning IT inventory management and other compliance issues. Despite assurances from the bank regarding measures to bolster its IT infrastructure, concerns linger among investors regarding the impact on its operations.

Hindustan Unilever: Reporting a modest volume growth of 2% for the March quarter, Hindustan Unilever's performance remains in line with market expectations. While other parameters also meet consensus estimates, the company's overall performance is seen as meeting rather than exceeding low expectations, reflecting stability in its core operations.

Axis Bank: Surprising analysts, Axis Bank announced a net profit of Rs 7,130 crore, surpassing estimates. However, concerns loom over the bank's asset quality, which has dipped to its lowest level in over eight years. Notably, the bank's restructured book is at its lowest in 14 quarters, coupled with an improved Net Interest Margin (NIM) contradicting expectations of a decline. The bank's plans to raise capital through debt and equity further add intrigue to its future trajectory.

LTIMindtree: Despite posting revenue and margin figures below estimates, LTIMindtree faces headwinds with declining Constant Currency revenue and consecutive margin contractions. Deal wins also witnessed a slight decline, particularly in North America and Europe, contributing to the company's subdued performance compared to expectations.

Dalmia Bharat: The company reported a net profit of Rs 320 crore, which was above street expectations, reflecting robust financials. However, concerns arise over EBITDA and margin misses, attributed to weak pricing and higher-than-expected costs. While increased volumes buoy the company's performance, margin contraction raises questions about sustainable growth strategies.

Syngene: With net profit inching up by 5.5% and revenue declining by 7.8% year-on-year, Syngene grapples with reduced demand for research and development services, particularly within the US biotech sector. Despite challenges, management remains optimistic about a potential recovery, forecasting high-single-digit to low-double-digit revenue growth in the upcoming financial year.

AU Small Finance Bank: Exceeding expectations, AU Small Finance Bank reports a net profit of Rs 370.7 crore, alongside improved asset quality. Despite a marginal dip in Net Interest Income, the bank's efforts to reduce gross and net NPA levels showcase resilience amid challenging market conditions.

Indian Hotels: Delivering strong financials, Indian Hotels witnesses a notable increase in net profit, revenue, and EBITDA, bolstered by a robust cash position and expansion plans. The brand's strategic growth initiatives aim to achieve a portfolio of 100 hotels by 2030, signalling long-term viability and scalability.

In addition to these corporate updates, Rail Vikas Nigam emerges as the lowest bidder for a Southern Railway project worth Rs 239 crore, underscoring its continued involvement in critical infrastructure projects.

Looking ahead, ITC shareholders are slated to convene on June 6 to discuss a scheme of arrangement between ITC and ITC Hotels, while Motilal Oswal announces key leadership changes, appointing Prateek Agrawal as MD & CEO of Motilal Oswal AMC, and elevating Akhil Chaturvedi as Executive Director.

Global markets faced a wave of turbulence on Wednesday and early Thursday, driven by a combination of disappointing earnings from tech behemoths and cautious anticipation ahead of key economic indicators set for release later this week.

US stock futures experienced a downward trajectory on Wednesday night, echoing the sombre mood on Wall Street. Futures tied to the Dow Jones Industrial Average dropped 76 points or 0.2%, while S&P 500 futures slid 0.6%, and Nasdaq 100 futures plummeted 1%. Meta Platforms, formerly Facebook, led the tech slump, nosediving 15% in after-hours trading due to tepid revenue guidance for the upcoming quarter. Similarly, International Business Machines (IBM) tumbled 8% after failing to meet revenue estimates for the first quarter, compounding the market's unease.

Amidst the market jitters, US Treasury yields surged as investors awaited crucial economic data to gauge the trajectory of Federal Reserve policies. The 10-year Treasury yield climbed 4.6 basis points to 4.644%, while the 2-year Treasury yield edged 2.4 basis points higher to 4.929%. Rising yields exerted downward pressure on equities, adding to the uncertainty prevailing in the market.

European markets closed on a mixed note, relinquishing earlier gains as uncertainty loomed. The Stoxx 600 index ended 0.43% lower, reversing morning gains, with tech stocks showing resilience while financial services suffered losses. The UK's FTSE 100 snapped a five-day winning streak, closing marginally lower amidst broader market volatility.

Oil prices dipped in early trading on Thursday, reflecting concerns over a potential economic slowdown in the US and geopolitical tensions in the Middle East. Brent crude futures slipped 9 cents to $86.95 a barrel, while US West Texas Intermediate crude futures edged 7 cents lower to $82.74 a barrel. Despite marginal losses, both benchmarks remained relatively stable after shedding less than 1% on Wednesday.

In Asia, markets took a breather following two consecutive days of gains, with investor sentiment subdued ahead of critical economic data releases. Japan's Nikkei 225 and Topix indices dropped 1.8% and 1.4%, respectively, reflecting cautious sentiment among investors. South Korea's Kospi and small-cap Kosdaq indices also experienced declines, while Hong Kong's Hang Seng index and China's CSI 300 fell 0.45% and 0.4%, respectively. Notably, markets in Australia and New Zealand remained closed for a public holiday.