Trade Setup: Nifty Gains In Last 6 Out Of 7 Sessions; Focus On Macro Data, Q4 Earnings & Global Cues

The Nifty has managed to secure a strong performance streak over the last seven trading sessions, closing higher in six of them. This recovery has brought much-needed cheer to investors and market watchers alike, showcasing the index's ability to rebound swiftly from intraday lows.

From a recent swing low of 21,821 on May 13, the Nifty has surged nearly 700 points, reclaiming all the losses from the previous week. The index's comeback this extended week has effectively brought it back to levels seen at the beginning of May. A notable milestone was achieved in the truncated session on Saturday when the Nifty climbed above the 22,500 mark, a critical level identified by technical analysts. Sustaining above 22,300 had set the stage for this positive move.

An encouraging development during this streak was the turn of foreign institutions into net buyers in the cash market during Friday's trading session. This marked their first net buying day in May, signalling renewed confidence in the Indian markets. However, with Saturday being a holiday for foreign institutions, no additional institutional data was available to gauge their stance over the weekend.

Several companies are set to announce their quarterly results on Tuesday, which could impact market sentiment further. Key names to watch include BHEL, NMDC, PI Industries, IRCON, JK Tyre, GSFC, Metropolis, Laxmi Organic, VA Tech Wabag, and Gulf Oil. These announcements will likely provide more direction to the market, depending on whether the reported earnings meet, exceed, or fall short of investor expectations.

The Nifty Bank index has also demonstrated commendable resilience, maintaining its position above the crucial 48,000 mark for two consecutive days. This performance has sparked optimism among chartists, who anticipate a potential move towards 48,500 if the index continues to hold its ground. Over the past six trading sessions, the Nifty Bank has gained in five, recovering half of the 3.1% decline it experienced in the prior week.

In the futures and options (F&O) market, Nifty 50's May futures saw a decrease in open interest by 0.3% or 33,325 shares on Saturday, though they are now trading at a premium of 41.9 points, up from 31.6 points earlier. Conversely, Nifty Bank's May futures witnessed a 0.9% reduction in open interest, shedding 21,405 shares.

The Put-Call Ratio (PCR) for Nifty 50 has increased slightly to 1.24 from 1.23, indicating a marginally bullish sentiment in the options market.

For the May 23 expiry, the Nifty 50 strikes of 22,650 and 22,750 on the Call side have seen an increase in open interest, suggesting that traders are placing bets on further upside. In contrast, the strikes at 22,400 and 22,450 have experienced a shedding in open interest.

On the Put side, strikes between 22,100 and 22,500 have seen a build-up in open interest, reflecting traders' expectations that these levels will act as strong support in the short term.

A number of stocks continue to remain in the F&O ban list, including Aditya Birla Capital, Balrampur Chini, Bandhan Bank, Biocon, Birlasoft, GMR Airports, Granules India, Hindustan Copper, Vodafone Idea, India Cements, SAIL, Piramal Enterprises, and Zee Entertainment. This restriction implies that these stocks cannot be traded in the derivatives segment, often due to reaching the market-wide position limits.

The recent performance of the Nifty and Nifty Bank indexes paints an optimistic picture for the near term, provided the upward momentum is sustained and supported by strong institutional buying and positive earnings reports. The ability of the Nifty to maintain its position above key technical levels will be crucial for continued bullish sentiment.

As the market gears up for another trading session on Tuesday, several stocks are poised to capture investor attention due to significant developments and financial results. Here's a detailed look at some of the key players:

SAIL: SAIL reported a mixed bag of results with a slight decline across key metrics. Sales volume dropped by 3% to 4.56 MT from last year's 4.68 MT, and revenue dipped by 4% to Rs 27,958 crore. Net profit also saw a reduction, falling 3% to Rs 1,127 crore. A notable factor impacting SAIL's financials was an exceptional loss of Rs 502 crore due to the settlement of government taxes under the Vivad se Vishwas scheme II and entry taxes. The company's borrowings as of March 2024 stood at Rs 30,593 crore, highlighting ongoing financial challenges.

Biocon: Biocon received a boost as its biosimilar afilbercept secured interchangeable status from the US FDA. The approved biosimilars, Yesafili and Opuviz, can now be substituted at pharmacies without additional approvals from prescribing physicians. Afilbercept is crucial for treating eye conditions like macular degeneration and diabetic retinopathy.

RITES: RITES inked a deal with Bangladesh Railway to supply 200 passenger coaches. The order, valued at Rs 915 crore and funded by the European Investment Bank, was won through a global competitive bidding process. This contract includes a supply and commissioning period of 36 months, followed by a 24-month warranty.

Ujjivan Small Finance Bank: Ujjivan Small Finance Bank reported stellar financial results, surpassing market estimates. The bank's Net Interest Income (NII) stood at Rs 933.5 crore, exceeding the estimated Rs 890.6 crore, while net profit was Rs 329.6 crore against the expected Rs 294.2 crore. The reversed merger of its holding company contributed to topline growth. Looking ahead, the bank anticipates a 25% growth in gross loans for FY25, with credit costs ranging between 1.4% to 1.5% and deposit growth aligning with asset growth. The bank also provided a NIM guidance of 9% for FY25.

Anupam Rasayan: Anupam Rasayan faced a tough quarter with net profit plunging 45.6% to Rs 31 crore and revenue down 16.5% to Rs 401 crore. EBITDA also decreased by 21.4% to Rs 92 crore, with the EBITDA margin slightly declining to 23% from 24.4%. Despite challenges in the agrochemical sector, the company's efforts to expand its pharma and polymer portfolios are beginning to pay off. The pharma segment now contributes 9% to overall revenue, up from 4% the previous year, with expectations for further growth.

India Cements: India Cements reported a reduced net loss of Rs 29.3 crore, compared to a loss of Rs 217.8 crore last year. Revenue dropped 14.7% to Rs 1,245.4 crore, while EBITDA improved to Rs 46.9 crore from a loss of Rs 44.4 crore. Capacity utilization rose to 63% from 51% in the March quarter. However, increasing cost pressures, high logistics costs, and severe market competition remain significant overhangs impacting margins.

Whirlpool of India: Whirlpool of India posted a strong quarter with net profit up 24.8% to Rs 79.5 crore and revenue increasing by 3.7% to Rs 1,734 crore. EBITDA surged 36% to Rs 143.7 crore, with margins improving to 8.35% from 6.3%. The company's market share grew in the January-March period, driven by product upgrades and innovations, leading to a 9.9% growth in consolidated revenue in the latter half of FY24.

City Union Bank: City Union Bank recorded a 6.3% rise in NII to Rs 546.6 crore and a 17% increase in net profit to Rs 254.8 crore. The bank's Gross NPA improved to 3.99% from 4.47% in December, while the Net NPA reduced to 1.97% from 2.19%. Despite a rise in slippages to Rs 219.4 crore, write-offs increased significantly to Rs 99.9 crore from Rs 30 crore in December, with recoveries and upgrades remaining flat.

Oil India: Oil India announced the issuance of one bonus share for every two held, with July 2, 2024, set as the record date. This move aims to enhance shareholder value and improve liquidity.

Lupin and Solara Active Pharma: Lupin received a form-483 with six observations from the USFDA for its Somerset facility, to which the company has pledged a timely response. Conversely, Solara Active Pharma's Visakhapatnam facility inspection by the USFDA concluded with zero observations, reflecting positively on its compliance standards.

Patanjali Foods: Patanjali Foods addressed media reports regarding unsafe Soan Papdi, clarifying that the issue pertained to a 2018 incident involving a distributor and had no direct connection to the company's current operations.

Patel Engineering: Patel Engineering reported an 83% rise in net profit to Rs 141 crore and an 11.5% increase in revenue to Rs 1,343 crore. EBITDA jumped 41% to Rs 238 crore, with margins improving to 17.7% from 14%. The company also reduced its net serviceable debt by Rs 331 crore in FY24.

Shalby: Shalby issued a corporate guarantee on behalf of its subsidiary, Mars Medical Devices Ltd., for cash credit facilities amounting to Rs 42 crore sanctioned by Citibank N.A.

Global Market Wrap
Stock futures remained largely flat on Monday night, following a mixed session on Wall Street where the tech-heavy Nasdaq Composite achieved a new all-time high. This comes as market participants eagerly await Nvidia's earnings report and continue to scrutinize potential policy moves by the Federal Reserve.

The Nasdaq Composite closed at a record high on Monday, rising about 0.7%, buoyed by a 2.5% rally in Nvidia shares. The tech giant's stock surge came as investors geared up for its highly anticipated earnings report on Wednesday, with expectations that Nvidia will showcase robust growth in the AI chip market. The S&P 500 also saw a slight increase, edging up nearly 0.1%.

However, the Dow Jones Industrial Average did not share in the gains, slipping almost 200 points, or 0.5%. The index was primarily dragged down by a significant 4.5% drop in JPMorgan Chase & Co. shares after CEO Jamie Dimon hinted at an earlier-than-expected retirement and stated that the bank would not be buying back shares at current prices.

As of Monday night, futures for the Nasdaq 100 were down about 0.1%, while those for the Dow Jones Industrial Average and S&P 500 hovered near their flatlines. Meanwhile, US Treasury yields ticked higher, with the yield on the 10-year Treasury note rising nearly 3 basis points to 4.447%, and the 2-year Treasury yield up more than 2 basis points to 4.852%. These moves reflect investor anticipation of upcoming economic data and comments from Federal Reserve officials that could provide further insight into the central bank's policy direction.

In Europe, the Stoxx 600 index closed slightly higher, up 0.2%, with industrial stocks gaining 0.96%. However, the automotive sector saw a decline of 0.77%. Notably, Swiss luxury goods company Richemont experienced a 5.3% rise after several analysts raised their price targets, extending gains from its recent record sales report and the announcement of a new CEO.

Asian markets displayed mixed results on Tuesday, despite the Nasdaq's overnight gains. Nvidia's positive performance influenced tech shares, yet South Korea's Kospi fell 0.34% and the small-cap Kosdaq declined 0.15%. In contrast, Japan's Nikkei 225 rose by 0.29%, continuing its momentum above the 39,000 mark, while the Topix gained 0.21%. Australia's S&P/ASX 200 slipped 0.17% after the Reserve Bank of Australia's minutes revealed considerations for rate hikes due to inflation concerns. Hong Kong's Hang Seng index dropped 0.86%, and mainland China's CSI300 decreased by 0.24%.

Crude oil futures declined on Monday amid geopolitical developments in Iran. West Texas Intermediate (WTI) for June delivery fell 27 cents, or 0.32%, to $79.80 a barrel, while Brent crude for July delivery dropped 26 cents, or 0.32%, to $83.71 a barrel. Despite these declines, US crude is up 11.3% year-to-date, and Brent is up 8.6%.

This dip followed the tragic death of Iranian President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian in a helicopter crash due to poor weather conditions. Vice President Mohammad Mokhber has assumed the role of interim president as the country prepares for new elections within 50 days. Market analysts believe that Iran's oil policy is unlikely to change in the immediate term despite the leadership upheaval.

Investors continue to weigh the implications of recent earnings and economic data, alongside Federal Reserve signals. The solid earnings season and signs of cooling inflation have fueled hopes for potential rate cuts by the Fed, contributing to the recent market rally. However, with the S&P 500 trading at a forward price-to-earnings ratio of 20.8, well above its historic average of 15.9, concerns about stock valuations persist.

Deutsche Bank has raised its 2024 year-end S&P 500 target to 5,500 points, the highest among major brokerages, while Morgan Stanley projects the index will hit 5,400 by June 2025. These bullish forecasts underscore the optimistic sentiment prevailing in the market, despite potential headwinds.

As the market awaits Nvidia's earnings report and further comments from Federal Reserve officials, trading volume remains robust. The S&P 500 recorded 58 new 52-week highs and four new lows, while the Nasdaq logged 222 new highs and 101 new lows on Monday. Advancing issues outnumbered decliners by a 1.14-to-1 ratio on the NYSE, while on the Nasdaq, decliners slightly outpaced advancers by a 1.01-to-1 ratio.

As the markets look ahead to another week of trading, the focus will remain on corporate earnings, macroeconomic data, and the behaviour of foreign institutional investors. A steady flow of positive news and robust earnings could further solidify the upward trend, while any negative surprises could prompt a re-evaluation of the market's resilience.

Investors and traders will do well to keep a close watch on the technical indicators and F&O cues to navigate the volatile market landscape effectively. With cautious optimism, the market participants are hopeful that the Nifty's impressive streak continues, paving the way for sustained growth and recovery in the coming weeks.