Stock market preview: Probable trading range for Nifty could be 9850 to 10330

Nifty plunged for the second straight week and ended lower by 2.65% at 10030, the lowest level in the seven months on the back of continuous foreign institutional investors (FII) selling, weak global cues ignoring positive factors of lower crude and stable rupee. The mid and small cap indices also lost 1.56% and 4.10%, respectively.

All the sectoral indices ended in red, led by the pharma and media, which lost 5.50% each. IT lost 4.65% post mixed set of results by the mid-sized IT companies, energy sector fell 3.50% post Reliance results and profit booking in oil marketing companies (OMC). Bank Nifty also lost 2.65% on profit booking in the private sector banks while FMCG, auto and metals lost 2-3%.

Microfinance companies Equitas Holdings and Ujjivan Financial nosedived 22% each after the Reserve Bank of India (RBI) asked both to comply with a regulatory timeline to list their small finance banks within three years of commencing operations. In the last week, FIIs sold equities worth Rs 5,260 crore while the domestic institutional investors (DIIs) bought shares of Rs 4,508 crore.

The global markets also faced their worst week in the last five years. Sell-off in the US markets accelerated, wiping out gains for the current year post anxiety over corporate profits, global trade war and weak economic growth. The US 10-year bond yield softened to 3.10%. The US, European Union (EU) and Asian stock markets tumbled which added to woes of the Indian markets, which was dragged down by a weak rupee and tepid earnings.

Key global events to look for this week include Bank of Japan policy meeting on Tuesday followed by the US ADP non-farm Employment change data on Wednesday, Bank of England policy meeting and US vehicle sales on Thursday and the US employment change data will be released on Friday.

On the domestic front, India’s September infrastructure output data will be released today while all the automobile companies will release their October sales on Thursday and Friday.

In the ongoing corporate earnings season Divi’s Lab, Colgate, BPCL, Tech Mahindra, Pidilite, Bank of Baroda, Dabur, Tata Motors, Mcdowell, Escorts, L&T, Lupin, Vedanta, HDFC, HPCL, Arvind, Godrej Consumer, Axis Bank, Hindalco, IOC, Bharat Forge, Sun TV, SAIL, PNB will announce their second quarter results this week.

Last week, Nifty opened at a high level of 10408 but could not sustain it; every bounce was toned down by selling throughout the week. Nifty traded in the predicted range of 9950-10450 defined in last week communication and cautioned about pressure in the medium term trend since the last two-three weeks ahead of a trade war and fear of slowing global economies.

Technically on a weekly scale, Nifty formed a long bearish candle, which is a negative indication though RSI is in oversold zone. The Nifty is near 9950 level where the bull rally started. A breach of this level may accelerate selling towards 9850 which could act as trend reversal level while on the upside 10140, 10220 and 10330 are the resistance levels.

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This week probable trading range could be 9850 to 10330, taking cues from the global markets and also stock-specific action during results announcement with a focus in financials, auto and IT sectors.

By: Yogesh Vinod Mehta

(The writer is VP- retail research, Motilal Oswal Financial Services)

Source: DNA Money