After a phase of consolidation, the market posted its biggest weekly gains in six months in the week gone by. But the rally was led by select large-cap stocks like Reliance Industries and TCS, and was not a broad-based one.
Hope of better earnings growth in Q1FY19, stability in the rupee and crude oil prices, and stable global cues boosted investors' sentiment.
The Nifty managed to end the week a tad above the 11,000-mark, gaining 2.3 percent, while the Sensex hit a record high of 36,740.07 and ended 2.5 percent higher at 36,541.63.
But the broader markets underperformed the benchmark indices, with the BSE Midcap index gaining just 0.3 percent and the BSE Smallcap index gaining only 0.85 percent during the week.
After such a sharp rally in benchmark indices, the market is expected to consolidate in the coming week before moving towards its earlier record highs, experts said.
According to them, stock-specific action is also likely as it would be an action-packed week, with a lot of big corporate earnings (including those of nine Nifty stocks) scheduled to be announced.
"We may witness profit-booking in the coming week," Rahul Sharma, Senior Research Analyst, Equity99, told Moneycontrol.
"The focus will now shift on management commentary and guidance in the coming months which most fund managers will use it as an opportunity to reshuffle their portfolio," Sharma said.
A similar sentiment was echoed by other market participants as well.
"We will continue to see stock-specific approach as heavyweights like HDFC Bank, Hindustan Unilever, Ashok Leyland, Zee Entertainment, Ultratech Cement, MindTree, Bajaj Finance, and Kotak Mahindra Bank are scheduled to report their quarterly earnings," Gaurav Jain, Director at Hem Securities, told Moneycontrol.
Here are 10 key factors that will keep traders busy next week:
Earnings
With the June quarter results season kicking off, investors will been keenly watching the various earnings announcements that are scheduled to take place in the week to come.
In the past week, TCS' earnings beat analysts' expectations, while those of IndusInd Bank were stable. IT major Infosys reported a mixed set of numbers for the quarter gone by.
More than 100 companies will declare their earnings for the June quarter this coming week, including Hindustan Unilever, Zee Entertainment, ICICI Lombard, Ashok Leyland, UltraTech Cement, Mindtree, Bandhan Bank, Reliance Communications, Bajaj Finance, Bajaj Finserv, RBL Bank, Kotak Mahindra Bank, ABB India, Wipro, L&T Finance, Bajaj Auto and HDFC Bank.
The Indian subsidiary of the Anglo-Dutch company Unilever Plc is likely to report a 18.6 percent year-on-year increase in its April-June quarter net profit to Rs 1,538 crore on Monday.
According to a Reuters poll of analysts, the FMCG major's revenue is seen rising 14.73 percent YoY to Rs 9,638 crore. Earnings before interest, tax, depreciation, and amortisation (EBITDA) will likely rise 19.2 percent to Rs 2,224 crore.
Brokerages expect the company's volume growth to be in the range of 11-14 percent, as against a flat volume growth in the year-ago period because of disruption in trade channels before the implementation of Goods and Services Tax (GST).
The management's commentary on rural demand and the company's pricing strategy in the wake of rising prices of some commodities, especially crude oil, are key things to watch out for.
HDFC Bank
HDFC Bank, the country's second largest private sector lender, is expected to report a rise of over 20 percent in its net profit for the quarter ended June.
Brokerages said its net interest income is seen rising 15-20 percent and that it could also report a healthy other income number.
"We expect 20 percent YoY growth in advances along with stable net interest margin (NIMs). Non-interest income should be healthy, growing 21 percent YoY. We expect elevated provisioning to continue (as has been the trend since last 5 quarters). Deposits are expected to continue to show strong traction," KR Choksey said in its report.
Commentary on growth outlook for FY19, increasing competition in the retail space and consequent margin pressure will need to be monitored along with credit cost guidance, the brokerage said.
Prabhduadas Lilladher said the bank would continue to report steady earnings growth but that its NII will be slightly weaker as NIM could be under pressure. "Loan growth will be led by unsecured credit, home loans (as bank bought back good quantum) and corporate book," it said.
Kotak too expects the lender's NII growth to be marginally lower than its loan growth of around 20 percent. "NIM will decline 10 bps QoQ. Loan growth on the corporate side (NCLT cases refinancing) could be strong along with retail (mostly led by unsecured loans)," the brokerage said.
Bajaj Finance
Bajaj Finance is expected to report another robust set of numbers for the June quarter. Brokerages estimate the company's bottomline to rise 35-45 percent YoY and its net interest income to increase 30-40 percent. Assets under management (AUM) are seen increasing 35 percent.
"For Bajaj Finance, Q1 and Q3 are seasonally strong quarters in terms of asset growth. We expect AUM to increase by 37 percent YoY to Rs 94,093 crore led by the consumer finance segment and in that mainly aided by the consumer durable segment," ICICI Securities said in its research note.
The brokerage said the company's calculated NIMs are expected to come in higher than 11 percent. "No negative surprise is expected on the asset quality front. PAT of Rs 869 crore is estimated, up 44 percent YoY," it said.
KR Choksey expects Bajaj Finance's AUM to grow 35 percent YoY, owing to the company's dominant position in the consumer finance segment.
"We expect stable NIMs of 11.5 percent to aid NII growth of 29 percent. Reducing asset quality pressure should translate into lower credit costs, aiding PAT of Rs 830 crore, up 37 percent YoY," KR Choksey said.
The brokerage said that cost structure will need to be monitored as the company has been making investments in tech and digital (as part of BFL 2.0) and expanding its branches.
"Further, commentary on reviving SME lending and scaling up BHFL (housing finance sub) will need to be watched out for," it said
Kotak expects the NBFC to report loan growth of 35 percent, which along with a stable NIM, will push NII up 36 percent. "Cost-income will remain stable at 44 percent YoY," the brokerage said.
Macro Data
WPI along with Manufacturing, Fuel and Food inflation data for June month will be released on Monday. WPI rose by 4.43 percent in May, after a 3.18 percent rise in the prior month.
Foreign exchange reserves for the week ended July 13, and deposit and bank loan growth for the week ended July 6 will be announced on Friday.
Technical Outlook
In the passing week, the Nifty surpassed psychological 11,000-mark for the first time since February 1, 2018 and managed to hold the same at close, forming bullish body candle.
On top of that technically, it did not break its Thursday's intraday low of 10,999.65, which indicated that the market may consolidate further before moving towards earlier record high of 11,171 seen in January.
Experts feel the index has to close above Thursday's intraday high of 11,078.30 to show strength that can push it above 11,100 and then to earlier record high.
"The index finished off the week above the higher end of the range 10,600-10,900. Hence, 10,900 may now act as the pivotal support for the next week. Candle pattern on the weekly chart suggests, index bulls are quite confident about the benchmark index making higher highs," Stewart & Mackertich Wealth Management said.
Hence, traders and investors may again accumulate blue-chip stocks on dips, it added.
Further, thorough technical study of the weekly as well as the daily chart patterns suggests, Nifty broader trading range for the coming week is expected to be 10,900-11,120, the report said.
"In the near future, we may witness profit-booking in the coming week as Nifty formed a 'Shooting Star' which is treated as a short-term reversal pattern," Rahul Sharma, Senior Research Analyst, Equity99 told Moneycontrol.
He expects the short-term trend to reverse only after Nifty trades below the low of 10,999, which is also a crucial support while resistance is around 11,100-mark.0
IPO
The Rs 1,125-crore initial public offering of TCNS Clothing will open for subscription for three days during July 18-20, 2018.
The IPO comprises an offer for sale of 1,57,14,038 equity shares by Onkar Singh Pasricha, Arvinder Singh Pasricha (promoters), Anant Kumar Daga, Saranpreet Pasricha, Angad Pasricha, Vijay Kumar Misra and Amit Chand (other selling shareholders) and Wagner Limited (investor), which will constitute up to 25.63 percent of the post-offer paid-up equity share capital.
The price band for the offer is fixed at Rs 714-716 per share. Bids can be made for a minimum lot of 20 equity shares and in multiples of 20 equity shares thereafter.
Corporate Action
Stocks in Focus
Infosys: Profit in Q1 fell 2.1 percent to Rs 3,612 crore versus Rs 3,690 crore and revenue rose 5.8 percent to Rs 19,128 crore versus Rs 18,083 crore. Dollar revenue grew by 0.9 percent at $2,831 million versus $2,805 million (QoQ).
Infosys: Guidance for FY19 constant currency growth maintained at 6-8 percent and operating margin at 22-24 percent.
Vedanta: Company has been identified as the 'H1 qualified interested bidder' as per the bid process of the consortium of lenders of GMR Chhattisgarh Energy Limited (GCEL) for sale of controlling equity stake and restructuring of debt in GCEL.
Dr Reddy's Laboratories: US District Court for the District Of New Jersey converted temporary injunction into preliminary injunction against DRL. With this court ruling, the company is prevented from re-launching its generic product until patent litigation related to 305 patent is concluded and company prevails on an appeal of this injunction.
The company announced its intent to appeal the decision made by the US District Court for the District of New Jersey in a preliminary injunction hearing with respect to further sales and commercialisation of Dr Reddy's Buprenorphine and Naloxone Sublingual Film within the United States.
Aurobindo Pharma: The company signed definitive agreement to acquire Apotex' businesses in Poland, Czech Republic, Netherlands, Spain & Belgium for 70 million euro.
PC Jeweller: Board decides to withdraw buyback offer of 1.21 crore shares with immediate effect.
Minda Industries: Board has approved acquisition of 80 percent of equity capital of iSYS RTS GmbH based in Germany.
Inter Globe Finance: Navin Jain, Managing Director has also been appointed as chairman of the company.
JSPL and Zee Media Corporation: Jindal Steel and Power and Zee Media Corporation have entered into an amicable settlement with each other, to put a quietus to the entire issues and have withdrawn the allegations against each other.
Fortune Financial Services: Scheme of Arrangement between Napean Finvest (demerged company) and Fortune Credit Capital, (resulting company) a wholly owned subsidiary of the company has been approved by the National Company Law Tribunal. According to the Scheme, the lending business of the demerged company will be transferred to the resulting company as a going concern.
Bhansali Engineering Polymers: Q1 profit falls to Rs 16.77 crore from Rs 16.88 crore and revenue dips to Rs 201.7 crore from Rs 251.1 crore YoY. Company put on hold its capacity expansion programme from 100 KTPA to 137 KTPA at Abu road unit.
3i Infotech: Q1 consolidated revenue rises to Rs 241.98 crore versus Rs 239.31 crore; profit falls to Rs 15.19 crore versus Rs 16.88 crore YoY.
Fine Organic Industries: Company has signed agreement with Citi Bank NA, Jersey branch for availing external commercial borrowing of $18.75 million to finance the capital expenditure.
Visa Steel: Manoj Kumar Digga, Chief Financial Officer has resigned and company is proposed to appoint Ranjan Kumar Jindal as the Chief Financial Officer.
Cochin Shipyard: Company signed shipbuilding contract with Inland Water Authority of India (IWAI) for design, construction and supply of Ten Ro-Ro Vessels. The total contract value is Rs 102.6 crore.
Adani Green Energy: Company through its wholly owned subsidiary, Mahoba Solar (UP) Private Limited has won tender for setting up 300 Mwac solar generation project.
Vipul: Ajay Agrawal resigns from the position of Chief Financial Officer of the company.
Nucleus Software Exports: Company acquires remaining 4 percent stake in Avon Mobility Solutions, taking total stake to 100 percent.
KP Energy: Company and GE India Industrial (P) Limited have signed up definitive agreements for development of 300MW Wind Power Project (120 Wind Turbine Generators of 2.5 MW each) at Kutch, Gujarat.
Bajaj Corp: Q1 profit falls to Rs 53.76 crore versus Rs 54.97 crore; revenue rises to Rs 221.41 crore from Rs 197.43 crore YoY.
DCB Bank: Q1 profit rises to Rs 69.50 crore versus Rs 65.22 crore; net interest income jumps to Rs 272.97 crore from Rs 233.16 crore YoY. Gross NPA stands at 1.86 percent versus at 1.79 percent and net NPA at 0.72 percent versus 0.72 percent QoQ.
Seamec: Subsidiary Seamec International FZE purchased a bulk carrier 'TENTO' renamed as 'GOOD HOPE'.
Global Cues
China's GDP growth rate for Q2CY818, and China Industrial Production and Retail Sales for June month will be released on Monday. US Retail Sales for June and Euro Area Balance of Trade data for May will be announced on the same day while European Union and China Summit will be held on the same day.
US Industrial Production for June and China Industrial Capacity Utilization for Q2 will be declared on Tuesday while European Union and Japan summit will be held on the same day.
US MBA Mortgage Application for the week ended July 13 and Housing Starts for June, and Euro Area Inflation data for June will be released on Wednesday.
Japan's Balance of Trade data for June and US Initial Jobless Claims for the week ended July 14 will be announced on Thursday.
Japan's Inflation data for June and All Industry Activity Index for May, and Euro Area's Current Account Balance for May will be declared on Friday.
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