Sensex, Nifty rally 50% since March, gain 3% this week; Apr-Jun results by RIL, SBI to drive markets next week

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Published: July 25, 2020 12:00 PM

A host of events such as derivatives expiry of July month contracts, ongoing earnings season, trends in coronavirus cases, global cues and newsflow related to COVID-19, will remain on investors' radar.

Sensex, NiftySensex and NSE’s Nifty are now up nearly 50 per cent from their March low levels

Domestic equity market benchmarks BSE Sensex and Nifty 50 posted gains for the sixth consecutive week and managed to end higher up to 3 per cent. With this, Sensex and NSE’s Nifty are now up nearly 50 per cent from their March low levels. In the coming week, April-June quarter earnings of index heavyweights such as Reliance Industries (RIL), Kotak Mahindra Bank, Maruti Suzuki, State Bank of India (SBI), and Bharti Airtel among others are expected to sway investor sentiment. “During the week, the market continued its euphoric mood rally with less participation from broader indices. It is well observed that the percentage of shares moving in tandem with Nifty50 is far lower than what was witnessed in the previous few weeks,” said Jimeet Modi, Founder & CEO Samco Group.

India’s forex reserves at new high: Forex reserved continued to hit record high levels as they rose by $1.275 billion for the week ended July 17 to $517.63 billion, according to the latest data put out by the Reserve Bank of India (RBI). Foreign currency assets (FCA), which form a key component of reserves, rose by $1.245 billion to $476.88 billion.

Nifty’s valuations above levels seen in 2008: According to data from Bloomberg, the benchmark Nifty in 2008 reached the peak value of 19.7 times one year forward PE which makes it higher than the current one year forward PE of 20.51 times. Such rich valuations have worried experts, who are of the view that the markets are in the expensive territory.

FII and DII data: Foreign portfolio investors (FPI) were net buyers of Indian equities during the week buying stocks worth $679 million while the domestic institutional investors (DII) sold equities worth $261 million during to the week.

Upcoming events: A host of events such as derivatives expiry of July month contracts, ongoing earnings season with index heavyweights scheduled to announce their first-quarter earnings, trends in coronavirus cases, global cues and newsflow related to COVID-19, will remain on investors’ radar.

Market outlook for next week: “The market volatility is likely to continue. We would advise investors to continue with their defensive portfolio approach given the high valuations and maintain stock specific action. Traders, on the other hand, are advised to stay cautious and keep booking profit at regular intervals,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

Expectations for the Week

“As markets stroll along with the result season, they are continuously discounting surprises in results, if any, as well as the discounting commentaries from the management on the irreversible impact on businesses. At least from a rhetoric point of view tensions are increasing everyday between the US and China and India too is taking actions against Chinese business interests by overhauling internal policies to benefit domestic counterparts. It seems that global peace is nearing its all-time lows and equity too cannot prosper in such times. Investors are advised to be patient and wait for a deeper correction,” said Jimeet Modi.

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