Market Week Ahead: 10 key factors that will keep traders busy next week

Experts largely see the stock specific action on earnings and also expect the consolidation to continue in the coming week.

  

Bears managed to halt the bulls in their tracks at Dalal Street this week, with the market taking a breather following a 7 percent rise over the past five weeks.

The Nifty lost 0.7 percent and the Sensex fell 0.2 percent amid volatility after hitting a three-month high in the week gone by. The broader markets underperformed frontliners, with the Nifty Midcap index falling 2 percent and BSE Smallcap declining over a percent.

Investors turned cautious and preferred to book some profits as they digest the ongoing company earnings announcements and ahead of an important political event: Karnataka elections, which will be held on May 12 (the result will be declared May 15). Global markets also stayed cautious through the week, ending mostly in the red.

Experts said that the upcoming assembly election, which could set the tone for the general election about a year ahead, could continue to keep markets volatile.

They added that the market could witness-stock specific action based on earnings and said the market could break out on either side only after exit polls will be announced by media houses and survey agencies after voting on May 12.

We expect some amount of consolidation at current levels with individual sectors and stock rotation being in focus depending on further news flow emanating from quarterly results during the month.

Tthe volatility is likely to remain in next week. In the near term, markets would continue to focus on the outcome of assembly polls in Karnataka along with oil prices, yield movement and rupee depreciation, she said.

By May 12, US President Donald Trump will decide whether to restore US sanctions on Tehran. If imposed, it would likely result in a reduction of Iran’s oil exports, thereby further lifting Brent prices.

Here are 10 key factors that will keep traders busy next week:

Earnings

As we are in the middle of March quarter earnings season, about 600 companies (as per latest data available on the BSE) are going to announce their quarterly numbers in current month. Some companies have not announced their results dates yet, so the list will increase as we move towards last fortnight of this month.

In the coming week, more than 200 companies will release their January-March quarter earnings reports, which includes ICICI Bank, Eicher Motors, Asian Paints, Titan Company, Zee Entertainment, Exide Industries, ABB India, Goderj Consumer Products, Jubilant Foodworks, Arvind, Tata Chemicals, Tata Global, Jindal Steel & Power, Parag Milk Foods, Adani Enterprises and Apollo Tyres.

Apart from ICICI Bank, another eight banks will also announce their results next week, which are Allahabad Bank, Canara Bank, Dena Bank, Vijaya Bank, Federal Bank, Indian Bank, Oriental Bank of Commerce and UCO Bank.

ICICI Bank

Country's larget private sector lender ICICI Bank will declare its March quarter earnings on Monday. The key thing to watch out for by the Street would be its asset quality performance and provisions and their impact on profitability. Investors will also keenly watch MD & CEO, Chanda Kochhar's view on the bank performance going forward.

The bank is likely to post a sharp decline of about 52.7 percent YoY in net profit for the fourth quarter ending March 2018 at Rs 955.7 crore while net interest income is also projected to be marginally lower by about two percent to Rs 5,832 crore YoY, according to Reuters Poll estimates.

The profits are likely to be hit because of substantially high provisions for bad loans. The provisions are expected to jump by 146 percent year-on-year to Rs 7131 crore, which would be doubled from the December quarter.

On the other hand, non-interest income is estimated to be more than doubled to Rs 6,711 crore, up 122 percent from Rs 3,017 crore in the year ago quarter. The sharp rise is likely from the proceeds of stake sale in its subsidiary ICICI Securities through the IPO or the initial public offering.

Karnataka Elections

The most important event to watch out for towards the next weekend would be the Karnataka elections that will be held on May 12 in all 224 constituencies of the state assembly followed by counting on May 15, which will keep market volatile.

Karnataka elections results are not only important for market but also for General Elections 2019 to some extent as it will give some direction to the market in short term and some hint about political stability.

The market on May 14 will first react to the exit polls announced immediately after the voting on May 12 and then will look for results on May 15.

Macro Data

On the macro front, the government will release the industrial output data for month of March on Friday after market hours.

Industrial output, measured by the index of industrial production (IIP), continued to grow more than 7 percent for fourth consecutive month in February at 7.1 percent against 7.4 percent growth in January.

Rupee

The Indian rupee is marching towards 67 against the US dollar, falling for the fourth consecutive week on strengthening US dollar, rising oil prices and worries over widening trade deficit.

It closed 21 paise lower at 66.87 in the week gone by. Rising demand for US dollar on hope that Federal Reseve will continue raising interest rates also drove the rupee lower. The rising rupee could put inflationary pressure on the economy.

According to reports, Indian rupee has been among the worst performing currencies in the emerging market pack this year and has lost over 4.5 percent against the US dollar.

ADB Chief Economist Yasuyuki Sawada on Friday said India need not worry much about currency fluctuation at the moment as the country has good accumulation of foreign exchange reserves, but a depreciating rupee could put inflationary pressure on the economy.

He said the Asian Development Bank (ADB) does not foresee a sharp increase in oil prices which has touched USD 75 a barrel recently.

Oil prices increased sharply on Friday as global supplies remained tight and the market awaited news from Washington on possible new US sanctions against Iran, reports CNBC.

Brent crude oil futures were at USD 74.90 per barrel, up 1.7 percent on Friday. It already hit a three-and-half-year closing high of USD 75.17 on Monday while US crude futures clsoed up 1.9 percent at USD 69.72 per barrel, the highest level since November 26, 2014.

Technical Outlook and F&O

Experts largely feel the market looks week, especially after breaking key important levels of 10,650 and 10,620.

The Nifty50 which closed in red for the third consecutive day in a row on Friday could face rough waters in the coming week as support levels for the markets are shifting lower which does not augur well for the bulls, Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

The Nifty lost 0.7 percent in the passing week, after rising 7 percent for previous five consective weeks.

"Failing to breakout critical resistance around 10,780 resulted in retracement towards ending nearer the weekly low of 10,602. Ending the week below 10,640 mark brightens the possibility of further correction towards and 10,520. Midway critical support is placed around 10,580." Stewart and Mackertich said.

Further, as the weekly chart pattern suggests, Nifty broader trading range for the coming week is expected to be 10,520 to 10,780, it added.

According to Sumit Bilgaiyan, Founder of Equity99 said now, one can look at 10,550 levels on a downside and 10,680-10,780 levels on upside.

Meanwhile, options data indicated that the Nifty could be in the broader range of 10,500 to 10,800 in the coming week, experts said.

On the options front, maximum Put open interest (OI) is placed at 10,500 followed by 10,400 strikes while maximum Call OI is placed at 11,000 followed by 10,800 strikes. Fresh Put writing was seen at 10,400 and 10,500 strikes while Call writing was seen at 10,700 and 10,800 strikes.

"Options activity remains concentrated at 10500 Put and 10800 Call where both these strikes are seeing addition of almost 10 lakh shares each during the week. This suggests a broad Nifty range of 10500-10800 for the Nifty in coming sessions," ICICI Securities said.

IPO

Indostar Capital Finance will open its initial public offering for subscription on May 9 with a public issue which comprises of fresh issue aggregating up to Rs 700 crore and an offer for sale of up to 2 crore equity shares. The price band for the offer is fixed at Rs 570-572 per share.

The company aims to raise Rs 1,844 crore at higher end of price band through the issue which will close on May 11.

It intends to primarily utilise the net proceeds of the fresh issue for augmenting its capital base to meet future capital requirements.

Established in 2009, Indostar Capital Finance is a leading NBFC lending to mid-to-large sized corporates in manufacturing, services and infrastructure industries and real estate developers of residential and commercial building projects. The company has recently ventured into other segments such as housing finance and vehicle finance.

Stocks in Focus

Wockhardt Q4: Loss at Rs 154 crore versus loss of Rs 174 crore; revenue up 17.6 percent at Rs 1,018 crore versus Rs 865.5 crore (YoY).

R Systems International Q4: Profit falls to Rs 3.85 crore from Rs 7.32 crore, revenue from operations decliend marginally to Rs 152.2 crore from Rs 155.5 crore (YoY).

Voith Paper Fabrics India Q4: Profit dips to Rs 4.5 crore versus Rs 5.2 crore; revenue from operations falls to Rs 23.8 crore from Rs 24.5 crore (YoY).

SQS India BFSI Q4: Profit after tax rises to Rs 10.4 crore from Rs 5.5 crore, aided by a forex gain of Rs 2.9 crore; operating revenue jumps to Rs 75.6 crore versus Rs 70.4 crore (YoY).

Teesta Agro Industries Q4: Profit falls to Rs 5 lakh from Rs 38 lakh; revenue from operations jumps to Rs 23.66 crore from Rs 14.70 crore (YoY).

BASF India Q4: Profit jumps to Rs 66 crore versus Rs 42.55 crore; revenue from operations slips to Rs 1,343.56 crore versus Rs 1,392.62 crore (YoY).

Indo Count Industries Q4: Profit dips to Rs 26.79 crore versus Rs 48.80 crore; revenue from operations falls to Rs 405.94 crore versus Rs 467.51 crore (YoY).

Nitta Gelatin India Q4: Profit jumps to Rs 5.48 crore versus Rs 4.01 crore; revenue from operations rises to Rs 88.64 crore versus Rs 78.39 crore (YoY).

Great Eastern Shipping Q4: Loss widens to Rs 418.2 crore versus Rs 34.16 crore; revenue from operations increases to Rs 768.90 crore versus Rs 746.52 crore (YoY).

LS Industries Q4: Net profit at Rs 26.14 lakh versus loss of Rs 9.18 lakh; revenue from operations jumps to Rs 4.2 crore from Rs 1.9 crore (YoY).

Triton Valves Q4: Profit falls to Rs 1.23 crore versus Rs 2.48 crore; revenue from operations increases to Rs 54.9 crore versus Rs 48.7 crore (YoY).

Nocil Q4: Profit rises to Rs 50.95 crore versus Rs 20.91 crore; revenue from operations jumps to Rs 275.87 crore versus Rs 209.78 crore (YoY).

Indbank Merchant Banking Services Q4: Loss at Rs 2.5 crore versus profit at Rs 1.07 crore; revenue from operations rises to Rs 2.7 crore versus Rs 2.35 crore (YoY).

Lloyds Steels Industries Q4: Profit jumps to Rs 99.84 crore from Rs 12.03 crore; revenue from operations rises to Rs 63.4 crore versus Rs 39.4 crore (YoY).

Elecon Engineering Q4: Profit rises to Rs 53.38 crore versus Rs 30.04 crore; revenue from operations falls to Rs 437.14 crore from Rs 446.64 crore (YoY).

Kaya Q4: Loss at Rs 7.8 crore versus loss of Rs 4.52 crore; revenue from operations dips to Rs 97.38 crore versus Rs 114.4 crore (YoY).

Fortis Healthcare appointed Arpwood Capital Private Limited as financial advisor to the board of directors of the company to provide its independent opinion on (a) the offers received or to be received from bidders for a potential significant equity investment and/or acquisition or restructuring of its assets, and (b) on the appropriateness of the process put into place for dealing with the said offers.

Indiabulls Ventures: To capitalise and fund IVL Finance Limited and Indiabulls Asset Reconstruction Company, subsidiaries of the company, for meeting their business requirements and to support the future growth of their businesses and to further augment the long-term financial resources of the company, Indiabulls Ventures' board of directors approved the preferential offer and issue of upto 4,58,39,888 equity shares at an issue price of Rs 450 per share, for cash consideration aggregating to approximately Rs 2,063 crore, to certain foreign investors.

Thomas Cook India: CRISIL revised its outlook of the credit rating assigned to long-term instruments of the company amounting to Rs 200 crore.

Larsen & Toubro: Subsidiary company, L&T Infrastructure Development Projects (L&TIDPL) transferred its stake in five subsidiary companies to Indinfravit Trust through the infrastructure investment trust (InvIT) route on May 4, 2018. Accordingly, these companies cease to be subsidiary companies of the company.

Bank of Baroda keeps marginal cost of funds based lending rate (MCLR) at existing level across the tenors.

Cadila Healthcare: Zydus receives final approval for Succinylcholine Chloride injection USP and tentative approval for Plerixafor injection from the USFDA.

Smartlink Holdings: Board of directors of Smartlink Holdings Limited (formerly known as Smartlink Network Systems) has approved the buyback of 56 lakh equity shares of Rs 2 at a price of Rs 120 per share under tender offer route.

Bodal Chemicals: Company had started the process for acquisition of land aggregating to about 4.82 lakh square metres from the Gujarat Industrial Development Corporation (GIDC) authority, Ankleshwar for future expansion and new projects.

Punjab National Bank: Hiroo Mirchandani, Director under shareholder category, ceased to be director on the board of the bank on completion of her tenure.

PNC Infratech: CARE has assigned credit rating on the long term bank facilities of subsidiary, PNC Khajuraho Highways Private Limited to A-; stable.

Benares Hotels: Ashwani Anand has resigned as the chief executive officer (CEO) of the company.

Pankaj Polymers: Board of directors approved sale of assets of the company located at Nagpur Unit.

Manomay Tex India: Commercial production at Denim Plant situated at Gangrar (Raj) successfully commenced.

Otco International: To consider splitting up of face value of equity shares of the company from of Rs 10 each.

A Infrastructure: Board has given consent for execution of a memorandum of understanding (MOU) for purchase of land, building and plant & machinery used for distillery owned by J R Organics Limited for Rs 28.50 crore.

James Hotels: Committee of Creditors decided that in the absence of any viable resolution plan, the company will be liquidated in terms ofthe provisions ofthe Insolvency and Bankruptcy Code.

Global Cues

On coming Monday, Indian equities may initially react to US jobs data, which missed analyst expectations. The US government on Friday reported that the economy added 1,64,000 jobs in April, lower than the 1,95,000 expected by economists polled by Reuters while while the unemployment rate fell to 3.9 percent in April, an 18-year low.

On Monday, the Bank of Japan monetary policy meeting minutes will be released. The BoJ had kept its key short-term interest rate unchanged at -0.1 percent in its April meeting, which was on expected lines.

China's balance of trade data for April will be announced on Tuesday, inflation for April on Thursday, outstanding loan growth & vehicle sales for April on Friday.

The Bank of England will announce its interest rate decision on Thursday while US' core inflation data for April, continuing jobless claims, Real Earnings for April and Michigan inflation expectations for May will be unveiled on Thursday.

MORE WILL UPDATE SOON!!

Top 3 benefits for investors as SEBI extends trading hours for equity derivatives

Brokerage houses are taking the decision in the right spirits and see investors benefiting in the long run. It will help in bringing down volatility and create more opportunities for investors.

   

India’s market regulator, SEBI in a landmark decision on May 4 announced that stock exchanges will now be able to trade in the Equity Derivatives Segment between 9 am and 11.55 pm. The motive behind the change is to bring the timings in-line with the commodity market.

This step was taken with a view to enable integration of trading of various segments of securities market at the level of exchanges from October 1. As of now, trading is allowed from 9.15 am until 3.30 pm.

Stock exchanges seeking to extend their trading hours will have to seek prior approval from SEBI by submitting a detailed proposal, the circular said.

That should include the framework for risk management, settlement process, monitoring of positions, availability of manpower, system capability, and surveillance systems.

Brokerage houses are taking the decision in the right spirits and see investors benefiting in the long run. It will help in bringing down volatility and create more opportunities for investors, suggest experts.

SEBI’s announcement to allow exchanges to extend derivatives trading till 11:55 pm is a positive move. Traders can benefit by avoiding overnight swings and can align their trading to be more in sync with global markets. Longer hours will also bring in more opportunities for traders.

Here’s how it will benefit investors in the long run:

Likely increase in trading volumes:

Even though the response to likely rise in trading volumes seems mixed but experts feel it could pick up with time.

I don’t think the volumes will go up significantly, what we observed when the market opening was preponed was the same positions get segregated across the additional time frame.

On the other hand, Vikram Limaye, MD & CEO, NSE said that it is very hard to predict quantum to increase. “But, I do believe in trade volume after implementation of this circular. Since you are giving the option to trade more time and secondly giving hedging option in the corporate action after a traditional trading hour.

In Sync with global markets:

Ashishkumar Chauhan, MD & CEO, BSE said that globally, the derivative exchanges are already following the extended trading hours. The introduction of the extended hours is a positive development.

Limaye of NSE says that it is a good development for the market since we are moving to in line with global standards. “There are enough examples where derivative market opens much longer time than cash market. So again I would say it is a good move.

Hedging:

Extension of trading hours would bring down volatility in markets and we could avoid wild swings on any given day. It will also give an opportunity to traders to hedge their risk which will lead to avoiding losses and protection of capital.

A small extension or pre/ post market contracts on some contract like international bourses will be par for the course and might bring down volatility, it may also give domestic investors an opportunity to hedge risks overnight wherein only the larger participants had this opportunity up until now, using instruments like SGX etc.

Weakness could push Nifty to 10,550; IT, NBFC, tyre, cement stocks may be under pressure

Traders are suggested to go for hedging activities or initiate spread strategy to get the momentum by paying the limited option premiums.

   

Nifty formed a Three Black Crows pattern on daily and Dark Cloud Cover on weekly scale which indicates that bears are now getting active after the strong surge of 833 points in last six weeks.

It has been making lower highs – lower lows from last two sessions and now if it holds below 10,638 zones, then weakness could be seen towards 10,550 then 10,500 zones while if it sustains above 10,680 then only bulls would be back to take it towards 10,780-10,800 zones.

Index has taken a halt from its positive momentum so now requires a time or price consolidation to start the next up move.

Derivative

Nifty failed to continue its positive momentum in the last week and witnessed profit booking decline from higher levels. It remained negative for last three sessions of the truncated week.

India VIX moved up by 10.23 percent in last week after the decline of last four weeks, surge in volatility has given a pause in positive momentum. VIX has to hold below 13.50 to again get back the buying interest.

On the option front, Maximum Put OI is at 10500 followed by 10400 strike while maximum Call OI is at 11000 followed by 10800 strike. We have seen Put writing at 10400 and 10500 strikes while Call writing is seen at 10700 and 10800 strikes. Option data suggests a slight lower shift in the trading range between 10550 to 10750 zones.

Bank Nifty has been outperforming the Nifty index as closed positive with the gains of around 1 percent compared to Nifty loss of 0.69 percent on weekly basis. It managed to hold above 25,500 zones and a hold above the same could extend its move towards 25,750 then 26,000 zones while on the downside major support is seen at 25,250 levels.

Put writing at immediate strike, buying interest in HDFC Bank and ICICI Bank is keeping the positive momentum in the Banking index.

We expect stock specific action including movement in Tech Mahindra, HDFC Bank, IndusInd Bank and L&T Finance Holdings, while selective Tyre, Cement, IT and NBFC stocks would be under pressure.

Market will now keenly watch the outcome from Karnataka Election result that would decide the next leg of rally after the recent up move of more than 800 points in last six weeks.

Traders are suggested to go for hedging activities or initiate spread strategy to get the momentum by paying the limited option premiums.

MORE WILL UPDATE SOON!!

Earnings, Karnataka exit polls to decide market trend; 3 stocks can give up to 21% return in short term

Overall, next week's trend will be decided on the basis of quarterly earnings, trend in global markets and exit polls of Karnataka elections.

 

Benchmark indices ended on a negative note on Friday as Nifty closed below 10,650 zone. Midcap and small cap counters continued to remain under pressure.

On sector front, Metal, Energy, IT stocks witnessed selling pressure while selective Banking and Financial stocks ended in green.

The coming week will be quite important due to quarterly earnings and Karnataka elections.

ICICI Bank will announce Q4 earnings on Monday. Eicher Motors will announce Q4FY18 results on Wednesday. Zee Entertainment, Asian Paints and Titan will announce Q4 numbers on Thursday.

On Monday, Prime Minister Narendra Modi will address meetings in Raichur, Chitradurga and Kolar and on Tuesday in Vijayapura, Mangaluru and Bengaluru. PM Modi will visit Nepal on Friday.

Fortis Board will meet on Thursday to decide on binding bids.

Saturday will be quite important day as Karnataka will go for polling and it’s exit polls will drive the sentiments of Indian stock market.

Market looks weak especially after breaking key important levels of 10,650 and 10,620. Now, one can look at 10,550 levels on a downside and 10,680-10,780 levels on upside. Overall, next week's trend will be decided on the basis of quarterly earnings, trend in global markets and exit polls of Karnataka elections.

Here is the list of three stocks that can give up to 21 percent return in short term:-

Prakash Industries: Buy | Target – Rs 235 | Return – 15%

Prakash Industries is a low cost steel producer having an integrated steel plant at Champa, Chhattisgarh. The sponge iron kilns installed at Champa work on latest SL/RN technology developed by German company Lurgi. SL/RN is the only renowned technology in coal based Sponge Iron manufacturing.

Prakash Industries is self reliant in power through its captive power plant at Champa, with existing capacity of 230 MW. Additional 15MW capacity is to be commissioned by September 2018 for upcoming capacity in steel. For Iron Ore requirements, Prakash Industries owns mines at Sirkaguttu (Odisha) & Kawardha (Chhattisgarh). It has secured 100 percent requirements of coal through long term coal linkages for next 5 years.

Prakash Industries is a low cost, fully integrated steel producer. It has linkages for coal up to 1.56 MTPA for next 5 years. Post regulatory clearance, two third of Iron Ore requirement which is currently procured from outside will be fulfilled from company owned mines. Sirkaguttu Iron Ore mine is estimated to start in April 2018 while Kawardha mine in April 2019.

Currently running at 1 mtpa , Prakash Industries is doubling its steel capacity to 2 mtpa in a phased manner. Installation of 6th kiln will add 0.2 MT additional capacities by September 2018. In next 5 years management has a vision to become 3MTPA company.

We are recommending a Buy on back of full utilisation of steel capacity, strong steel prices in Indian market & uninterrupted supply of iron ore from Odisha with target price of Rs 235.

PFC: Buy | Target – Rs 102 | Return – 21%

Power Finance Corporation (PFC) is a specialiSed in power sector financing, providing fund and non-fund-based support for development of power projects in India. The company’s project financing activities are primarily focused on the thermal and hydro-energy generation areas.

In addition, it finances renovation and modernisation of power projects, projects related to transmission and distribution of power. It has also initiated financing of projects based on renewable energy sources such as bio mass and wind power generation.

PFC’s clientele comprises state power utilities, central power utilities, private power utilities, joint sector power utilities, and power equipment manufacturers. Of total loan assets around 65 percent of advances were extended to state power utilities, 8 percent to central power utilities, 17 percent to private power utilities, and 9 percent to joint sector power utilities.

Its Q3FY18 earnings were supported by provisions write-back of Rs 220 crore given upgrades from stress pool. In addition to it, Q3FY18 marks the quarter where upgrades have been crystallising on a guided path plus, NNPL plus restructured, also known as stress pool, fell to 26 percent from 29.5 percent on a QOQ basis, a trend management believes will sustain in future.

Given that large part of stress pertains to state utilities, where recovery is just a matter of time we believe stock is available at a throw away price. It is trading at below band of its historic P/B value band. We are recommending a Buy with target price of Rs 102.

Maan Aluminium: Buy | Target – Rs 155 | Return – 14%

The company manufactures aluminium extruded products, which find use in engineering, construction and architectural applications. Maan Aluminium is one of the India's largest manufacturers and exporters of aluminium extruded products from central India.

During FY17, the company has achieved production of 4854.087 MT as compared to 4557.457 MT during the previous year. Considering the installed capacity of 9000 MT, Maan Aluminium has significant spare capacity to increase production and sales level.

Management has guided for a sale of 9000 MT in 2 years time with increasing capacity level. We believe Maan is at sweet spot. It has already incurred CAPEX and in next two years it is focusing on ramping up of the facilities. It will substantially increase the revenue in coming days.

The future for aluminium and aluminium extrusion in India looks promising with the low per capita consumption in the country coupled with high and good quality reserves of Bauxite. Awareness of the utility of aluminium in various industrial sectors is growing and it provides a lower cost option as to use of various metals in different sectors.

The company has immense growth potential which can be seen in the FY17 numbers. Its sales increased from Rs 190.33 crore in FY16 to Rs 349.56 crore FY17, which is more than double. Most of the growth is attributed to trading, in addition to an increase in export market.

Looking at the FY18 numbers, we are quite positive on this counter and we are recommending it with target price of Rs 155.

MORE WILL UPDATE SOON!!