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Informist, Friday, Jul 26, 2024

By Anjali Singh

MUMBAI – The benchmark Nifty 50 index is seen notching new record highs next week and touching the next psychologically important level of 25000 points, analysts said. The rise will likely be supported by foreign and domestic investments, they said. "Following the recent Budget, we anticipate this trend of strong retail engagement to continue and possibly increase," Krishna Appala, senior research analyst at Capitalmind Research in a note said.

Today, foreign investors turned net buyers after being sellers in the Indian market for the last three consecutive sessions. They net offloaded 107.11-bln-rupee worth of shares during the time period.

However, concerns of expensive valuations persist, which may lead to bouts of profit-booking in the upcoming week, though sharp losses are unlikely. Investors will also continue to closely watch the June quarter earnings of comapnies for further cues.

Today, the Nifty 50 recouped all the losses made during the week, gaining over 400 points and reaching a new lifetime high of 24861.15 points. It also ended at its record closing high of 24834.85 points, up 1.8%. This is the eighth straight week of gains for the index, during which it rose over 10%. Going forward, the support for the 50-stock index is pegged at 24450-24500 points while the next resistance for the index is seen at 25000 points. The Sensex closed 1.6% higher at 81332.72 points.

"The sharp rebound signifies that India remains a good long-term bet and the economy continues to show strong resilience in spite of global uncertainty and geopolitical tensions," Prashanth Tapse, senior vice-president of research at Mehta Equities, said in a note. "Also, most of the blue-chips and mid-cap companies have reported better earnings, which is providing a major impetus to markets." 

Today's gains were a "liquidity driven rally" with foreign institutional investors showing buying interest, Saral Seth, research analyst at IndSec Securities said. Seth expects a rally of another 200–300 points in the near term, while a correction in the second half of the week "cannot be ruled out".

Now, investors await the results of ICICI Bank, Dr Reddy's Laboratories, and NTPC, all due Saturday, and Power Grid Corp of India, due later today. On Monday, shares of these companies and IndusInd Bank, which declared its quarterly earnings after market hours today, will be in focus as investors will be reacting to the earnings.

Shares of Shriram Finance will also be in focus as analysts covering the stock expect it to rise more after today's whopping gains. The stock rose over 10% to hit an upper circuit of 2,946.90 rupees after the company reported on-year growth in key earnings metrics and improvement in its asset quality, with both gross non-performing assets and provisions falling. Shweta Daptardar, research analyst at Elara Capital, said the credit cost of the company fell to over 2% during the June quarter from 2.3% a quarter ago. 

Market participants are bullish on information technology companies. Shares of IT players will likely be in focus as investors will closely watch the US Federal Open Market Committee's meeting outcome next week to get hints about the interest-rate trajectory. As per the CME FedWatch Tool, there is a 93.3% probability of the central bank keeping the rate unchanged at next week's meeting, but there is 85.8% probability of a cut in rates at the September meeting.

Analysts also remain bullish on state-owned banks. Shreyansh Shah, research analyst at BP Equities, said that the concerns regarding the asset quality of these banks are relatively less compared to those seen in their private peers. Earnings of public sector banks have been largely in line, unlike those of private players who have failed to impress because of high gross non-performing assets. Private banks disbursed more unsecured loans, which reduced their profitability, Shah said. 

Investors now await the Apr-Jun earnings of ICICI Bank on Saturday, which may report a 9.9% on-year rise in net profit to 106.04 bln rupees, though this would mean a largely flat growth sequentially. Despite steady loan growth, contraction in the net interest margin is likely to weigh on the bottomline. 

For Dr Reddy's Laboratories, pricing pressure due to increased competition for some of its key generic products and moderation in US sales, are likely to have affected its earnings, according to analysts. The Hyderabad-based pharmaceutical major is likely to report a 5% on-year fall in its Apr-Jun consolidated net profit to 13.3 bln rupees, while its revenue for the quarter is seen up 7% year-on-year to 72.6 bln rupees. 

Further, power generation company NTPC, which is scheduled to release its results Saturday, is expected to report a 15% on-year rise in net profit to 46.81 bln rupees, on a revenue of 424.78 bln rupees, up 8.6% on year.  End

Edited by Tanima Banerjee

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