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Informist, Tuesday, Jul 30, 2024

By Alina Geogy

MUMBAI – While domestic benchmark indices are near their record highs, analysts said the market may turn volatile Wednesday as there could be a tug of war between bulls and bears. Investors will eye corporate earnings from four Nifty 50 companies and the outcome of the US Federal Reserve's ongoing meeting, due Wednesday. 

"Market has been trading with cautious optimism as valuations are quite rich, and any slight hiccup on the external front could trigger correction, although domestic fundamentals remain buoyant," Prashanth Tapse, senior vice-president of research at Mehta Equities, said in a note. The decision of the US Federal Open Market Committee's two-day meeting will provide the much-awaited cues on the central bank's stance with respect to rate cuts.

Market participants are of the view that the US central bank will cut rates from September. There is nearly 96% probability of the US Fed keeping rates unchanged this time, while there is nearly 90% probability of a cut in rates at the September meeting, as per the CME FedWatch Tool.

Back home, the resistance for the Nifty 50 is pegged at 25000 points, while support is pegged at 24600 points. Today, the Nifty 50 and Sensex closed up 0.1% each at record closing highs of 24857.30 points and 81455.40 points, respectively. The India VIX, the volatility gauge of the market, ended at 12.88 points today, down 0.5% after surging in the previous session.

Investors will also assess the June quarter earnings of Tata Consumer Products, which were released after market hours today. The fast-moving consumer goods company's consolidated net profit fell over 8% on year to 2.90 bln rupees, missing analysts' 3.65-bln-rupee estimate.
 

Stock-specific movements are also expected for Mahindra & Mahindra, Maruti Suzuki India, Tata Steel, and Coal India, which will release their Apr-Jun financials on Wednesday. Both automobile manufacturers, Mahindra & Mahindra and Maruti Suzuki India, are expected to report strong earnings growth, likely aided by higher sales, price hikes, and moderation in raw material costs.

On the other hand, Coal India may report an on-year decline in its consolidated net profit, while revenue may remain flat on year. Tata Steel's consolidated revenue for the June quarter is also expected to take a hit from a sequential decline in India volumes, while higher sales realisations may result in higher operating profit. 

Shares of Tata Motors were the top gainer on the Nifty 50, ending over 3% up at a record closing high. Speaking of the autombile sector, Kripashankar Maurya, assistant vice-president of research at Choice Institutional Equities, said that the volume growth of sports utility vehicles and passenger vehicles will be in low single digits until the festival season begins. Original equipment manufacturers need to push premium products to offset de-growth in volumes, he said.

The performance of two-wheeler manufacturers is comparatively better, Maurya said. Meanwhile, commercial vehicles are expected to have good growth and momentum from Jul-Sep onwards, he said.

Echoing similar views, Saral Seth, vice president of institutional equities at IndSec Securities, said the outlook for passenger vehicles is subdued. The auto sector is expected to see a 10-15% correction, led by passenger vehicle makers, as valuations of the sector are "really stretched", Seth said.

Further, the defence sector is in a growing phase with the government's push for local manufacturing of strategic equipment with the aim of fulfilling domestic demand, and later for exports, Maurya of Choice Institutional Equities, said. These companies need to deliver in terms of earnings performance, else stocks will undergo some correction, he said.

Meanwhile, the Nifty Bank index is facing resilience around the crucial zone of 51900-52000 points, and will further outperform only if it decisively closes above this resistance zone, Tejas Shah, technical research analyst at JM Financial, said in a note. Otherwise, a reversal from here could take the index back to the support levels of 50500 points, he said. The Nifty Bank index ended 0.2% higher at 51499.30 points today.  End

Edited by Tanima Banerjee

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