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New Delhi: Equity investors will track the trading activity of foreign investors, global trends and ongoing earnings results for further cues, and benchmark indices may continue to witness consolidation in a holiday-shortened week amid the monthly derivatives expiry, analysts said.
Markets fell sharply last week amid massive foreign capital outflows and dismal Q2 earnings so far.
Weakness in the markets might continue in the near term amid cautiousness among investors ahead of the US presidential election early next month, an expert said.
Equity markets will remain closed on Friday for Diwali, but a special trading window will be open for one hour in the evening.
Leading stock exchanges BSE and NSE will conduct a one-hour special 'Muhurat Trading' session on the occasion of Diwali on November 1, marking the start of the new Samvat 2081.
Vinod Nair, Head of Research, Geojit Financial Services, said, "We expect the consolidation to continue in the short term. A reversal in trend will depend on a slowdown in FIIs' selling intensity and the outcome of the US presidential election".
"Going forward, FII flows will play a crucial role in determining market direction, while volatility is expected to rise in anticipation of the October F&O expiry. With the Q2 earnings season in progress, upcoming corporate results will be key indicators for market sentiment," said Santosh Meena, Head of Research, Swastika Investmart Ltd.
On the global front, geopolitical developments, particularly the Iran-Israel situation, will be closely monitored for their potential impact on crude oil prices, he added.
"Markets worldwide may adopt a cautious wait-and-watch stance ahead of the US presidential election. Key macroeconomic data releases, such as the US jobs report, GDP data, and China's PMI manufacturing data, will be important indicators, alongside the US core PCE prices index release on October 31, the Federal Reserve's preferred inflation gauge. The Bank of Japan is also set to announce its interest rate decision on October 31," Meena added.
From the quarterly results calendar, Adani Power, BHEL, Adani Enterprises, Adani Ports and Dabur India will announce their earnings this week.
"The trend of sustained FPI selling, which started in early October, continues and is showing no signs of reversal any time soon. The current wave of FPI selling was triggered by the Chinese stimulus measures and cheap valuations of Chinese stocks. The elevated valuations in India made India the top choice of FIIs to sell," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Sustained FPI selling impacted market sentiments, pulling the Nifty down by 8 per cent from the peak, Vijayakumar added.
Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd, said, "Overall market has corrected by 8 per cent from the all-time high of 26,277 level led by weak global cues, muted Q2 result season, and heavy selling by FIIs. We expect this weakness to continue in the near term amid cautiousness among investors ahead of the US presidential election on November 5th".
Last week, the BSE benchmark tanked 1,822.46 points or 2.24 per cent, and the Nifty fell by 673.25 points or 2.70 per cent.
"The dismal Q2 earnings so far has aggravated the investors’ woes while persistent FII selling continued to create havoc in the market," Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said.