Expect increased market volatility this week

We expect Nifty to consolidate in a broader range with an increase in volatility as we enter an eventful week. Investor’s focus would remain on the busy earnings season as several index heavy-weights like Titan, Dr Reddy’s, Tata Steel, Power Grid, Apollo Hospital, Mahindra, State Bank of India, Tata Motors and Asian Paints are set to announce their quarterly results this week.

Globally, United States election results will be out on November 5, followed by the Federal Reserve and Bank of England interest rate decisions, which will keep investors busy. Other events to watch out for will be India and US manufacturing and services PMI.

The NSE Nifty, after four weeks of decline, took support at lower levels in the Diwali week and consolidated in a range. The index ended the week with a loss of 162 points or 0.7 per cent at 24,205. Broader markets performed mixed with Nifty midcap down -0.4 per cent and smallcap index  up 1.9 per cent. Sector wise, PSU Banks, Realty and FMCG gained 1-4 per cent while IT, Auto and Energy were the top losers.

Foreign Institutional Investors continued their selling streak, having pulled out more than Rs 1 lakh crore in October. On the other hand, domestic investors offset this to some extent by consistently buying throughout the month.

Action continued in the primary market with Waaree Energies IPO receiving a stellar response from investors. The company listed with gains of 66 per cent from its issue price. This week will see three main board issues with all eyes on Swiggy IPO which will be open for subscription between 6-8 November. The Issue size is  Rs 11,327 crore and the price band is set at  Rs 371-390.

Last week, India Inc reported a mixed set of numbers. So far July-September quarter earnings have failed to live up the expectations, thereby witnessing a few downgrades and target price cuts. Banking stocks extended support to the market during the week, gaining on the back of strong numbers from the likes of ICICI Bank, Bank of Baroda, and Federal Bank. Nifty IT index declined sharply after US big tech companies reported lower than expected earnings. Meta announced weaker-than-expected user numbers in its third-quarter results, while Microsoft’s revenue growth guidance fell short of expectations.

Nifty has given a return of around 25 per cent in Samvat 2080 so far (14th Nov 2023 to 31th Oct 2024). Broader markets have significantly outperformed with Nifty Midcap 100 and Smallcap 100 rallying 38 per cent each. Overall, despite a high base and strong run-up in the last 2 years, Indian markets are likely to continue to deliver steady return in Samvat 2081.

Any correction due to global headwinds should be used as an opportunity by long-term investors to accumulate quality stocks. Also in this uncertain global environment, one should focus on sectors and stocks that provide high growth and earning visibility. For Samvat 2081, we expect sectors linked to domestic structural and cyclical themes to do well. We are positive on sectors such as Financials, Discretionary, Industrials, Real Estate, Technology, Healthcare.

(The author is head of Research, Wealth Management, Motilal Oswal Financial Services)