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Markets may exhibit further weakness but Bank Nifty may outperform benchmark index

04:53 PM Oct 23, 2021 | Satish Kumar

Indian equity benchmarks indices snapped the two-week winning streak ending 0.8 percentlower during the week gone-by due to sharp selling pressure in IT, FMCG and metal stocks. Institutional investors turned cautious over market amid rising inflationary pressure in the economy, which has started impacting the margin of the companies.

So far, domestic institutional investors have sold Rs 49 billion and Foreign Portfolio Investors at Rs 99 billion of Indian stocks. Sentiments also remained weak on global level as China’s Q3CY21 GDP growth slowed to 4.9 percent due to below expected expansion in industrial output. US industrial production also dropped sharply at 1.3 percent in September.

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Investors were also seen taking cues from latest earning session as FMCGs are indicating building pricing pressure in the economy which has started impacting margin. Metal index was down by over 5 percent during week amid concerns over rising cost of production for metal companies while FMCG sector plunged almost 6 percent. Broader indices also recorded a sharp cut as investors attempted to book profit after recent rally.

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Banking index though was up by 3 percent which helped the market to contain losses. Expectation of better earning session after HDFC Bank reported sharp jump in profitability and valuation comforts compared to other sectors were also driving banking stocks higher.

Key global events for the next week are India’s core industries data, US Q3CY21 GDP, China industrial profit, BoJ & ECB interest rate decisions.

Technically, benchmark index Nifty closed at 18,114.90 down 63.20 points or 0.35 percent while Bank Nifty was comparatively stronger than Nifty throughout the week.

On the sectoral front, the underperformance was seen in most of the indices except for Finance and Banking sectors showing minor gains. On the gainer's dashboard, KotakBank saw 7.5 percent gains and TechM gained 6.21 percent while on the losing side, Asian Paints shredded above 9 percent, Hindalco saw losses around 8.5 percent while Eicher Motors, ITC, and HUL saw losses above 7 percent.

The Stochastic Indicator is seen giving a negative crossover which indicates a further decline while the Momentum indicator is also seen pointing southwards for Nifty on the weekly charts. For Bank Nifty, the Parabolic Stop and Reverse (PSAR) has moved below the weekly candles, indicating a further bullish momentum. Also, the index has settled above the upper Bollinger Band, which indicates a further northward journey.

The Nifty has immediate support at 18,000 or 17,800 levels while resistance is seen at 18,500 levels. On the other hand, Bank Nifty has support at 3,9600 levels and psychological resistance at 41000 levels.

Top Gainers

Nifty Gainers

Kotak Mahindra Bank: Kotak Mahindra Bank recorded strong up move during week as investors are optimistic about the business growth ahead of Q2FY22 result. Bank is witnessing renewed investors interest over the past month amid developments such as investment in KFin Tech. Investors are also piled up position in bank as it has been relatively under performer to leading corp banks.

Tech Mahindra: Tech Mahindra up by over 6 percent during week as investors are expecting strong Q2FY22 result.

ICICI Bank: ICICI Bank remained on buying radar ahead of quarterly numbers. Investors are estimating strong business growth, additionally reasonable valuation of the bank also attracts investors interest.

HDFC Ltd: HDFC is gaining investors interest due to buoyant housing sector of the country amidst prevailing low interest scenario. Being the largest player in the sector, HDFC to remain major beneficiary of robust housing market. Strong HDFC Bank business trend also helped the holding company to attract investor interest.

SBI: SBI to remain major beneficiary of renewed investors interest in the PSU banking space.

Top Losers

Nifty Losers

Asian Paints: Asian Paints share tumbled after Q2FY22 result came below estimates

Hindalco: Hindalco shares came under pressure due to sharp selling in the metal index during the week. Investors are concerned over rising cost of production for metal companies.

HUL: HUL remained on investors selling radar after the company highlighted increasing pricing pressure in Q2FY22 result. Investors are estimating weak margin in coming quarters.

(Satish Kumar is Research Analyst, Choice Broking)

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