Stock market outlook: Nifty has support at 10138, below which index may see selling towards 9950

Post a breather in the earlier week, the 50-share Nifty resumed its decline last week with a loss of 1.61% to close at 10303. The mid and small cap indices lost 1.38% and 0.50%, respectively during the week.

Sector-wise, among the gainers, FMCG and pharma ended in the green zone with Hindustan Unilever reporting in-line results while among the losers Auto lost 4.34% due to all-round selling across 2W, 4W and CV companies. The Bank Nifty also fell 1.22%. Media, Metals and Realty lost 2.50% while the Energy sector lost 1.61% after Reliance Industries announced poor petrochemical margins though profits were very much flattish. The IT sector lost 0.50% on H1-B visa issue and weaker Mindtree results.

Last week, foreign institutional investors (FII) continued selling in equities worth Rs 1,345 crore while the domestic institutional investors (DII) bought shares worth Rs 1,010 crore.

In the last week highlights, the overseas markets plunged post-Wednesday over worries of slowing down of the global economy. China announced GDP data on Friday morning, which grew 6.50%, much slower than estimated. In addition, the likely change in H1-B visa norms by Trump administration dented the already fragile Indian market sentiment despite Reserve Bank of India’s (RBI) announcement of relaxation in liquidity norms to ease the strain in the financial markets. Crude remained flattish at $81/bbl while the rupee appreciated by 25 paise to 73.32 level with RBI intervention. India’s September month trade deficit stood at $13.50bn even when Crude prices were inching higher.

The key global events to watch this week includes, the European Central Bank (ECB) Meeting on Thursday and the US 3Q GDP data will be released on Friday. In the ongoing corporate earnings season Asian Paints, TVS Motors, HCL Tech, Ambuja Cement, MCX, RBL Bank, Bajaj Finance, Bajaj Auto, KPIT Tech, Wipro, Jubilant Food, Kotak Bank, LIC Housing Finance, M&M Finance, Maruti, Biocon, JSW Steel, YES Bank, Nestle, ITC, BEL, Dr. Reddy, ICICI Bank etc. will announce their Q2’19 results in this week.
In the last week, Nifty traded positive for initial two sessions and touched high of 10710 on Wednesday but sell-off in NBFCs pulled down the 50-share index for the rest of the sessions and made low of 10250 with a gap down opening on the last trading day. Technically on the weekly scale, Nifty formed a Bearish candle which indicates the medium-term trend is under pressure and any bounce may face selling.

For this week sectors to watch are NBFC, FMCG and Oil and Gas ahead of any further development in lending norms by the RBI and movement in crude and rupee along with global market cues with individual stock specific action during result season.

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The October F&O series expiry is on Thursday which will intensify further volatility. Nifty has crucial support at 10200 and 10138 below which it may face selling towards 9950 while resistance at 10380-10450-10480 above which it may test 10550. Meanwhile, the broader trading range could be 9950-10480.

By: Yogesh Vinod Mehta

(The writer is vice-president at Motilal Oswal Financial Services)

Source: DNA Money