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Bulls Maintain Strong Hold on Dalal Street as Market Looks to Q1 Earnings and Economic Data

Last week, the bullish momentum continued on Dalal Street as the benchmark indices reached all-time highs, surpassing the crucial levels of 66,000 for the Sensex and 19,550 for the Nifty. Traders displayed optimism as they anticipated a potential pause in rate hikes by the US Federal Reserve. As we enter a new week, the market’s focus will be on the first-quarter earnings of prominent players in the Indian banking and IT sectors, including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Infosys, Mphasis, and LTIMindtree. Additionally, key economic data such as Indian Foreign Exchange Reserves and US Manufacturing and Industrial Production figures are scheduled for release.

Quarterly Results: Investors will closely monitor the Q1 earnings reports from major players in the Indian banking and finance sector, such as HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IndusInd Bank, and L&T Finance Holdings. The results of some PSU banks including Central Bank of India, South Indian Bank, Union Bank of India, and Bank of Maharashtra will also be released. In the IT sector, companies such as Infosys, Mphasis, Persistent Systems, Mastek, LTIMindtree, Tata Elxsi, Coforge, and L&T and Technology Services will declare their Q1 results. Additionally, Havells India, Hindustan Unilever, Reliance Industrial Infrastructure, Crisil, Tata Communications, Ashok Leyland, Hindustan Zinc, JSW Steel, and UltraTech Cement among others are scheduled to announce their results this week.

Major Economic Events: Traders will keep a close eye on the release of Foreign Exchange Reserves data on July 21. In the previous week, India’s foreign exchange reserves increased to $596.100 billion from $595.050 billion on June 30. The Monsoon Session of Parliament will be the first session to be held in the new parliament building and is set to commence on July 20 and will continue until August 11. Furthermore, Union Finance Minister Nirmala Sitharaman and Reserve Bank of India (RBI) Governor Dr. Shaktikanta Das will co-chair a meeting of the G20 Finance Ministers and Central Bank Governors (FMCBG) from July 17-18 in Gandhinagar, with the participation of 66 delegations.

US Market Data: From the United States, market participants will be closely watching several economic indicators. The NY Empire State Manufacturing Index is scheduled for release on July 17, followed by Industrial Production, Manufacturing Production, and NAHB Housing Market Index on July 18. On July 19, the API Crude Oil Stock Change and 20-Year Bond Auction will be announced, while Initial Jobless Claims and Existing Home Sales data will be released on July 20. The week will conclude with the release of the Baker Hughes Total Rig Count on July 21.

Market Analysis: According to Vinod Nair, the Head of Research at Geojit Financial Services, the initial downturn in the domestic market can be attributed to apprehensions regarding lackluster earnings in the IT sector and unfavorable indications from the US markets. Inflationary concerns arose due to an increase in domestic food prices, influenced by higher mandi prices above Minimum Support Prices (MSP), as well as muted Kharif sowing, prompting investors to exercise caution. Nair emphasized that the progress of the monsoon and the trend of Kharif sowing in July will play a crucial role in determining future inflation levels. He also highlighted that controlled inflation in the US has instilled optimism among investors, who believe that a 25-basis-point rate hike will be sufficient to stabilize the US economy.

Despite muted Q1 earnings, the optimistic sentiment has driven significant buying activity in Indian IT stocks. Nair additionally mentioned that this positive outlook has resulted in a decline in the US dollar and bond yields. The broader Indian market displayed positive performance, reaching record highs, supported by expectations of robust Q1 results, consistent foreign institutional investor (FII) inflows, declining wholesale prices, and low market volatility (VIX). However, the Nifty Bank sector faced relative weakness as it commenced the earnings season with disappointing results. Investors are eagerly awaiting forthcoming earnings reports to guide their trading decisions.

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