Expect firm and steady markets riding on optimism

This week, Indian equities are likely to remain firm, supported by better than expected Q2 earnings so far, robust festive demand during Diwali and renewed optimism over a potential India–US trade deal. On Monday, markets would react to the US monthly CPI (retail inflation) data released on Friday and the quarterly result of banking heavyweight Kotak Mahindra bank announced over the weekend. 

This will be a macro-heavy week, with investors closely tracking key data, including US Q3 GDP, interest rate decisions from the US Federal Reserve, European Central Bank (ECB), and Bank of Japan, along with China’s manufacturing PMI and India’s Industrial Production data. The interplay of these global and domestic factors will guide near-term market direction and sectoral trends.

Last week, Nifty50 surged past the 26k mark on Thursday, reclaiming the milestone after more than a year; although it could not sustain above the 26000 levels. Profit booking at higher levels and caution ahead of key global macro data capped the upside momentum. Nifty ended the week with a gain of 85 points at 25,795 (+0.3 per cent).

The broader market outperformed with Nifty Midcap100 and Smallcap100 up by 0.6 per cent and 0.7 per cent respectively. Nifty IT index was amongst the top sectoral gainers, up 3 per cent. 

Sentiments in the banking sector remained upbeat amid landmark deals — Emirates NBD’s ₹26,850 crore acquisition of 60 per cent in RBL Bank and Blackstone’s ₹6,200 crore stake in Federal Bank. This also revived M&A / FDI excitement in the sector.  

Shares of automobile companies, especially passenger vehicles (PVs) and two-wheelers (2Ws) makers were in the limelight post record festive sales during Diwali. While investors remain cautious about whether this momentum will sustain post-festive season and as discounts taper, the near-term outlook is strong, supported by healthy wholesales and pent-up demand. Two-wheeler demand is gradually improving, and commercial vehicles are benefiting from stronger pricing discipline and better leverage, positioning the segment well for a recovery. 

The cement industry saw a marginal 1% month-till-date price decline in Octobdf, primarily driven by softer prices in the South and East, while other regions remained stable. Demand was muted amid the festive season, extended monsoon, and labour shortages but is expected to recover from mid-November with renewed construction activity. With increasing consolidation and strategic investments in green power and logistics, the cement industry is well-positioned for sustainable growth. 

Key results this week include Maruti, L&T, BEL, ITC, Godrej Consumer, Cipla, IOCL, HPCL, SRF, TVS Motor, Tata Capital amongst others. Upbeat management commentaries and FII inflows could help sustain positive market momentum, though intermittent profit booking cannot be ruled out. Meanwhile, any progress on the India-US trade deal front, could further uplift investor sentiments.

(The writer is Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)