Corporate Earnings and Macro Data will dictate the trend along with Global Cues.
It was a good week for the Indian market where it outperformed most of its global peers amid worries of global energy crises and inflation worries.
IT and Auto sector added most of the gain while the broader market also did well with a gain of more than 3.5%.
The Q2 earnings season has started with TCS' results which is a minor miss on expectations and we could see some profit booking in the IT sector as IT stocks have rallied a lot in expectation of strong earnings however any correction will be a buying opportunity.
Infosys, Wipro, and HCL tech will come out with their numbers next week therefore we are going to see lots of volatility in the market, especially in the IT sector.
Along with corporate earnings, the market has to deal with macro numbers. The government will release IIP and CPI numbers on 12th October and WPI will be announced on 14th October.
The market is expecting strong growth in industrial production but at the same time, it worries about inflation.
Global factors will also play an important role in the direction of the market.
The headline numbers of US Nonfarm payroll are slightly weak however the internals are strong. The US bond yield is above the 1.6 mark, the Dollar index is above 94 and the price of Brent crude is above $83 that may lead to any correction in the market however market is ignoring all of them for time being as momentum is very strong.
Technically, Nifty is trading near-critical resistance zone of 17950-18000 where it could again witness selling pressure but if it manages to trade above this zone then we could see a rally towards 18200/18300 levels.
On the downside, 20-DMA of 17650 is immediate and important support; below this, 17450 is a critical support level because below 17450 we could see any meaningful correction.
If we talk about the data then the market is lacking FIIs' buying but getting strong support from DIIs, HNIs, and retail investors.
Put call ratio stands at 1.3 level whereas FIIs' long exposure in index future stands at 59% that is neutral to positive. On the options front, the 18000 strike call option has the highest OI of 37lac for14-Oct expiry while the 17800 strike put has the highest OI of 32.7lac therefore 18000 is an important and psychological hurdle.
Banknifty is trading near-critical resistance zone of 3800-38300; above this, we can expect a strong short-covering rally towards 39000 otherwise there is a risk of profit booking where 20-DMA of 37500 is critical support; below this, we can expect further selling pressure towards 36500/36000 levels.
In terms of sector, the Nifty PSU banking index is looking interesting because it is trading near-critical resistance however most of the PSU banks witnessed bullish momentum in Friday's trading session and if the market remains supportive and the Nifty PSU banking index manages to cross-resistance of 2660 then PSU banks may outperform.
Tata wins back Air India that is a historical moment and this is a sigh of relief for the lenders. PSU banks mainly the Bank of Baroda will be the biggest beneficiary as it has substantial exposure to the airliner.
If we talk about the Airline stocks then competition will increase so we could have a sentimental negative impact on listed players but the opportunity of scale is high so the long-term outlook is positive for the overall industry however investors should understand the unsystematic risk of the industry or company.
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