Q3 earnings, F&O expiry among 8 factors that will steer market this week

As the Budget day draws close, markets will likely remain volatile in the holiday-shortened week, mainly on account of the expiry of monthly derivative contracts.
Further, analysts expect the second phase of quarterly earnings and global cues to keep market participants on edge.

Here are a host of factors that will decide market action next week.

Q3 earnings
With earnings of index heavyweight Reliance out of the way, some major companies, including Axis Bank, Maruti Suzuki, Tata Motors, Bajaj Auto, Cipla, Bajaj Finance, Vedanta, and NTPC, among others, are slated to announce their third-quarter results this week. The markets on Monday will also react to RIL's earnings, which disappointed the Street, as well as other index majors ICICI Bank and Kotak Bank.

Pre-Budget expectations
Markets will also see some action around stocks and sectors that have turned attractive to investors ahead of the Budget. Most analysts expect the government to focus on infrastructure with increased capex outlay. There are also expectations that defence, railways, and roads could continue to witness significant allocation in the Budget. In light of this, infra and related stocks, capital goods and cement sectors would continue to remain in the spotlight.

Global Cues
Key economic data from the United States --- including new home sales, initial jobless claims --- is likely to dictate the US market action next week, which investors will closely track. US stocks rallied to close higher on Friday, as the S&P 500 and Dow snapped a three-session losing streak and the Nasdaq rose over 2%. Analysts also attributed the rally to Federal Reserve Governor Christopher Waller's comment endorsing a smaller 25-basis point rate hike at the Fed's next meeting, smaller than other recent hikes.

FII Selling
Foreign investors have sold shares worth over Rs 15,000 crore so far this year, with IT and financials making a big chunk of it. The benchmark indices have come under pressure this month, and gains were capped on sustained selling by the FIIs. In the coming week, market participants will closely track the FII behaviour.

Monthly Expiry
Markets may remain volatile in the coming week with the scheduled monthly expiry of January month derivatives contracts. "We recommend continuing with a stock-specific trading approach and focusing on overnight risk management. Participants should prefer index majors and quality midcaps over others, citing the prevailing underperformance of the broader indices," said Ajit Mishra, VP - Technical Research, Religare Broking.

T+1 cycle
The T+1 settlement cycle for all the securities will come into effect from January 27. Earlier, the settlement of trades would be two business days after the placed order. Last year, Sebi proposed a gradual movement to the T+1 cycle, and this Friday will complete the shift to the new mechanism. All the stocks, including those that trade in derivatives, will shift to the new settlement cycle.

Adani FPO
Investors will keep a close watch on Adani Enterprises' Rs 20,000 crore follow-on public offer (FPO), which will open on January 27 and will be available for subscription till January 31. The company has fixed the price band at Rs 3,112 to Rs 3,276 apiece. Retail investors would get a discount of Rs 64 per equity share on the price band. Adani Enterprises was the best Nifty performer in 2022, as it more than doubled investors' wealth.

Technicals
Nifty has formed a Doji candle on the weekly frame, and a hold of 18,018 is crucial for a decisive move in the next week. Nifty is placed within a broad high-low range of 18,200 to 17,900 levels, and the specific direction is missing in the market, said analysts.

"The index has to hold above 18,018 zones for an up move towards 18,181 and 18,250 zones, whereas supports are placed at 17,950 and 17,850 levels," said Chandan Taparia of Motilal Oswal. Indicators like the RSI and MACD are weakening and trading sideways, indicating that the current weakness will persist unless there is a sharp move on either side. On the other hand, options data suggests a trading range between 17,800 to 18,350 levels while an immediate trading range between 17,900 to 18,200 zones.