Trade Setup: Nifty Breaks Above 23,000 Mark Led By Midcaps; Q4 Earnings, Global Cues In Focus

The Nifty finally breached the coveted 23,000 mark on Friday, marking a milestone. Unlike previous instances, the market did not have to wait for weeks or months for this achievement, as it had come tantalizingly close just a day before, within 7 points of the target. The Nifty's performance has been nothing short of spectacular, with the index recovering 1,200 points in just nine sessions from its May 13 low of 21,821.

Despite the momentum, the Nifty could not sustain above 23,000 on Friday, retreating over 70 points from its intraday record high of 23,026. This pullback was expected as the market typically takes a breather after hitting significant milestones. Nonetheless, the index closed the week 2.2% higher, achieving its fourth weekly gain in the last five weeks.

The recent rally has been spearheaded by large cap stocks, with Reliance Industries and HDFC Bank being prominent contributors to the Nifty's ascent. Nine out of the top ten companies in India by market capitalization collectively added Rs 1.9 lakh crore to their market value last week. This surge underscores the strength and resilience of the market's largest players.

The upcoming week is poised to be eventful with the monthly Futures & Options (F&O) expiry for both the Nifty and the Nifty Bank. The Nifty has already climbed over 400 points in the current series, and a positive close would mark the fourth consecutive positive F&O series for the index.

Adding to the market dynamics, the earnings season is set to conclude next week, with several Public Sector Undertakings (PSUs) like LIC, NMDC, and IRCTC, among others, set to report their results. The earnings reports from these companies will likely influence market movements and investor sentiment.

Monday's trading session will be closely watched as stocks such as United Spirits, NTPC, Hindustan Copper, Sun TV, and Allcargo Logistics are expected to react to their results reported after market hours on Friday and over the weekend. Additionally, companies like DCM Shriram, Electronics Mart, GMDC, Natco Pharma, and Vishnu Prakash R Punglia will be reporting their results on Monday, adding further intrigue to the trading day.

Despite the positive market performance, foreign institutional investors (FIIs) remained net sellers in the cash market on Friday, withdrawing over Rs 22,000 crore this month. In contrast, domestic institutional investors (DIIs) continued to be net buyers, providing crucial support to the market amid the FII outflows.

While the Nifty scaled new peaks last week, the Nifty Bank is still 1,000 points shy of its record high. The banking index, however, reclaimed the 49,000 mark for the first time since May 7, although it failed to close above this level. Despite this, the Nifty Bank outperformed the Nifty on Friday, ending the week with gains of 1.8%.

In the F&O segment, Nifty's futures added 4% across the series on Friday, with current rollovers at the start of the expiry week standing at 38%. These futures are trading at a premium of 62.5 points compared to 35.05 points earlier, indicating positive sentiment. Similarly, the Nifty Bank futures across the series saw a 4.1% increase in Open Interest on Friday, with rollovers at 29.2%.

Several stocks saw changes in their F&O ban status. Biocon, GNFC, and Vodafone Idea are back in the F&O ban, while Aditya Birla Capital, Balrampur Chini, Zee Entertainment, IEX, and Metropolis are now out of the ban.

For the May 30 expiry, significant Open Interest (OI) addition was observed on both the Call and Put sides. On the Call side, Nifty 50 strikes between 23,000 and 23,300 saw notable OI additions. On the Put side, strikes between 22,500 and 23,100 experienced increased OI, indicating that traders are positioning for a potentially volatile expiry week.

As the Indian stock markets continue to show robust performance, several key stocks are poised to take centre stage in the upcoming trading sessions. Investors will be closely monitoring these stocks, driven by strong quarterly results and strategic business moves. Here's a detailed look at the key stocks to watch out for ahead of Monday's trading session:

Divi's Laboratories: Divi's Laboratories has demonstrated a recovery in its EBITDA margin, which has risen to over 30% after five quarters. The company reported a revenue increase of 18.1%, reaching Rs 2,303 crore, while the EBITDA margin stood at 31.7%, surpassing the estimate of 27.7%. The net profit surged by 67% to Rs 538 crore. Despite a decline in Active Pharmaceutical Ingredient (API) prices, Divi's managed to maintain its margins due to backward integration and higher volume share. With two molecules going off-patent expected to create business opportunities in FY25 and a cash reserve of Rs 3,200 crore at the end of FY24.

NTPC: NTPC reported a revenue increase of 7.6% to Rs 47,622 crore, with EBITDA rising by 19% to Rs 14,195.2 crore, and an improved EBITDA margin of 29.8%. The net profit saw a significant rise of 26.9% to Rs 6,168 crore. NTPC is targeting new thermal orders of 15.2 GW and is planning a listing for its renewable business between October and November this year. The company aims to commission 2.8 GW of thermal power in FY25 and 1.5 GW in FY26. However, challenges in renewable execution due to constraints on importing modules and land availability remain.

Hindustan Copper: Hindustan Copper's margin approached 40% due to a sharp reduction in costs, despite flat revenue year-on-year at Rs 565 crore. The company's net profit declined by 6% due to a drop in other income. With increasing copper prices, Hindustan Copper is expected to see further improvement in margins, bolstering its financial performance.

Aurobindo Pharma: Aurobindo Pharma reported a revenue increase of 17.1% to Rs 7,580.5 crore. While US sales were at the lower end of estimates at $432 million, double-digit growth in Europe, growth markets, and Antiretroviral (ARV) segments offset this. The company's margins were at a multi-quarter high, exceeding 20% for the second consecutive quarter, despite a one-time exceptional loss of Rs 122 crore. European sales grew by 10.4%, growth market sales by 50%, and ARV sales by 31.5%. The classification of Unit 3 of Eugia Pharma Specialities as Official Action Indicated Status is a point of concern.

Manappuram Finance: Manappuram Finance saw its gold tonnage grow at the highest sequential rate in the last nine quarters. The company's Net Interest Income rose by 33.2% to Rs 1,580 crore, and net profit surged by 35.7% to Rs 563.5 crore. Operating profit increased by 52.3% to Rs 933.3 crore. Gross NPA improved to 1.93% from 2% in December, while Net NPA reduced to 1.7% from 1.8%. The AUM growth of 18.7% was the lowest in four quarters, with the non-gold share in AUM at 48.9%.

Indiabulls Housing Finance: Indiabulls Housing Finance experienced a 2.5% decline in AUM to Rs 65,335 crore and a 3.9% drop in securitization to Rs 12,245 crore. Net Interest Income decreased by 19.7% to Rs 282 crore, and provisions surged by more than 2.5 times to Rs 290 crore. Despite these challenges, the net profit increased by 23.1%, aided by a 77% jump in other income to Rs 320 crore. Gross NPA slightly improved to 2.69% from 2.85%, and Net NPA decreased to 1.52% from 1.71%.

SPARC: SPARC's net loss widened to Rs 105.8 crore from a loss of Rs 82 crore last year, with EBITDA loss also increasing to Rs 105.8 crore from a loss of Rs 89.57 crore. Revenue fell to Rs 16.56 crore from Rs 47.69 crore. The resignation of CFO Chetan Rajpara, effective June 5, adds to the company's challenges. SPARC plans to seek shareholder approval for a resolution to raise Rs 1,800 crore.

Torrent Pharma: Torrent Pharma's results were largely in line with estimates, with revenue up by 10.2% to Rs 2,745 crore and EBITDA reaching Rs 883 crore. The EBITDA margin improved to 32.2% from 30% last year. The India business revenue grew by 10% to Rs 1,380 crore, while US business sales declined by 6% to Rs 262 crore. Germany and Brazil revenues increased by 11% and 17%, respectively. The company plans to seek shareholder approval to raise up to Rs 5,000 crore.

Glenmark: Glenmark reported a revenue increase of 2% to Rs 3,062 crore, with EBITDA up 27% to Rs 504.3 crore, close to estimates. However, the net loss widened significantly to Rs 1,218 crore from a loss of Rs 428 crore. The EBITDA margin improved to 16.5% from 13.3%. India revenue rose by 12.9% to Rs 939.1 crore, while North America revenue fell by 12.4% to Rs 755.7 crore. US sales were $91 million, below estimates.

Sundaram Finance: Sundaram Finance saw disbursements increase by 18.1% to Rs 6,209 crore, and AUM grew by 27.3% to Rs 43,987 crore, marking the highest year-on-year growth in nearly seven years. Net Interest Income rose by 20% to Rs 517 crore, and net profit jumped by 60% to Rs 506.3 crore. Gross NPA improved to 1.26% from 1.77%, and Net NPA decreased to 0.63% from 1.02%.

Affle India: Affle India reported a 42.3% increase in revenue to Rs 506.2 crore, with EBITDA margin remaining stable at 19.3%. Net profit surged by 40% to Rs 87.5 crore. The company achieved its highest quarterly revenue run-rate, highest EBITDA, net profit, and consumer conversions to date.

MM Forgings: MM Forgings is set to hold a board meeting on May 29 to consider a bonus issue, dividend, and quarterly earnings. Investors will be keenly watching the outcomes of this meeting for potential impacts on the stock.

Global Market Cues
The Nasdaq closed at a fresh record high on Friday, driven by robust gains in chipmaker Nvidia, which helped offset lingering concerns about the Federal Reserve delaying interest rate cuts. Meanwhile, the S&P 500 and Dow Jones Industrial Average also saw positive movement, albeit more modestly. Here's a detailed look at the market's performance and the factors influencing it.

The S&P 500 rose by 0.7%, closing at 5,304.72. The tech-heavy Nasdaq Composite advanced by 1.1%, ending at 16,920.79, while the Dow Jones Industrial Average edged up slightly by 4.3 points, or 0.01%, to finish at 39,069.59.

For the week, the S&P 500 inched up by just 0.03%, indicating a relatively flat performance. In contrast, the Nasdaq outperformed with a gain of 1.41%, buoyed by strong performances in the tech sector. The Dow, however, experienced a 2.33% decline, marking its first negative week in five, influenced by varying sector performances and broader market sentiments.

Nvidia shares surged by approximately 2.6% on Friday, continuing the momentum from its earnings report. This pushed Nvidia's shares above the $1,000 mark for the first time, reflecting bullish investor sentiment towards the AI giant and other tech names. The optimism around Nvidia and its positive outlook significantly powered the Nasdaq and the broader market higher.

Despite the market gains, concerns about the Federal Reserve potentially delaying interest rate cuts this summer weighed on investor sentiment. US Treasury yields remained relatively stable as investors processed recent economic data. The 10-year Treasury yield was down by less than 1 basis point at 4.467%, while the 2-year Treasury yield saw a minor increase of 1 basis point to 4.948%.

European markets mirrored the global trend of caution, closing lower on Friday due to concerns about the US interest rate outlook. The regional Stoxx 600 index fell by 0.17%, with most sectors in the red. Utilities led the losses for the second consecutive day, down by 1.2%, while retail stocks saw a modest increase of 0.3%.

Oil prices remained in a holding pattern in early Asian trading on Monday, as markets anticipated the upcoming OPEC+ meeting on June 2. Producers are expected to discuss maintaining voluntary output cuts for the rest of the year. The Brent crude July contract inched up by 11 cents to $82.23 a barrel, while the more active August contract rose by 13 cents to $81.97. US West Texas Intermediate (WTI) crude futures also increased by 13 cents to $77.85. Trading was expected to remain thin due to public holidays in the US and UK on Monday.

Asia-Pacific markets rose on Monday, buoyed by positive industrial profit data from China. China's industrial profits rose by 4.3% year-on-year in the January to April period, according to data from the National Bureau of Statistics. This positive economic data spurred gains across various Asian markets:

Mainland China's CSI 300 climbed by 0.21%, Hong Kong's Hang Seng added 0.4%, Japan's Nikkei 225 increased by 0.22%, Japan's Topix rose by 0.3%, rebounding from Friday's losses, South Korea's Kospi gained approximately 0.5%, South Korea's Kosdaq remained flat, and Australia's S&P/ASX 200 rose by 0.8%, poised to snap a four-day losing streak.

On the domestic front, the GIFT Nifty was seen trading with a premium of nearly 10 points from Nifty Futures' Friday close, suggesting a muted start for the Indian market. Investors in India will be closely monitoring both global cues and domestic developments to gauge the market direction.

The Nifty's historic breach of the 23,000 mark signals robust market sentiment and the resilience of India's largest companies. As the market heads into an eventful week with the F&O expiry and the culmination of the earnings season, investors will be watching the performance of key stocks and sectors. The interplay between domestic and foreign institutional investments will also be crucial in determining the market's direction in the near term.