Trade Setup: Market To Open Flat; Union Budget, US Fed Outcome And Stock Surprises Set The Tone

In a turbulent start to the February F&O series, the Nifty 50 embarked on a rollercoaster ride, initially surging before relinquishing more than half of its gains on Tuesday. The mid-week session, initially marked by consolidation, witnessed a remarkable recovery of nearly 300 points, closing in proximity to the 21,750 mark.

As investors catch their breath, all eyes are fixed on Finance Minister Nirmala Sitharaman, set to present the Union Budget on Thursday. While expectations remain tempered for major announcements in this interim budget, market participants eagerly await a clear policy direction and insights into the road ahead.

Adding to the intrigue, Thursday's trading session promises to be eventful. Companies are poised to unveil their auto sales figures for January, while crucial macro data, including the manufacturing PMI, will be disclosed on the first day of the new month. Furthermore, the weekly options expiry of the Nifty 50 contracts will add an extra layer of complexity to the day's proceedings.

The recovery witnessed on Wednesday is attributed, in part, to substantial buying by both foreign and domestic investors in the cash market. Foreign investors, reversing the trend of recent sessions, turned net buyers, injecting further uncertainty into the market dynamics.

Despite the Nifty Bank historically lagging behind the Nifty, Wednesday saw a surprising outperformance, especially during the weekly expiry of its options contracts. While the index closed tantalizingly close to the 46,000 mark, it still stands 5.5% away from its record high of 48,636. Encouragingly, the index has been charting higher highs over the last four days, offering a glimmer of optimism for bullish investors.

Examining the futures and options (F&O) landscape, Nifty 50's February futures experienced a marginal dip of 0.1% or 7,750 shares in Open Interest on Wednesday. Currently trading at a premium of 82.9 points, down from 108.4 points earlier. Conversely, Nifty Bank's February futures shed 5.9% or 1.93 lakh shares in Open Interest. Nifty 50's Put-Call Ratio has climbed to 0.9 from 0.82 earlier.

Steel Authority of India (SAIL) and Zee Entertainment have entered the F&O ban zone, stirring speculation and being closely watched by market participants.

For the February 1 expiry, Nifty 50's call strikes between 21,800 and 22,000 have witnessed increased Open Interest, indicating potential bullish sentiments. On the put side, strikes between 21,500 and 21,700 are showing Open Interest addition, suggesting a level of cautious optimism as the market braces for Thursday's expiry.

As investors prepare for Thursday's trading session, several stocks are poised to attract attention:

Paytm: The Reserve Bank of India's directive to halt onboarding new customers has shaken Paytm Payments Bank. Potential deficiencies in technology and customer redressal mechanisms, KYC processes, and monitoring systems have raised concerns. Paytm anticipates a substantial impact on its annual EBITDA in the worst-case scenario.

Dixon Technologies: Despite doubling year-on-year revenue, Dixon Technologies fell short of estimates, with a net profit of Rs 97 crore. The decline in the mobile business on a sequential basis adds a layer of complexity to the company's financial performance.

Godrej Consumer Products: Solid operational performance with margin expansion is a silver lining for Godrej Consumer Products. Although LatAm currency impact weakens consolidated revenue, the company's domestic and consolidated volume growth surpasses market expectations.

Shree Cement: In-line sales volumes and an interim dividend announcement characterize Shree Cement's performance. The decline in power and fuel costs contributes to a better-than-expected EBITDA.

JSPL: Jindal Steel and Power Limited's December quarter results surpass estimates, driven by benefits from captive thermal coal mines in India. The impressive EBITDA margin underscores the positive impact on raw material costs.

Mankind Pharma: A robust financial performance is evident as Mankind Pharma reports a 25% increase in revenue, with a significant rise in EBITDA and net profit. The company maintains a strong net cash balance, reflecting its financial resilience.

Cochin Shipyard: Securing a substantial order for a hybrid service operation vessel (SOV) from a European client adds to Cochin Shipyard's robust order book, projecting a positive outlook for the company.

Divgi TorqTransfer Systems: Winning orders worth Rs 212.1 crore from two North American automotive transmission manufacturers over a five-year period marks a strategic move to expand the product portfolio.

Glenmark Pharma: A strategic partnership with Pfizer to launch Abrocitinib in India for Atopic Dermatitis treatment showcases Glenmark Pharma's commitment to introducing innovative healthcare solutions.

Turning our attention to global cues, Asian markets open mixed following Fed Chair Jerome Powell's announcement, dashing hopes of a rate cut in March. The Nikkei 225 and the Topix in Japan experienced a 0.5% decline, while the Kospi in South Korea edges up by 0.5%. Futures on the Hang Seng signal a positive start to the trading day.

In contrast, the US markets witnessed a downturn overnight, attributed to the Federal Reserve's announcement and disappointing results from tech giants Alphabet and Microsoft. The S&P 500 experienced its most substantial fall since September, and the Nasdaq declined over 2%.

GIFT Nifty is seen trading flat against Nifty Futures Wednesday close, indicating a muted start for the Indian market ahead of Budget 2024.

As the markets brace for Thursday's session, the confluence of the Union Budget, global market trends, and an array of corporate performances sets the stage for a pivotal day. Investors and analysts alike are poised for potential surprises, market reactions, and the unveiling of new trends that could shape the trajectory in the days to come.