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Indian markets ended last week in the red, however, losses were offset by buying in midcap stocks. FMCG, IT, and consumer durable stocks further limited the downside. The markets are set to begin another week of the trading session from July 4-8 and experts believe a host of factors will keep the sentiment volatile. Corporate earnings will also take focus in the upcoming trading week with TCS quarterly results.

On Friday, Sensex closed at 52,907.93 down by 111.01 points or 0.21%. Nifty 50 ended at 15,752.05 lower by 28.20 points or 0.18%.

Last week, both Sensex and Nifty 50 dipped by nearly 1% each.

Yesha Shah, Head of Equity Research, Samco Securities said, "Market is expected to remain volatile due to a slew of market-moving events. On the macroeconomic front, investors will be watching FOMC minutes to see where the economy is headed. Furthermore, global markets would be influenced by China's inflation figures, which are due next week. Back home, the first quarter of fiscal year 2023 earnings season will drive market sentiment and stock-specific actions. Investors should pay careful attention to management commentary and select solid fundamental companies in order to focus on the long-term picture."

1. Earnings:

The June 2022 (Q1FY23) quarter earnings season will begin this week with the IT-giant Tata Consultancy Services (TCS) announcing its financial performance for the period on July 8 followed by Avenue Supermarts (Dmart) earnings on July 9.

Sameer Pardikar, Research Analysts at ICICI Securities last week said, "the recent correction in IT stocks could be an indication that the revenue growth in FY23 could be healthy but it may be in the slow lane from FY24 onwards due to possible recession in the US, which subsequently could lead to a reduction in tech spending from some of their biggest clients. In this context, LTI had given cautious commentary on the growth outlook in Q4, while other companies were still upbeat on demand. We believe that growth outlook, more colour on attrition in Q1FY23 is expected to set the tone for FY24 numbers."

2. FOMC meeting:

Investors will be keenly watching FOMC minutes which are scheduled on July 6, to under where the economy is headed.

Last month, FOMC raised the target range of federal funds rate to 1.75% - the biggest hike in 28 years. Additionally, FOMC stated it will continue reducing its holdings of Treasury securities and agency debt, and agency mortgage-backed securities. It is strongly committed to returning inflation to its 2% objective.

3. Operational performance for Q1: 

Many auto companies have announced their sales data for Q1FY23 and June 2022.  ICICI Direct in its note said wholesale dispatches for June 2022 came in steady with most segments reporting neutral to positive MoM growth. CV space continues to witness secular MoM growth trend and outperformed the OEM pack with encouraging double-digit recovery in the M&HCV segment. In the 2-W pack, it was largely flat performance MoM with Bajaj Auto being an exception, with the company reporting ~27% MoM growth albeit on a low base (impacted by supply-side issues). PV space also witnessed flat MoM performance with Tata Motors leading the pack. Tractor space reported muted prints i.e. double-digit YoY decline amid wheat export ban imposed around May 2022 end and channel stuffing in previous months.

Further, metal companies are also announcing their operational performance data for June and Q1FY23 quarter. While banking stocks will be in focus as bankers have started to announce their deposits and net advances data for Q1FY23 ahead of their earnings. These sectors will be in focus and contribute in moving the market. 

4. F&O expiry:

Investors carried forward a bearish position at the start of the July derivatives series as fear over possible recession continues to play spoilsport amidst mounting inflation, monetary policy tightening, and higher commodities prices.

ICICI Direct in its research note said despite the June F&O settlement, the Nifty lacked momentum and ended almost flat. Financial stocks were top gainers while metals, IT, and auto were among the top losers. Over the past few days, the Nifty is stuck in a range of 15700-15900. Hence, for getting any directional move, a break on either side of the mentioned range would be critical.

For the July 7 expiry, ICICI Direct said to sell Nifty 16,100 call option in the range of 42-44 Target: 18 Stop loss: 58. They said, buy Bank Nifty future in the range of 33500-33550 Target: 33750-33850 Stop loss: 33300.

There are currently no stocks in the F&O ban.

5. FPI outflow:

From the Indian market, foreign portfolio investors (FPIs) removed about 811 crore on July 1. FPIs have been net sellers throughout the year so far. In the first half of 2022 (January - June this year), FPIs removed money to the tune of a whopping 2,27,290 crore from the Indian market.

Overall, FPIs outflow from the Indian market is to the tune of 2,28,101 crore.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "FPIs are selling more in countries with rising current account deficits ( CAD) like India because the currencies of such countries are vulnerable to further depreciation. Towards the end of June, FPI selling has been showing a declining trend. If the market rises in July anticipating or responding to good Q1 results, FPIs may again sell. This trend will be halted only when the dollar stabilises and US bond yields decline" 

6: Crude oil prices:

Last week on Friday, crude oil prices surged on the back of supply outages in Libya, an oil and gas workers' strike leading to fear of shutdown in Norway, and an economic slowdown possibly denting demand weighed on sentiments. Brent crude rose 2.4% and was at $111.63 per barrel, while US WTI crude oil jumped over 2.5% to $108.43 per barrel.

Meanwhile, bond yields dropped significantly on Friday. The 10-year Treasury yield whose performance is gauged in setting mortgage rates - slipped to 2.89% from 2.97% the previous day. The 2-year Treasury yield declined to 2.83% from 2.92%.

The Indian government last week imposed special excise duty of 6 per litre on exports of petrol and aviation turbine fuel (ATF) and 13 per litre on exports of diesel. Major oil stocks like ONGC, Oil India, and Reliance Industries tumbled as the new taxation signaled a tightening energy market outlook.

7. Geopolitical tension:

The uncertainty over the Russia-Ukraine war continues to hint at a bearish market tone for the week.

As per a Reuters report, Russia said it had taken full control of the eastern Ukrainian region of Luhansk on Sunday after capturing the final Ukrainian bastion of the city of Lysychansk, where Kyiv said it had withdrawn to save the lives of its troops.

However, Ukrainian President Volodymyr Zelensky denied the Kremlin's claim of capturing Lysychansk.

8. Macroeconomic data:

US will be announcing factory orders for May on July 5. Apart from FOMC minutes, data on vehicle sales for June 2022, S&P Global Services PMI, Composite PMI, and ISM non-manufacturing PMI for June will also be announced on July 6. Jobless claims data will be presented on July 7, and non-farm payroll data will be announced on July 8.

In European Union, PPI data for May will be released on July 4, S&P Global Services & Composite PMI for June will be released on July 5, and S&P Global Construction PMI for June and retail sales data for May - will be announced on July 6.

Japan will also announce its PMI data on July 5 and householding spending data on July 8.

China is set to announce its PMI data for June - on July 5, and inflation along with PPI and vehicle sales data will be presented on July 9.

9. Indian rupee:

On Friday, the rupee touched a new all-time low of 79.12 before closing at 78.94 per dollar higher by 12 paise. The performance comes during the time government decided to hike the import duty on gold to 15% From 10.75% to curb imports.

Manish Jeloka, Co-head of Products & Solutions, Sanctum Wealth said, "FII selling in the Equity Markets, Higher Imports due to increase in crude prices, Higher Commodity prices and Importers now coming in to hedge, are the factors that contributed to the INR being at record lows," adding, "for USD-INR 80 is a big psychological level. There appears to be Central Bank intervention to help a soft landing. INR is expected to continue to outperform most other emerging market currencies. This is because most of the factors like higher crude and commodity prices affect everyone."

10. Corporate actions:

JSW Steel and Petronet LNG stocks will turn ex-dividend on July 4 ahead of their record date. Companies like AstraZeneca Pharma, Axis Bank, Bank of India, GSK Pharma, DCM Shriram, and Oberoi Realty have set their dividend record date on July 8 which means the stock will turn ex-dividend on July 7.

Ex-dividend date also referred to as the reinvestment date, is a term involving the timing of payment of dividends on stocks of companies listed on stock exchanges.

HDFC Bank and HDFC have received a green signal from stock exchanges. IndusInd Bank and Federal Bank have announced their net advances and deposits data for Q1FY23.

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