D-Street week ahead: Fed rate decision, Q3 earnings, F&O expiry likely to influence market

More earnings reports from India Inc will take centre stage on Dalal Street, after Reliance Industries and ICICI Bank posted their quarterly numbers last week. Globally, the main focus in the holiday-truncated, four-session trading week will be the outcome of a scheduled policy review by the Federal Reserve.

The US central bank's decision on key rates comes at a time when uncertainty around an earlier-than-expected policy normalisation has rattled financial markets the world over.

Market participants will brace for high volatility with the expiration of the monthly futures & options (F&O) contracts due on January 27.

Expectations from the upcoming annual Union Budget and updates on COVID-19 will remain in focus.

Headline indices Sensex and Nifty50 fell around 3.5 percent each last week -- their first weekly loss after four back-to-back weekly gains. The Sensex shed

2,185.9 points and the Nifty lost 638.6 points. (What spooked investors)

Broad-based weakness pulled both benchmarks lower. The Nifty Midcap 100 and Smallcap 100 indices fell 4.5 percent and 4.1 percent.

As many as 45 Nifty50 stocks finished the week in the red.

Around 410 stocks in the BSE 500 index -- the broadest index on the bourse -- succumbed to negative territory.

The week will begin with investors reacting to quarterly financial results of Reliance Industries and ICICI Bank. A slew of largecap corporates are slated to report their earnings for the December quarter this week, including Maruti Suzuki, Vedanta, Axis Bank, Dr Reddy's, Kotak Mahindra Bank, Larsen & Toubro and NTPC.

"The week is going to be a critical one due to a list of events and data that are lined up.... Currently, uncertainty around the quantum of rate hikes by the Fed is spooking markets globally... The monthly expiry of the January month derivatives contract would keep the traders on their toes," said Ajit Mishra, VP-Research at Religare Broking.

He expects sector-specific expectations in the run-up to the Budget to add to choppiness.

The Nifty50 appears to be finding a cushion around 17,500, according to Yesha Shah, Head of Equity Research, Samco Securities. The 50-scrip benchmark has formed a hammer-like candlestick pattern around the previous resistance zone on the daily chart, and the Nifty Bank made a similar pattern around its 20-day moving average, she said.

"This indicates the continuation of the ongoing major uptrend. If the Nifty fails to hold above the support zone around 17,500, an extension of time and price correction is likely," Shah said,

She expects resistance for the index at 18,300, and advises traders to maintain a cautious to mildly bullish outlook.

Religare Broking's Mishra believes it will be critical for the Nifty50 to hold the 17,600-17,350 band for any meaningful recovery going forward.

Jan 24: Axis Bank, HDFC AMC, Ramco Cement, Zensar, Burger King and  Oriental Hotels

Jan 25: Maruti Suzuki, Cipla, Pidilite, Federal Bank, Macrotech, Raymond, TeamLease, Torrent Pharma and AB Sun Life AMC

Jan 27: BHEL, RBL Bank, Canara Bank, Birlasoft, Coforge, Dalmia Bharat, Motilal Oswal, Wockhardt, MapMyIndia, Route Mobile and Laurus

Jan 28: Dr Reddy's, Vedanta, Kotak Mahindra Bank, L&T, Marico, Naukri, NIIT, Dixon, Happiest Minds, Chambal Fertilisers, Deepak Fertilisers, AU Small Finance Bank and Equitas Small Finance Bank

Jan 29: NTPC and MCX

Edible oil refiner Adani Wilmar's IPO worth up to Rs 3,600 crore will hit Dalal Street on Thursday.

Foreign fund flows will remain in focus. Last week, foreign institutional investors net sold Indian equities worth Rs 10,647.9 crore ($1.4 billion), according to provisional exchange data.

A PMI survey on manufacturing and services in the world's largest economy is due on Monday.

On Thursday, the Federal Reserve's decision on key interest rates will be released. On the same day, data on GDP, jobs and home sales in the US is due.

On Monday, PMI surveys on manufacturing and services in the United Kingdom, Germany and France will be released.

Data on business optimism in the UK is due the next day.

Data on consumer confidence in Germany is due on Thursday, and France's GDP numbers the next day.

PMI surveys on manufacturing and services in Japan are due on Monday.

Data on Hong Kong's GDP is due on Friday.