Ahead of the results for Nifty 50's largest constituents, Reliance Industries Ltd. and HDFC Banks Ltd. are hinting towards diametrical moves.
First-quarter results for the two constituents commanding a combined weight of over 20% in the index are set to be announced, with Reliance's on July 19 and HDFC Bank's on July 20.
Long-Due Pick-Up For India's Largest Bank
HDFC Bank, the largest constituent in the benchmark index, has fallen to a one-month low level at Rs 1,599 per share on Thursday, taking support from the 50-day exponential moving average.
The stock briefly crossed a three-year long resistance to hit a life-time high level of Rs 1,794 apiece on July 3, only to fall back once again, steadily declining by 10% since then.
(Source: TradingView)
(Source: TradingView)
The relative strength index, a momentum indicator which estimates if prices are hitting oversold or overbought levels, has steadied its decline, while hitting the lowest level in two months at 38. The last time its 14-day RSI fell to this level, the stock subsequently rose 5.9% over seven sessions.
Notably, the last time its price fell below the 50-day EMA, it rose 6.6% over the next seven sessions.
The Rs 1,610 apiece level could act as an immediate support for HDFC Bank, according to Nilesh Jain, head, derivatives and technical research at Centrum Broking. He expects consolidation for the stock, with another leg on the upside to Rs 1,700 per share levels.
Country's Largest Company Set To Lag?
With the second largest weight in the index, Reliance Industries Ltd. is facing the biggest three-day decline in a month, a day before results for its first-quarter results are set to be announced.
(Source: TradingView)
(Source: TradingView)
The 14-week RSI as of the week ended July 12 crossed the 72 mark—the highest in 18 weeks. The last time it crossed this level, it subsequently fell 4.1% to the 50-week exponential moving average.
The stock is down 2% so far this week, and is currently 3.4% above the 50-week EMA.
Call writing at Rs 3,200 per share is treating the level as a resistance, Bhavin Mehta, vice president, derivatives strategies at Dolat Capital, told NDTV Profit.
"Till the time stock doesn't cross this level, it could move to around (Rs) 3,050 on the downside," he said. "The range looks to be around (Rs) 3,050 on the downside, with (Rs) 3,200 on the upside," Mehta said.
Earnings Expectations
HDFC Bank released credit and deposit growth figures for the quarter on July 4, post which, the stock fell 4.6%.
The lackluster business updates failed to meet the street's expectations as gross advances declined sequentially by 0.8% and deposits remained flat over the period.
This will be the first quarterly results that will be comparable against the year-ago figures due to a mega-merger with Housing Development Finance Corp. which was completed last July.
Historically, first-quarter results were followed by muted returns for the bank's shares, despite surpassing analysts' consensus estimates as per Bloomberg data.
For RIL, consensus estimates as per analysts tracked by Bloomberg suggest a 3.57% decline in revenue against the previous quarter, with net profit declining by 8.1%.
Historically, shares of the Mukesh Ambani-led conglomerate has delivered muted or negative returns in the week following the first-quarter results' announcement.
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