Top Stocks to Watch This Week: Key Indian Shares and Market Triggers for Investors

Indian equity market begins the week in a good way with strong corporate earnings but also elevated geopolitical and macroeconomic risk. The Nifty 50 was up 1.7% to 24,252 on Friday, August 21, and the Sensex up 0.5% to 77,540.83. Both indices fell by more than 1% in the week as higher crude prices and higher global bond yields sapped equity risk appetite.

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To this end, investors are likely to focus on stocks with strong earnings momentum and improved sectoral fundamentals and company-specific triggers. Private banks have been relatively strong in recent weeks, and IT stocks are under pressure. The broader market is also entering a period where global developments, crude prices, foreign fund flows and corporate news are likely to cause considerable volatility.

The stocks described in this paper are to be watched as well as not to buy, as stock recommendations would be made for the stock. Investors should be aware of valuation, financial performance, risk tolerance, and current market price before making any investment decisions.

ICICI Bank

ICICI Bank is one of the banking stocks investors might want to keep on their radar this week. Private banks have been in relative health recently, with private banks gaining 1.3 percent last week as the broader market slipped.

The positive sentiment towards private banks has also been buoyed by healthy credit growth and improving earnings. Goldman Sachs recently identified ICICI Bank and Kotak Mahindra Bank as its top five Indian banks under its coverage and cited growth in loan flows, liquidity conditions, net interest margins and asset quality as the most important factors.

The key for the ICICI Bank investors will be credit growth, asset quality, margins and the general direction of interest rates. The stock could also be influenced by general market sentiment, as financial company influence is a huge factor with the Nifty.

Kotak Mahindra Bank

Kotak Mahindra Bank is another private-sector lender that is also gaining some attention after the positive brokerage commentary. Goldman Sachs has highlighted the bank alongside ICICI Bank as a preferred banking exposure, as earnings could be recovering cyclically.

Investors should monitor loan growth, deposit mobilisation and net interest margins. Any improvements in credit demand could be a boon for the banking sector, but margin pressures and valuation remain of particular concern.

The banking sector may remain one of the key areas of interest if investors continue to opt for companies with relatively strong domestic earnings visibility.

Reliance Industries

Reliance Industries is still an important stock to watch because of its diverse energy, telecommunications, retail and consumer businesses. It was also one of the big-caps contributing to the Nifty 50 earnings performance during the June quarter.

The company's diversified business model means investors can look at developments in multiple segments (and not just one) as the primary business driver. Energy prices, consumer demand, telecom trends and capital expenditure will all remain important in the future.

And with global crude prices so high due to geopolitical strain, the energy business could also affect investor sentiment towards the stock and the broader market.

Bharti Airtel

Bharti Airtel is another big-cap stock to keep in mind as telecommunications remains a key structural growth sector in India. Airtel was one of the companies mentioned by analysts as having a role to play in the wider earnings momentum in the last quarter.

Investors will be interested in subscriber growth, average revenue per user, 5G monetisation and capital expenditure. The company operates in India’s telecom market and so investors will be interested in getting access to the country’s growing digital economy as well.

Hindalco Industries

Hindalco is another stock that has recently been one of the big contributors to the Nifty 50's earnings. Nifty 50 companies collectively grew on average by 18% in the June quarter -- the best growth rate in 10 quarters, Reuters reported. Hindalco was among the large-cap companies that contributed to the earnings picture.

Investors will need to keep in mind international metal prices, demand, input costs and global economic developments for Hindalco. Metals stocks can also be very volatile because earnings are closely related to commodity cycles.

Tata Motors

Tata Motors, for all its future success, is likely to remain on investors’ radar, but there are some negative near-term factors. The company suffered a weekly decline of around 5% in the past week after weak quarterly results, and the company planned a price increase.

Investors will see if the stock stabilises after the recent decline or remains under selling pressure. And auto demand, margins, input costs, and the company’s overall business picture will be important factors.

In this case, investors should look at how the bottom line as well as the bottom line as a whole is up to a better place than down.

Welspun Corp

Welspun Corp was one of the best performers in the week. The stock jumped about 15.3% after the firm received a record order for $1.8 billion, which the company said was about 15.3%.

High order wins can have a big impact on investor expectations, particularly when they increase revenue visibility. But investors should also consider when to execute, margins, working capital requirements and the company’s ability to convert order-book strength into sustainable profits.

IT Stocks Under Pressure

Information technology stocks may need some special attention for this week, yet the current situation is still difficult. The Nifty IT index fell by about 2% for the second consecutive week and had fallen by 4.8% over the last two weeks, and was down 4.8% over the previous week (compared with the Nifty 50's 1.2% rise in the same period).

The sector remains highly dependent on US inflation expectations, interest rates, technology spending and artificial intelligence concerns. Investors should therefore monitor major IT names to see if they are stabilising and not buy them in the moment, and not assume that the recent falls are buying opportunities.

Crude oil and global cues could drive volatility

The key factor on the Indian stock market will be crude oil. Higher prices of crude oil could be one of the key to Indian equities in this week will be crude oil, and crude oil is one of the biggest driver of the Indian stock market's big picture and will be crude oil prices. Higher crude prices have already affected investor sentiment but it is a big deal for Indian equities this week because oil prices are also high and the price of oil prices are already affecting investor sentiment and geopolitical tensions in the Middle East have also added to the risk of higher oil prices and investors are concerned for Indian stocks and global geopolitics and uncertainty in the Middle East has led to increased uncertainty.

Higher crude prices can be bad news for an oil-dependent economy like India -- oil-dependent economy like India with a country like India that has much to worry as it has the effect of higher crude prices on inflation, corporate costs, corporate expenses, and the external balance of the economy, and the country’s economy will have a huge impact on inflation, corporate cost for the economy of India.

Global bond yields are also another important factor. Rising yields can reduce the attractiveness of emerging-market equities and affect global portfolio flows. Higher crude prices and rising global bond yields, according to Reuters, have been the reason for the recent fall in Indian shares.

Strong Earnings Provide Some Support

Despite the recent market weakness, India’s corporate earnings picture provides a reason for cautious optimism. In the June quarter, Nifty 50 companies saw an average profit growth of 18% year-on-year, which was the highest in 10 quarters. And they were more broad-based, and most sectors’ results were better than expected.

In the near term, domestic consumption, credit growth and investment activity should continue to be key earnings drivers. Yet, even so, market valuations remain higher in some parts of the market, and global uncertainty could slow the rally in general.

Stocks to Watch This Week: Quick Overview

What Investors Should Watch Before Taking Positions

Investors should not make decisions based only on lists of “stocks to watch”. A stock may have a favorable business outlook and still go down if its valuation is too high or the broader market is weak. And a stock under some pressure may recover if earnings fundamentals are stronger.

In the coming weeks, investors should closely watch the Nifty and Sensex, crude oil prices, global bond yields, foreign institutional flows, rupee movement and geopolitical developments. Sector rotation could also be important, especially between private banks, IT, metals, automobiles and other cyclical sectors.

The Indian stock market is in a mixed situation for the new week. Strong corporate earnings are keeping the stock market on track but investors are cautious given that crude prices are up, global bond yields are up, and there’s uncertainty about the market, and even the rest of the world is uncertain. Private banks have been very good in recent months, and IT stocks have been under pressure.

ICICI Bank, Kotak Mahindra Bank, Reliance Industries, Bharti Airtel, Hindalco, Tata Motors and Welspun Corp are among the stocks to watch out for based on recent earnings, sector trends and company-specific developments. But investors should treat them as watchlist options and not as buy calls.

Short-term traders may find some opportunity as well as risk in volatility. Long-term investors ought to be paying more attention to business quality, earnings visibility, valuation and financial health rather than price movement.

This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Investors should conduct their own research or consult a qualified financial adviser before making investment decisions.