Stable sale of FII dampens market reaction
Frightened by negative global signals like rising oil prices, US bond yields and growing concerns about the Chinese economy; the stock market ended a five-week winning streak in the week that ended. BSE Sensex lost 1,282.89 points or 2.14% to close at 58,765.58, and NSE Nifty lost 321.15 points or 1.80% to 17,532.05 points. However, the larger markets outperformed, with the BSE Midcap index up 0.12% and the Smallcap index up 0.69%. The steady sale of FII dampened sentiment. The FII net sold Rs 6,092 crore in shares in India during the week. On the contrary, the support of the DII with purchases of Rs 4,305 crore limited the correction to two odd percent in the benchmarks.
FII’s “mindset” appears clouded by fears of easy liquidity reduction after the US Fed suggested an earlier-than-expected rate hike and a gradual decrease towards the end of 2021. Oil hit its highest level since October 2018. Analysts estimate prices could hit $ 90 a barrel in the coming months, as OPEC + is unlikely to increase production at the next meeting. Under the effect of rising oil prices, demand to buy dollars and expected FII outflows; the Indian rupee has weakened to 74.15 per dollar from 73 levels in the past month and experts expect the currency to depreciate further to 75-76 against the US dollar. The Reserve Bank of India (RBI) is expected to announce its bimonthly monetary policy on Friday, October 8. Observers expect the RBI to maintain its accommodative stance to maintain adequate liquidity in the system and support economic activity. It is more important to listen to the RBI governor’s commentary for advice on the direction of the economy.
Gross GST revenue collected in August 2021 is Rs 1 12,020 crore. Revenues for August 2021 are 30% higher than GST revenues for the same month last year. The second quarter earnings season will kick off with results for biggest IT player TCS on Friday, October 8. It would be relevant to focus on management’s commentary on the outlook for the IT sector as most of the projections have already been incorporated by the market. Infosys and Wipro will report the results on October 13.
Paras Defense and Space Technologies became the first title in the current decade to deliver a whopping 185% return to investors on the day it debuted. The investment of Rs 14,875 for 85 shares (one lot) is now worth Rs 42,393.75. The country’s largest insurer, LIC, is expected to file draft documents with Sebi by November for the largest IPO in the country’s history, according to finance ministry sources.
The SME segments of the stock exchanges are also inundated with new IPOs. The new offerings underway on the NSE are Bombay Metrics Supply Chain, Destiny Logistics and Dynamic Services; and on ESB are Adishakti Loha, CWD Innovation, Promax Power and Samor Realty.
F&O / SECTOR WATCH
Reflecting the volatility of the spot market, the derivatives segment experienced increased volatility during the settlement week. Market-wide rollovers remained stable at 92% (93% of the market last month) in terms of value Rs1.88,505 cr, which is higher than last month’s 1.67,435 cr. In terms of equities, it is stable / declining with a price effect, as controlling individual stocks rose 10 percent. Maximum open call interest (OI) was observed at 18,000 strikes, followed by 17,700 and 17,800 strikes. The writing of appeals was seen at 18,000 strikes followed by 17,500 and 17,600 strikes. The maximum OI Put was observed at 17,400 strikes, followed by 17,500 and 17,000 strikes. Put writing was seen at 17,400 strikes, then 17,000 & 17,500 strikes with a put occurring at 17,600, 17,700 & 17,800 strikes. The maximum pain point of the September series options was at the 17,600 level. Nifty would need to trade continuously above that level to maintain a bullish position, say technicians.
OI’s PCR for the week closed at 1.46. Aggregate options data indicates that the Nifty could see a wide range of 17,000-18,200 levels over the next few weeks. Sectors that may outperform in the Oct series are automotive (CVs and tractors), banking and finance (NBFC banks and mid-cap PSUs), oil and gas, power, real estate and textiles . A further rise in product prices could trigger new purchases at metal counters like JSW Steel, JSPL, Tata Steel and Nalco. In the pharma pack, Sun Pharma and Alkem are on track for further gains.
Two auto stocks to watch are Ashok Leyland and Tata Motors. Ahead of the festival season, capital goods outlets like Voltas, Dixon and Havells are on the radar of savvy punters. With higher prices for raw materials, coal, etc., cement stocks are expected to underperform in the near term.
Shiva Texyarn Limited is engaged in the manufacture and marketing of cotton yarn and textile products – coated and laminated fabrics, home textiles and backpacks. The company’s products / services include cotton yarn and gray fabric; and is also in the technical textiles sector of manufacturing coating fabrics and laminates which meet the needs of sectors such as healthcare, military and advertising, among others. The technical textile industry is still an untapped field in India and the growth potential is promising and limitless. The announcement of the Production Incentive Program (PLI) for artificial fibers and technical textiles with a total expenditure of Rs 10,683 crore is very beneficial for the company. Its divisions include Spinning Mills, Knitting, Processing, Garments, Coating, Lamination, Bag Division and Windmill. Buy this hidden gem for a long term target price of Rs500.
Alkali Metals Limited is engaged in the business of manufacturing bulk drugs, intermediates, such as organic and inorganic chemicals and fine chemicals. The company’s products include sodium derivatives, pyridine derivatives and fine chemicals. It manufactures a range of products including alkali metal derivatives, tetrazoles and cyclic compounds. The company manufactures its products under three categories: Sodium derivatives Pyridine derivatives and Fine chemicals. Its products are amides, hydrides, alkoxides, azides, tetrazoles, pyridine compounds, cyclic compounds, pharmaceutical and pharmaceutical intermediates and specialty fine chemicals. These products have enormous potential and the company has been successful in negotiating with new customers who are added to the existing list. The company owns high-value plots of land and has three manufacturing units, in Uppal, Dommara Pochampally and JNPC Visakhapatnam. A strong buying interest has been observed at the counter in recent days. Buy for a short term goal of Rs175 and a long term goal of Rs300.
(The author is a stock market expert. He is the former vice-chairman of the AP Planning Board)