Deteriorating market breadth a concern

Ahead of a potential shift in US Federal Reserve policy at Jackson HoleEconomic Symposium over the weekend, Indian market scaled new all-time highs during the week ended August 27.

Benchmark indices, the BSE Sensex and theNSE Nifty touched their fresh record high levels of 56,198.13 (on August 25) and16,722.05 (on August 27), respectively.

For the week, the BSE Sensexadded 795.4 points (1.43 percent) to close at 56,124.72 points and the NSE Nifty rose254.7 points (1.54 percent) to end at 16,705.2 levels. After several weeks ofunderperformance, renewed buying was also seen in the mid-cap andsmall-cap stocks. The BSE Midcap index was up 2.54 percent and Smallcapindex gained 2.04 percent during the week.

FIIs sold equities worth Rs6,833.33 crore during the week with net sales of Rs7,652.49 crore inAugust. However, DIIs with purchases of Rs 8,078.24 crore lent support tomarket. Observers do not expect major purchases from FIIs for next fewmonths considering the expected Fed tapering by end of 2021.

Market players advice buying in large-caps and other heavyweights as anycorrection in markets may again derail the recovery in mid-cap andsmall-cap space. Analysts are expecting GDP growth rate numbers for Junequarter to be close to 20 per cent.

But any deviation from expectation canget a reaction from markets. Investors were monitoring US Fed ChiefPowell's speech for clues about when the Fed might start to scale back itseasy-money policies.

After the tepid listings in August, two IPOs- specialtychemical company Ami Organics, and diagnostic chain operator VijayaDiagnostic Centre are scheduled to open next week.

Heard on the Street

Discussion on the start of tapering by the US Fed isagain making markets nervous about a repeat of the 2013 'taper tantrum'.Analysts, however, say that both the US and Indian economies are on muchstronger footing than it was in 2013, which should allow the reflation tradeto return as the market digests the clarity on this taper in the comingweeks.

Hence, the fear of a notable economic slowdown due to gradual taperingshould be a much lesser fear than in the 2013 episode. Indian economy ison far stronger footing now to prevent a repeat of the 2013 mishap.

Expect growth sectors likefinancials and commodities to again start doing well amid clarity from theFed and Indian growth picks up in the upcoming festive season.

F&O / SECTOR WATCH

On the back of the benchmark indices scaling new highs, settlement weekwitnessed robust trading activity in the derivative segment. Rollovers in theNifty futures were at 84 per cent (last month 82%), well above 3-month average of81 per cent.

Also in value terms it was higher at 21721 Cr. versus 15027 Cr.(Nifty closed August series with gains 5%). Market wide rollovers stood at93 per cent (last month 91%) and in value terms it was at Rs16,7435 cr, which ishigher than last month Rs16,6199 cr.

Strong supportive buying seen in the IT sector with focus on large-cap stocks likeHCL Tech, Infosys, TCS and TechMahindra. Among the financials, BajajTwins were in limelight. Punters predict Bajaj Finserv and Bajaj Finance toscale Rs20,000 and Rs10,000 levels respectively in next few months.

Tenadditional securities were added to the Futures and Options segment -Dixon Technologies, Can Fin Homes, Hindustan Aeronautics (HAL), IndianEnergy Exchange (IEX), Indiamart Intermesh, Ipca Laboratories, MultiCommodity Exchange of India, Oracle Financial Services Software,Polycab India and Syngene International.

Stock futures looking good areAdani Ports, Axis Bank, L&T, Navin Fluorine, Trent and SBI Life. Stockfutures looking weak are PVR and UPL.