Weak global cues weighing on Dalal St

Unnerved by falling Indian rupee, continued selling by the FIIs, lower GDP data, rising inflation and weak global cues; the benchmark indices lost one percent each during the week ended. However, lower crude oil prices and a good monsoon provided some respite. BSE Sensex lost 721.06 points (1.32 percent) to close at 53,760.78 points, while NSE Nifty declined 171.4 points (1.05 percent) to end at 16,049.2 points. The BSE Small-cap and the Mid-cap indices rose 0.5 per cent and one per cent showcasing outperformance of broader market.

In the month of July so far, FIIs have sold equities worth of Rs10,459.13 crore and DIIs bought shares worth of Rs7,367.04 crore. On the back of FII selling, Indian rupee continued to depreciate against the US dollar and closed near the 80 mark. Several indicators suggest that the Indian economy is making resilient progress in the first quarter of FY23, in spite of the drag from global spillovers, elevated inflation and some slackening of external demand as geo-political developments take their toll on world trade. The recent revival of the monsoon, the pick-up in manufacturing and services, stabilisation of inflation pressures and strong buffers in the form of adequate international reserves, sufficient food grain stocks and a well-capitalised financial system together brighten the outlook and strengthen the conditions for a sustainable high growth trajectory in the medium-term.

The monsoon session of Parliament holds a lot of importance given the fact that both the election of the President of India and the Vice-President of India will take place during the session. Important bills are also likely to be tabled. Near term direction of the market will be dictated by Q1 earnings, monsoon, rupee-dollar moves, crude oil prices, macro-economic indicators and noise from US markets. Key Q1 earnings to watch out for in next week include Ambuja Cements, Reliance Industries, HDFC Life, Hindustan Unilever, Havells India, InduSind Bank, Wipro, JSW Steel, Ultratech Cement, ICICI Bank, Kotak Mahindra Bank, Tata Communications, Mphasis, Persistent Systems, PVR, SRF and Karnataka Bank.

Listening Post: Since you can't predict the unpredictable, you should control the controllable is the mantra for handling bear market. Part of what makes bear markets so unbearable is that nobody—and I mean nobody—knows when or how they will end. That doesn't stop everyone on

Dalal Street from flogging measures, hunches and folklore purporting to foretell when stocks will finally stop falling. However, intelligent investors don't bother trying to predict the unpredictable; they focus on controlling the controllable. That's the psychological key to surviving this—and any—bear market, no matter how long it lasts. Ask any market veteran when stocks will start to recover, and you're likely to hear something like this: Bear markets don't end until individual investors throw in the towel, fear hits new heights or stocks finally get cheap again. To get your priorities straight understand the three beliefs about when bear markets end and myths surrounding them.

Retail investors have to capitulate. Financial professionals love to argue that bear markets hit bottom when individual investors give up on stocks in a crescendo or capitulation of panic selling. Only trouble is that isn't what happened on several occasions. Bear markets sometimes end in a selling frenzy, but they often end in an indifferent stupor.

Fear has to spike. Many professionals contend that the Volatility Index or VIX, is too low right now. The VIX, commonly called market's fear gauge, spiked to then-record highs in October 2008, during the global financial crisis—but stocks still fell more than 19 per cent before the bear market finally ended in March 2009. When markets are trying to re-price their expectations of the future, they only nibble away at that truth. No single indicator like the VIX can capture the moment when those expectations are about to shift.

Although stocks didn't seem like a statistical bargain at the time, they went on to gain roughly 15 per cent annually over the next decade. All this shows the folly of trying to figure out when stocks have hit bottom. So you should distinguish what you can control from what you can't. Instead of wasting your time trying to read the market's tea leaves, take charge of the risks you run, the taxes you incur and your investing time horizon. Quote of the week: "An investment in knowledge pays the best interest." — Benjamin Franklin When it comes to investing, nothing will pay off more than educating yourself. Do the necessary research and analysis before making any investment decisions.

F&O / SECTOR WATCH

With Q1 results season in motion, derivatives segment witnessed sector and stock-specific moves. While Nifty closed above key psychological level of 16000, Bank Nifty ended the week below 35000 levels. On Option front, maximum Call Open Interest (OI) is at 16500 followed by 17000 strike and maximum Put OI is at 15500 then 15000 strike. Call writing was seen at 16400 then 16300 strike while Put writing is seen at 15600 then 15800 strike. Option data suggests a wider trading range in between 15700 to 16350 zones. Implied Colatility (IV) of Calls closed at 17.80 per cent, while that for Put options closed at 18.37 per cent. The Nifty VIX for the week closed at 18.34 per cent. PCR of OI for the week closed at 1.16 lower than previous week, which indicates more call writing than put writing during the week. For upcoming week, expect markets to trade with positive bias if Nifty holds above 16000 level. A decisive move beyond 16250 levels could trigger fresh round of buying and propel Nifty towards 16500 levels as well.

However, if the Nifty breaks 15,850 level, the last week's low point, then there could be sharp fall up to 15,700-15,500. Industry observers say that the rally has just started in the automobile sector. Auto sector is an area where one should definitely be positioned and overweight now. Information Technology index shed six percent during the week ended suggesting sustained selling in the sector. For present, the sector is out of favour, even though a odd company might do well, very rarely will one find that a stock will outperform the market or outperform the sector. Pharma stocks witnessed renewed buying interest. The sector is seen turning around by improving its momentum and may show stock-specific outperformance going ahead from here. Stock futures looking good are Alkem, BHEL, MCX, Polycab India, Shriram Transport, SBI Life, Syngene and Whirlpool.

Stock futures looking weak are Bharti Airtel, HCL Tech, Intellect Design, Jindal Steel, Powergrid, Sun TV and Wipro.