Investors awaiting major cues from Q2 earnings

Nervousness over rising geopolitical tensions, weak quarterly earnings projections and continued selling by FIIs resulted in stock market ending lower for the second consecutive week. BSE Sensex fell by 307.09 points or 0.37 percent, to close at 81,381.36 points, while NSE Nifty slipped 50.3 pointsor 0.20 per cent, ending at 24,964.30 points. However, the broader market indices continued to outperform their main counterparts for the second consecutive week, even as benchmark indices faced pressure.

Both the Small-cap and Mid-cap indices gained one per cent each. FIIs extended their selling streak, offloading equities worth Rs27,674.99 crore during the week. However, DIIs remained net buyers, purchasing equities worth Rs31,363.61 crore. China’s monetary stimulus has triggered a wave of tactical foreign institutional investor outflows from India. The Indian rupee extended the losses and weakened past 84 mark for the first time. For the week, it ended 10 paise lower at 84.07 on October 11 against its October 4 closing of 83.97.There is a downward bias for the rupee in the near term, but the market doesn’t expect a sharp decline due to the RBI’s healthy forex reserves. The market focus is now on Q2 earnings.

Investors will closely examine corporate performance to assess the health of Indian businesses and the impact of a slowing global economy.

IPO Corner: The primary market will see its biggest offering till date from Hyundai Motor India next week as the automaker is planning to raise over Rs27,000 crore through its IPO.

The Indian arm of the South Korean carmaker will be making investments towards capacity expansion, product and platform development, and new launches. The company is also gearing up to widen its footprint in the Battery Electric Vehicle (BEV) market.

F&O/ SECTOR WATCH

Mirroring the consolidation in the underlying cash market, in the derivatives segment, the week that went by was in complete contrast to the week before as the markets heavily consolidated in a tight range. NSE Nifty had seen a significant retracement of over 1,167 points; However, over the past five trading days, the index stayed totally devoid of any directional bias. In the options market, the highest Call Open Interest for the Nifty was seen at the 25,000 and 25,200 strikes, while the highest Put Open Interest was at the 25,000 and 24,900 strikes.

For Bank Nifty, the highest Call Open Interest was seen at the 51,500 and 52,000 strikes, with the highest Put Open Interest at the 51,000 strike. Implied Volatility (IV) for Nifty’s Call options settled at 12.31 per cent, while Put options conclude at 13.05 per cent. The India VIX, a key market volatility indicator, closed the week at 13.50 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 0.98 for the week. Technically, the Nifty has next support at 24,800, while the 25,200-25,400 zone will serve as a key resistance area.

The coming weeks are crucial for the markets from a short-term perspective. The Bank Nifty and Fin Nifty will cease to have weekly contracts beginning November 20 following the Sebi’s recent directives. It will be only the Nifty that shall have weekly contracts. This may keep the indices a bit volatile over the coming days. Stock futures looking good are Crompton, Divi’s Labs, Polycab India, HCL Tech, Oberoi Realty, MCX and Kotak Bank. Stock futures looking weak are ACC, Aarti Inds, Godrej Consumer, ITC, Sun TV and Shree Cement.

(The author is a senior maket analyst and former vice- chairman, Andhra Pradesh State Planning Board)