Investors look to macro data for market cues

Buoyed by the US Fed decision to pause interest rates, positive domestic macroeconomic data and expectations over developments during the PM visit to US; the week gone by was a stellar one for the Indian markets with Nifty and Sensex closing at record levels. The Nifty advanced 1.4 percent closing at 18,826 points and the Sensex gained 1.2 per cent ending at 63,384.58 points. Broader markets also participated in the rally with Nifty Midcap rallying 2.9 percent and Nifty Small-cap index up 2.8 percent.

It is pertinent to observe that the Mid-cap index is at its record high level, the Small-cap index is still about 11 percent away. While benchmark indices are taking baby steps towards lifetime highs, the broader market and even penny stocks remained on the fast track lane. As many as 60 penny stocks have given returns of over 20-66 per cent last week. These stocks have a market capitalisation of less than Rs500 crore. The general sentiment in the broader market has remained positive in the recent weeks and there is tell-tale evidence of irrational exuberance developing in the market.

Avoid cats and dogs caution old timers. FIIs bought shares worth Rs6,644 crore in the week gone by and DIIs bought shares worth Rs1,320 crore. In June so far, FII net buy stands at Rs6,886 crore and DII net buy stands at Rs4,329 crore. After the late arrival of this year’s monsoon, the spread of rainfall to the rest of the country is behind schedule.

The ongoing rally in Small-cap and mid-cap stocks has made everybody who’s invested in the market more optimistic. This bull market for stocks is 38 months old, making it one of the longest in recent times.

F&O/ SECTOR WATCH

Mirroring the bullish undertone in the cash market, the derivatives segment witnessed brisk trading activity. The turnover in the derivatives of benchmark Sensex touched Rs3.42 lakh crore on the weekly expiry on Friday.

This is double the turnover registered last week. In the options segment, the turnover was Rs3.41 lakh crore and in futures, it was Rs211 crore. Currently, the NSE enjoys a near monopoly position in the derivatives market in India.

Last year, NSE emerged as the world’s largest derivatives exchange. BSE has been struggling to increase participation and gain market share in the derivative segment. Since the relaunch of Sensex derivatives, the Open Interest has been steadily climbing, signalling a sustained and growing interest from market participants. According to options data in the NSE, maximum Call Open Interest (OI) was seen at 18,800 strike, followed by 19,000 strike. On the Put side, the 18,700 holds the maximum OI followed by 18,800 strike. The Implied Volatility (IV) for Call options concluded at 10.09 per cent, while Put options closed at 11.25 per cent.

The Nifty VIX, a measure of market volatility, ended the week at 11.08 per centStock futures looking good are LIC Housing, Tata Communications, Mannapuram, Tata Consumer, IRCTC, SBI Life and Metropolis.Stock futures looking weak areContainer Corporation, Tata Chemicals, NMDC, SRF, Mphasis, Wipro and Voltas.