Investors may stick to stock-specific trading

Disappointed by the ‘status quo’ attitude on interest rates by the US Fed and RBI, renewed aggressive selling by FIIs, higher bond yields in the US and lack of specific triggers; Indian equity markets ended lower during the week ended. Nifty shed 71.3 points or 0.32 per cent to finish at 21,782.5 points, while BSE Sensex fell 490.14 or 0.67 per cent to end at 71,595.49 points.

However, despite the moderate selloff in broader markets, Nifty Midcap closed 0.85 per cent higher for the week. FIIs sold equities worth of Rs5,871.45 crore in the week gone by, while DIIs have provided support by buying equities worth Rs5,325.76 crore. Observers feel that the main trigger for FII selling is rising bond yields in the US. It is interesting to observe that FPIs were buyers in IT and telecom, which explains the resilience of the leading players in these segments. It is pertinent to understand that FIIs continued their bullish stance on the country’s debt markets with a net infusion of over Rs15,000 crore so far this month, on the back of inclusion of Indian government bonds in the JP Morgan Index along with relatively stable economy. This followed a net investment of Rs19,836 crore in January, making it the highest monthly inflow in more than six years. This was the highest inflow since June 2017, when they infused Rs25,685 crore. India’s net direct tax collection stood at Rs15.60 lakh crore as of February 10, reaching approximately 80 per cent of the revised target set for the entire financial year. In US markets, technology stocks drove the S&P-500 past another milestone and to a fresh record closing above 5,000 points for the first time. The rally reflects unexpected strength in the economy that has investors believing that as long as the expansion continues, they can ride riskier assets to gains even if interest rates remain high.

Near-term direction of the Indian market will be dictated by the release of US, UK, and Indian inflation data, geo political cues on Red Sea crises, international crude oil prices, FII fund flows and other global cues. Ahead of announcement of election calendar for General Elections by ECI, markets are expected to remain range bound with stock-specific moves in next few weeks.

In the last leg of Q3 FY24 results in the coming week, major companies announcing results are Mahindra & Mahindra, BHEL, IRCTC, Eicher Motors, Hindustan Aeronautics, Mazagaon Dock Shipbuilders, and Phoenix Mills.

F&O/ sector watch

Amidst high volatility, the derivatives segment witnessed brisk volumes during the week ended. On the sectoral front, PSU Banks, healthcare & pharma and oil & gas sectors were in limelight. Private bank stocks continued to drag the market. As per the weekly options data, the maximum Call Open Interest was seen at 22,000 strike, followed by the 23,000 and 22,700 strikes. On the Put front, the 21,500 strike owned the maximum Open Interest, followed by 21,000 and 20,500 strikes. India VIX, the fear index, remained on the higher side for fifth consecutive week indicating the possibility of higher volatility in the coming days.

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