Markets lack follow-up buying

Buoyed by a good start to the Q1 earnings season from the IT sector, supportive macroeconomic data, improvement in monsoon progress and global cues; benchmark indices closed at all-time highs on weekly basis. The BSE Sensex climbed 753.87 points to 53,140.06 points, and the NSE Nifty rallied 233.60 points to 15,923.40 points, while the broader markets also participated in the weekly run as the BSE Midcap index was up 1.4 per cent and Smallcap index gained 2.3 percent. However, lack of follow up buying was clearly visible at higher levels. Despite markets touching new highs, FIIs net sold Rs 2,667.16 crore of shares during the week, taking the total selling to Rs 6,923.61 crore in July. DIIs continued to support the market. Punters say that to successfully garner funds by privatisation and disinvestment of PSUs, GoI has now become the

'operator' of markets. Sideliners say that markets will sustain the uptrend till the completion of LIC IPO. Despite attracting a huge influx of dollars in the form of Foreign Portfolio Investments (FPIs) and Foreign Direct Investments (FDI) in recent times; rising crude prices and fear of US taper has kept rupee very weak in comparison to other BRIC nations. Near term direction of Indian market will be dictated by Q1 earnings and management commentary on recovery, progress of monsoon, crude oil prices, macroeconomic data and global cues.

Factors to watch out for in coming months in global markets - Equity markets have already priced in positive news around vaccine rollouts and any delay in vaccine progress may trigger spikes in market volatility. Important corporates announcing their Q1 numbers in the coming week are ACC, HCL Technologies, HDFC Life, Asian Paints, Bajaj Finance, ICICI Prudential Life, Bajaj Finserv, Bajaj Auto, Hindustan Unilever, Ultratech Cement, Ambuja Cements, JSW Steel, Reliance Industries, ICICI Bank and ITC. Other notable companies to keep track are Nippon Life, Ceat, Gland Pharma, Havells India, Jubilant FoodWorks, Biocon, Hindustan Zinc, ICICI Lombard, IEX, IndiaMart, India Pesticides, Wockhardt, Federal Bank, SBI Cards and United Spirits.

Heard on the Street

The strong response to the Zomato's Initial Public Offer (IPO), India's first unicorn listing on the main board, holds a cause for both cheer and concern on the equal measure. On the positive side, the over-subscription busts the myth that Indian investors, even domestic institutions, lack the risk appetite needed to bet on new-age technology businesses that rely on cash burn to acquire a critical mass of customers. On flip side, even by global e-commerce standards, Zomato's valuation is steep at 29 times sales for a cash-guzzling business with no clear runway to profitability in the foreseeable future. The brisk market in short-term IPO funding and the rash of demat account openings suggest newbie investors being swept up in the frenzy. In the past, institutions have proved to be as fallible as retail investors in high profile IPOs.

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F&O / SECTOR WATCH

Mirroring the undercurrent in the cash market, derivatives segment witnessed stock and sector specific moves. On option front, the maximum Put Open Interest was seen at 15,900 strike followed by 15,800 and 15,700 strikes, while maximum Call Open Interest was seen at 16,000 followed by 16,500 and 16,200 strikes. Call writing was seen at 16,000 strike followed by 16,500-16,200 strikes, while Put writing was seen at 15,300 strike followed by 15,900 and 15,700 strikes. The Bank Nifty has been showing promising move, but lack of follow-up buying has kept it below 36,000 strike. Near term target can be 36,800 points. The Implied Volatility (IV) of Calls closed at 11.62 per cent, while that for Put options closed at 12.07 per cent.

HDFC Bank is the first major lender in India to report results as the nation emerges from a second coronavirus wave that shuttered businesses and led to millions losing jobs.

The commentary has not been overly negative but reflected the impact of Covid-19, including changes in customer behaviour and pandemic fears. The Pension Fund Regulatory and Development Authority (PFRDA) has amended for foreign companies to hold — directly or indirectly — up to 74 per cent stake in pension funds notifying the new revised limit.

Sebi has modified margin related processes for those selling shares in the stock market. Stock futures looking good are Havells, HDFC Life, L&T, Sun Pharma and Tata Power. Stock futures looking weak are APL, Eicher Motors, Metropolis, Tata Motors, Titan Inds and Trent.