Markets set in explosive mode after exit poll forecast

On the back of caution ahead of general elections outcome, F&O settlement considerations, recent swoon in technology stocks in US, FII selling and uncertain global cues; the domestic stock markets corrected modestly during the week ended. Both the benchmark indices fell almost two per cent each to close at 22,531 and 73,961 points. S&P Global Ratings during the week revised outlook for the Indian economy to positive from stable and has affirmed the overall rating at BBB- citing robust growth and improved quality of government expenditure.

The exit poll estimates that predict a huge win for the ruling BJP-led NDA coalition may trigger an ‘explosion’ in the markets on Monday and observers believe that stocks and indices will register strong gains on Monday even as the continuity of the current government is already factored in. Technically and fundamentally the market is poised for a rally. Large-caps in financials, capital goods, automobiles, and telecom are likely to lead the present swing.

In the near term, while the single biggest trigger for the stock market, undoubtedly, this week would be the outcome of the Lok Sabha election results on June 4, investors would be eyeing other key triggers like monthly auto sales numbers, RBI Policy meeting on June 5-7, FII flows, inflation data and global cues. Once the results are out on June 4, investors would be looking for cues from the winning alliance regarding the immediate priorities of the new government.

Besides policy-related announcements, the Street also wants to know who would be the new FM and contours of the full-fledged Union Budget that will be tabled in next few weeks.

F&O / SECTOR WATCH

After reaching record highs, Acrophobia (fear of heights) triggered selling in the benchmark indices and the Nifty corrected by more than 1.5 per cent from its record highs, while the Bank Nifty closed on a flat note. Rollovers in Nifty futures improved to 71 per cent compared to last month’s 65 per cent, in line with the last 3-month average of 72 per cent.

On other hand, the market-wide rollovers stood at 90 per cent compared to last month’s market wide of 92 per cent. Rollovers in indices were aggressive from Indian market players whereas FIIs rolled over shorts. Analysing option data, the highest Call writing in Nifty was observed at the 23,000 and 22,500 strikes.

STOCK PICKS FOR 2024

EPL Ltd (formerly called Essel Propack Ltd) is the world’s largest specialty packaging company, with 21 state-of-the-art manufacturing facilities spanning across 11 countries (Brazil, China, Colombia, Egypt, Germany, India, Mexico, Philippines, Poland, and the United States) and 5 continents. It is estimated that every third tube produced in the oral category globally is an EPL tube. It can be recalled that after Blackstone had acquired a 75 per cent stake in Essel Propack, it sold a 23 per cent stake to Axis Mutual Fund, Franklin Templeton Mutual Fund and DSP Mutual Fund, Morgan Stanley, Neuberger Berman and Nomura on an average price of Rs256.5. Market sources indicate that remaining 51.53 per cent stake is going to be sold at Rs320-330 in near future. Stay invested and add on declines for target price of Rs350 in next few months.

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