A host of factors influencing market

Spooked by downgrades of Indian equities by global brokerage houses - Morgan Stanley and Nomura- hectic profit booking by FIIs and DIIs, mixed Q2 earnings reflecting inflationary pressure in margin due to higher input prices and fear of 'highs'; the markets suffered the biggest weekly fall in last eight months during the week ended October 22, 2021. The BSE Sensex closed below psychological 60,000 mark, declining 1,514.69 points to 59,306.93 points, and the NSE Nifty broke 18,000 level, down 443.25 points to 17,671.65.

Broader markets also witnessed sharp correction with both the Nifty Midcap and the Smallcap indices falling nearly two per cent. Net sales of FIIs during October amount to a staggering Rs25,572 crore compared to net buying of Rs4,471 crore by DIIs during the month. Continuous FII selling has turned sentiment weak and nervousness gripped the markets. With successive increase in petrol and diesel prices to new highs, cascading effect on inflation is not ruled out. The new variant of coronavirus is a concern across the globe as its latest mutation named, AY4.2, has been on the rise in the United Kingdom and other parts of globe. However, the new variant is a rare phenomenon in India thus far, but a few cases in southern Indian states have been reported. Do not ignore news on Covid front. The US Fed Policy meeting is scheduled to be held on November 2-3; global investors will closely watch the commentary related to tapering schedule and indication of interest rate hikes give the threat of inflation. Key Q2 earnings to watch in the coming week are HDFC, Tata Motors, Bharti Airtel, State Bank of India, Sun Pharma, Eicher Motors, HPCL, Divi Laboratories, and IRCTC. Stock exchanges will conduct the customary one-hour special 'Muhurat' trading between 6:15 pm and 7:15 pm on Diwali, November 4, a time beyond normal trading hours, but fixed as per the astrologically defined auspicious moments of the day.

IPO Bazaar: The IPOs of FSN E-Commerce Ventures Ltd (Nykaa) and Fino Payments Bank are currently open for public subscription. In the next four weeks, five firms including Paytm parent One97 Communications, Policy Bazaar parent PB Fintech, Sigachi Industries, and SJS Enterprises have lined up their IPOs to raise over Rs27,000 crore collectively. So far in 2021, as many as 41 companies have floated their IPOs to raise Rs66,915 crore. It is pertinent to remember that just because an IPO is a much fancied one or is very heavily oversubscribed doesn't mean that it will do well in the coming years.

F&O / SECTOR WATCH

Mirroring the heightened volatility and sharp whipsaw movements in the cash market, the derivatives settlement week witnessed sharp bouts of selling from bears. The November series started off on a week note as the NSE Nifty fell way below 18,000 mark and corrected nearly five percent from its record high levels. Nifty slipped below 17,700 mark, while Bank Nifty also ended the week with loss of more than 2.5 per cent. Weak sentiment also contributed to relatively weak rollovers. Maximum Call Open Interest was seen at 18,000 then 19,000 and 18,500 strikes, while Put Open Interest was seen at 17,000 then 17,500 strike. Implied Volatility (IV) of calls closed at 16.61 per cent, while that for Put options closed at 16.22 per cent. The Nifty VIX for the week closed at 17.91 per cent and is expected to remain volatile. PCR of OI for the week closed at 1.21. On downside, 17,500 would act as immediate support for the Nifty, while 17,800-17,900 zone could limit any sharp upside. Option data indicated that the Nifty could trade in a wide trading range of 17,200 to 18,300 levels in coming days. Thursday will just have a symbolic one-hour Muhurat Trading session while Friday will be a trading holiday on account of Diwali.

Nearly all the sectors ended in negative, except the PSU Bank and Health Care which were resilient. The Metal and Private Banks were the underperformers. The Metal stocks declined as the commodity prices continued to come down on weak demand outlook especially from China due to the slowdown in the economy. The private banks on the other side declined on weak results and lower asset quality. Maruti Suzuki, Tata Motors, Mahindra&Mahindra, Escorts, Bajaj Auto, TVS Motor, Hero Motocorp and Ashok Leyland are expected to be in focus. Stock futures looking good are Ambuja Cements, Canara Bank, Cholamandalam Finance, DLF, Escorts, Grasim, Torrent Pharma, UPL and Vedanta. Stock futures looking weak are Amaraja, Balkrishna Inds, Godrej Consumer, Laurus Labs, Muthoot Finance, NMDC and Zee Entertainment.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)