Better to focus on quality large-cap stocks

MARKET KHABREIN

Amidst heightened volatility sparked by both domestic and global factors like weak rupee, continued FII selling, potential adverse tariffs from Trump regime and reduced expectations for rate cuts in 2025; the domestic stock market witnessed range a range-bound activity during the week ended. Near-term outlook for the market will be guided by the Q3 earnings season, the major domestic and global economic data. The first week of January is likely to see Banks, FMCG companies, Real Estate, Metals and other companies release their quarterly provisional business updates, which will give an indication of how the Q3 earnings season is going to be after downgrades were seen in Q2. Despite significant market volatility in 2024, the number of companies boasting a market capitalization (mcap) exceeding Rs1 trillion has surged to 95. This marks a substantial rise from 74 firms in 2023 and demonstrates a sharp recovery from the static trends observed in 2021 and 2022. For investors, the expanding Rs1 trillion club underscores the importance of identifying high-quality, well-managed companies with strong fundamentals. While the number of firms achieving this milestone is likely to grow, periods of market correction should be anticipated as part of the natural market cycle.

F&O / SECTOR WATCH

On the back of modest consolidation in the cash market, the settlement week witnessed subdued rollover activity in the derivatives segment. Rollovers in Nifty futures were flat at 78 per cent (last month 79 per cent), above 3-month average of 77 per cent. It is important to observe that Nifty closed with loss of -1.5 per cent in the series; total loss in last 3 months is -11 per cent. On other hand, market wide rollovers stood at 90 per cent (last month’s market wide 91 per cent). Both the benchmark indices, Nifty and Bank Nifty, closed with an approximate one per cent gain on the weekly chart. Looking at Options data, the highest Call Open Interest was observed at the 24,000 and 24,200 strikes, while Put writers were at the 23,500 strike. For the Bank Nifty, the highest Call Open Interest was at the 52,000 strike, while for Put Open Interest concentrated at the 51,000 strike. Implied Volatility (IV) for Nifty’s Call options settled at 13.58 per cent, while Put options concluded at 14.72 per cent. The India VIX, a key indicator of market volatility, concluded the week at 14.04 per cent. The Put-Call Ratio Open Interest (PCR OI) stood at 0.87 for the week. The rollover rate of Nifty has decreased to 77.66 per cent, which is lower than the previous month's rate but aligns closely with the three-month average of 76.99 per cent. This indicates that the momentum for the January series is likely to follow a similar pattern to that of the December series.

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

Near-term Outlook

•Q3 earnings season

•Major domestic macro data

•Global economic trend

•Geopolitical unrest

STOCK PICK

Artemis Medicare Services Ltd (belongs to promoters of Apollo Tyres), is a state-of-the-art multi-speciality hospital in Gurugram, India. It is the first hospital in Gurugram to be consecutively accredited with JCI, USA, for the fourth time. It is the first hospital in North India to be certified with the National Marrow Donor Program (NMDP), USA. In the beginning of FY25, the company has signed definitive agreements with the International Finance Corporation to raise funds of Rs330 crore in the form of Compulsorily Convertible Debentures (CCDs) to explore growth opportunities in the quaternary care/super speciality hospital segment through brownfield/ greenfield expansion.