Focus on stock-specific strategy

On the back of mixed global cues after hawkish US Fed stance, buoyant GST collections, projections of GDP growth rate for FY22-23 and rising inflation in Eurozone triggered by gas supply shock by Russia; the domestic stock market remained unchanged during the week ended. For the week, BSE Sensex was down 30.54 points to close at 58,803.33 points, while NSE Nifty was down 19.4 points to end at 17,539.5 level. Outperforming the benchmark indices, the BSE Small-cap and Mid-cap indices rose 1.3 percent and 1.5 percent respectively. Despite volatility, FIIs continued to provide support with purchases of Rs1,305.54 crore of equities in the week gone by. Sales from DIIs were on reduced scale at Rs230.25 crore. It is pertinent to observe that in the month of August, FIIs bought equities worth Rs22,025.62 crore, and DIIs sold equities worth Rs7,068.63 crore. Indian rupee ended marginally higher to end at 79.80 per dollar. The dollar has been edging higher on account of aggressive US Fed rate hikes of 2.25 per cent till date.

With the retail inflation target at four per cent and a tolerance band of plus and minus two per cent (-2%) around it; the RBI has embarked on a front-loaded monetary policy response, with a cumulative 140 basis points increase in the policy rate so far. Elevated inflation will have more impact on investments than on consumption say observers. Over the weekend, Union Finance Minister Nirmala Sitharaman said that the Indian economy will clock a double-digit growth this fiscal, adding that the nation is on a strong wicket when compared to others, and is responsive in terms of extending hand-holding to the required sections. While rising yields, higher crude price, higher dollar index typically have not been very good for many of the markets across the globe, Indian markets in comparison have been very resilient. But it is too early to say that there is a structural decoupling, say market observers. The correction across global markets including Nasdaq is between 5% and 8% in the last few weeks. The present resilience in Indian market has to do with liquidity flows-- both domestic and global and also has to do with some of the measures taken by the GoI and RBI. Adopt stock-specific strategy and stick to companies with good visibility of numbers in Q2.

Listening Post:With stocks swinging wildly, it's easy to panic. Panic is a wild, irresistible fear that spreads through crowds like an epidemic -- and it may be upon us now, with day after day of multi-hundred-point swings in NSE Nifty and BSE Sensex. Viewed this way, today's financial markets -- in which tens of millions of investors watch each other's fears unfolding in real time on television and online -- constitute one giant panic-transmission machine.Thus, like soldiers or policemen on patrol in a danger zone, investors are now abnormally 'trigger-happy,' because panic has tensed their muscles for instant defensive action.

Fear also changes the way you think, reducing your ability to solve problems creatively, making you reluctant to consider a wider set of choices and causing you to distrust others. That means you are now unusually prone to acting on a gut feeling, instead of thinking.With panic pervading the markets, every company's assets may seem worth less now. Yet the underlying value of most businesses does not hang on what happens in the stock market, and many stocks have become bargains.You cannot brush panic away with willpower alone, but you can quarantine yourself from contagious settings: Break the circle. You may need help fighting your fears, so make a public commitment to your future action. Buying a stock next week is mentally easier than buying it today -- especially if you recruit some friends to cheer you on.

Quote of the week:"Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas." — Paul Samuelson

If you think investing is gambling, you're doing it wrong. The work involved requires planning and patience. However, the gains you see over time are indeed exciting.

F&O / SECTOR WATCH

Heightened volatile activity in the holiday laced week helped exacerbate stock swings in both directions during the week ended. Derivatives segment witnessed brisk trading and sector rotation. In the option segment, Open Interest in Call options shot up at 17600 & 17700 Call strikes; while marginal Put writing was observed at 17,500 strike. Implied Colatility (IV) of Calls closed at 17.46 per cent, while that for Put option, it closed at 18.98 per cent. The Nifty VIX for the week closed at 19.87 per cent. PCR of OI for the week closed at 1.45. On the higher side, the 17,800 would act as strong resistance for Nifty, while 17200 to 17000 zone will support any sharp downside. Bank Nifty remained outperformed Nifty closing the week with gains of more than one per cent. Bank Nifty is likely to face stiff resistance in the zone of 39800-40000 levels and may continue to outperform in coming sessions.The strong momentum of automobile sales continued in August as theindustry braces for a record festive season on improved supplies.Last month sales at 329,000 units was the highest ever for the month of August and third highest for any month yet. This was a third consecutive month of dispatches in excess of 300,000 units. Factors attributed for the buoyancy are easing supply chain problems, better monsoon resulting in decent agricultural harvest and positive consumer sentiments besides a healthy growth in the country's GDP. Stay overweight on the sector. The IT sector has been under pressure since the start of FY22-23 and is down by 25 per cent whereas Nifty is up three per cent in the same period. Industry observers believe contraction in valuations multiples from the peak, and a sharp price correction in individual stocks make IT a contrarian buy on dips for the next two quarters. Start accumulation of frontline IT counters. Stock Futures looking good are Ashok Leyland, Aarti Inds, Marico, Polycab, SBI, SBI Cards and Tata Consumer. Stock Futures looking weak are Crompton, Dr Reddy, MCX, Naukri, Voltas and ONGC.