Investors awaiting cues from Budget

Unnerved by the consistent selling by FIIs (reportedly due to Sebi’s new disclosure norms), Middle East geo-political concerns, none too enthusiastic Q3 results and jitters ahead of Union Budget; during the holiday-shortened week gone by, BSE Sensex and Nifty declined one percent each to end at 70,700 points and 21,352 points, respectively. FIIs sold equities worth Rs12,194.38 crore, while DIIs provided some support with purchases of Rs9,701.96 crore. It is pertinent to observe that in January so far, the FIIs sold equities worth Rs35,778.08 crore, and DIIs purchased equities worth Rs19,976.66 crore. Many observers may have blamed the fall over the past few sessions on FPIs selling down stakes to comply with the Securities and Exchange Board of India’s (Sebi) new disclosure norms, but savvy market players say the big falls over the past few sessions were triggered by stock-specific negative news and overvaluation. The next US Fed (FOMC) meeting will be held on January 30-31. During the most recent FOMC meeting held on December 12-13, 2023, interest rates were kept unchanged at 5.25-5.50 percent. The Fed, however, did signal at least three rate cuts could be on the cards for 2024 as inflationary pressures come down. Investors expect the US Fed will opt to maintain key interest rates at current levels. The Street will be keenly watching for Fed chair Jerome Powell’s commentary as recent US GDP numbers exceeded estimates.

F&O / SECTOR WATCH

Sharp stock-specific corrections with significant volume action were seen during the week ended in the derivatives segment. The Nifty (21,353) and Bank Nifty (44,866) dropped by one per cent and 2.6 per cent respectively. Tracking the options chain, the nearest supports are at 21,300 and 21,000 and the nearest resistances are at 21,400 & 21,500 points. Highest OI in Calls was seen at 21,400 and 21,500 strikes. Highest OI in Puts was seen at 21,300 and 21,000. Until Nifty futures remain below 21,700, the broader inclination will be bearish. Ahead of Union Budget, either go short on Nifty futures or buy at ¬the money (ATM) monthly put options or can consider Put spreads to keep the risk lower suggest punters. According to options chain in the Bank Nifty, 45000 is a strong barrier. Major support is at 44,000 points. As long as Bank Nifty futures lie below 46,000, bears will be in control. Overall option data shows that the Put Call Ratio of weekly expiry stands at 0.80.

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