Macro data to set the tone for markets

Spooked by the hawkish tone of the US Fed with hints of more rate hikes to control inflation, growing recession feaRsin developed nations, fresh weakness in rupee and renewed selling from FIIs; the market sentiment turned bearish at the close of the week end. The benchmark indices ended lower with BSE Sensex falling by 461 points to 61,338, and NSE Nifty dropping by 146 points to 18,269, their lowest levels since November 23. The Nifty Midcap 100 index was down a percent, whereas the Nifty Smallcap 100 index gained half a percent. The hawkish commentary by Fed and increasing global growth concerns seem to have dampened sentiment of FIIs. After sales of more than Rs1,800 crore worth of shares last week, on the monthly basis, they remained net sellers to the tune of nearly Rs7,500 crore worth shares. DIIs have net bought nearly Rs3,500 crore worth shares during the week totalling more than Rs10,500 crore of buying in December. As the market falls into last leg of the year and most of the FII fund managers expected to go on holidays; volumes are expected to dry up and erratic moves to prop up NAVs are not ruled out. Over the weekend, the GST Council agreed to decriminalise certain offences and doubled the threshold for launching prosecution under the tax law to Rs2 crore, but retained the limit at Rs1 crore for fake invoicing.

The Council also clarified on the definition of SUVs (sports utility vehicles) for the levy of 22 per cent compensation cess over the 28 per cent GST and decided to come out with parameters to define MUVs (multi utility vehicles). Reports indicate announcement of the second edition of the PLI scheme for textiles in next few weeks with higher focus on SMEs. The scheme will offer incentives for manufacturing of garments and home textiles such as blankets and bed spreads, and textile accessories like lace, button and zippers. Near term direction of the market will be dictated by the recent monetary policy meeting's minutes, rupee movement, international crude oil prices and US GDP numbers.

IPO Corner

The first IPO for next week is that of KFin Technologies, a technology-driven financial services platform, which will be open for subscription during the December 19-21 period. The company that provides services and solutions to asset managers and corporate issuers across asset classes in India aims to garner Rs1,500 crore via the issue, which is only an offer for sale. The price band for the offer has been fixed at Rs347-366 a share. Electronics manufacturing services (EMS) provider Elin Electronics' would be the second public issue opening for bidding on December 20, with a price band of Rs234-247 per share. The offer closes December 22. Half of the offer size is reserved for QIBs, 15 percent for HNIs and the balance 35 percent for retail investors. Elin Electronics is a leading manufacturer of end-to-end product solutions for major brands of lighting, fans and small/ kitchen appliances in India and is one of the largest fractional horsepower motors manufacturers in India. Three listings are slated for next week with Sula Vineyards being the first to debut on December 22. India's largest wine producer closed its public issue on December 14 with just 2.33 times subscription. The other two — financial service firm Abans Holdings and premium automobile retailer Landmark Cars— will be listing on December 23 after closing their offers on December 15. The former was subscribed 1.1 times and the latter garnered 3.06 times subscription. In the grey market, Sula Vineyards as well as Landmark Cars shares traded at a moderate discount, analysts said.

Quote of the week: "You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets." — Peter Lynch

When hit with recessions or declines, you must stay the course. Economies are cyclical, and the markets have shown that they will recover. Make sure you are a part of those recoveries.

F&O / SECTOR WATCH

Tracking the weakness and sell off in cash market, the derivatives segment witnessed fresh shorting and cuts in long positions. On the options front, Maximum Call Open Interest was seen at 19,000 strike, followed by 18,500 and 18,700 strikes. Call writing was visible at 18,300 and 18,400 strikes. Maximum Put Open Interest was seen at 18,000 strike followed by 18,300 and 17,500 strikes. Put writing was seen at 18,300 and 18,000 strikes. Implied Volatility (IV) of Calls closed at 12.33 per cent, while that for Put options, it closed at 13.38 per cent. The Nifty VIX for the week closed at 13.73 per cent. PCR of OI for the week closed at 1.13. Expected trading range for the Nifty is18,100-18,500 for the near term. Bank Nifty has strong support at 43000 level. Any upside rally may get capped around 43600-43800 zone.

In the upcoming week, further profit booking at higher levels is expected. The coming days are also likely to see a lack of leadership from any particular pockets of stocks or sectors. During the week ended, on a sectoral front, Consumer durable sector was the biggest laggard, followed by sharp fall in IT, Realty, FMCG and Media counters. Only, Infra, Telecom and Oil & Gas stocks were the only gainers. With a strong trend towards mechanisation, a rapid shift from bullock to tractor is becoming a reality. Reports indicate strong sales in tractor segment. According to industry estimates, Mahindra with a 41 per cent market share in domestic sales is the industry leader so far this fiscal year (April-November), followed by TAFE (18%), ITL (12%) and Escorts (10%). Use declines to buy M&M and Escorts with medium term view. Bank stocks gave the highest returns in five years as the Bank Nifty gained more than 24 per cent in 2022 and scaled a lifetime high. This has been the best performance since 2017 when the index gave more than 40 per cent returns. The index moved past the 44,000 mark during early part of last week for the first time ever, and the Bull Run for the sectoral index is expected to continue in 2023.

The strong pick-up in credit growth amid a rising interest rate environment, and major improvement in the balance sheets have been the key factors driving the stellar performance of the sector. Stay overweight on the sector and use the correction to accumulate good bank stocks. Stock-specific outperformance from PSU banks, metals, PSE stocks, can't be ruled out say punters. Stock Futures looking good are Apollo Tyres, Balakrishna Inds, M&M Fin, NMDC, SRF, Polycab and ONGC.Stock futures looking weak areAarti Inds, Bata India, Laurus Labs, IRCTC, Canfin Homes and Tata Chemicals.