Steady FII selling dampens market reaction

Spooked by negative global cues like rising oil prices, US bond yields and increasing concerns over the Chinese economy; the stock market snapped five-week winning streak during the week ended. The BSE Sensex fell 1,282.89 points or 2.14 percent to close at 58,765.58, and the NSE Nifty declined 321.15 points or 1.80 percent to 17,532.05 points. However, broader markets outperformed, the BSE Midcap index rising 0.12 percent and Smallcap index up by 0.69 percent. Steady FII selling dampened the sentiment. FIIs have net sold Rs 6,092 crore worth of equity shares in India during the week. On the contrary, the support by DIIs with purchases of Rs 4,305 crore limited the correction to two odd percent in the benchmark indices.

'Mind set' of FIIs looks clouded by the fear of reduction in easy liquidity after the US Fed hint of rate hike sooner than expected and gradual tapering towards the end of 2021. Oil prices jumped to the highest level since October 2018. Analysts feel the prices could hit $90 a barrel in coming months as OPEC+ is unlikely to raise output in the upcoming meet. On the back of the rising oil prices, buying demand for dollar and expected FII outflows; the Indian rupee weakened to 74.15 a dollar, from 73 levels in the last one month and experts expect the currency to depreciate further to 75-76 against the US dollar. The Reserve Bank of India (RBI) is scheduled to announce its bi-monthly monetary policy on Friday, October 8. Observers expect the RBI to maintain its accommodative stance to maintain adequate liquidity in the system and to support economic activity. It is more important to listen to the commentary of RBI Governor for hints over the direction of the economy.

The gross GST revenue collected in the month of August 2021 is Rs1,12,020 crore. The revenues for the month of August 2021 are 30 per cent higher than the GST revenues in the same month last year. Q2 earning season will kick off with the results of the largest IT player TCS on Friday, October 8. It would be pertinent to concentrate on the management commentary on the outlook of the IT sector as most of the projections have already been priced in by the market. Infosys and Wipro will report the results on October 13.

IPO Corner

Paras Defence and Space Technologies became the first stock in the current decade to give a massive 185 percent returns to investors on its debut day. The investment of Rs 14,875 for 85 shares (one lot) is worth Rs42,393.75 now. Country's largest insurer LIC is likely to file draft papers with Sebi by November for the largest IPO in country's history say sources of Finance Ministry.

The SME segments of the exchanges are also flooded by new IPOs. Ongoing new offerings on the NSE are Bombay Metrics Supply Chain, Destiny Logistics and Dynamic Services; and on the BSE are Adishakti Loha, CWD Innovation, Promax Power and Samor Realty.

F&O / SECTOR WATCH

Mirroring the volatility in the cash market, derivatives segment witnessed heightened volatility during the settlement week. Market-wide rollovers were flat at 92 per cent (last month's market wide 93%) in value terms Rs1,88,505 cr which is higher than last month 1,67,435 cr. In share terms it is flat / decline along with price effect as majority individual stocks moved up 10 per cent. Maximum Call Open Interest (OI) was seen at 18,000 strike, followed by 17,700 & 17,800 strikes. Call writing was seen at 18,000 strike followed by 17,500 & 17,600 strikes. Maximum Put OI was seen at 17,400 strike, followed by 17,500 & 17,000 strikes. Put writing was seen at 17,400 strike, then 17,000 & 17,500 strikes with Put unwinding at 17,600, 17,700 & 17,800 strikes. The maximum options pain point of the September series was at 17,600 level. Nifty should trade continuously above this level to maintain bullish stance say techies.

PCR of OI for the week closed at 1.46. Overall options data indicates that the Nifty could see a broad range of 17,000-18,200 levels in the next few weeks. Sectors that can outperform in the Oct Series are Auto (CV & Tractor), Banking &Financials (Mid Cap NBFC and PSU Banks), Oil & Gas, Power, Realty and Textiles. Fresh hike of product prices may trigger renewed buying in Metal counters like JSW Steel, JSPL, Tata Steel and Nalco. In the pharma pack Sun Pharma and Alkem are looking good for further gains.

Two auto stocks to watch out for are Ashok Leyland and Tata Motors. Ahead of festival season, capital goods counters like Voltas, Dixon and Havells are on radar of savvy punters. With hike of raw materials prices of Coal etc, Cement stocks are likely to underperform in near term.

STOCK PICKS

Shiva Texyarn Limited is engaged in manufacturing and marketing cotton yarn and textiles products - coated and laminated fabrics, home textiles and back bags. The company's products/services include Cotton Yarn and Grey Fabric; and is also into Technical Textile business of manufacturing of Coating & Laminated fabrics which serves the needs of the Sectors like Health-care, Armed Forces and Advertising among others. The Technical Textile Industry is still remaining an un-tapped area in India and the growth potential is promising and unlimited. The announcement of Production Linked Incentive (PLI) scheme for man-made fibres and technical textiles with a total outlay of Rs 10,683 crore is highly beneficial for the company. Its divisions include Spinning Mills, Knitting, Processing, Garments, Coating, Lamination, Bag Division and Windmill. Buy this hidden gem for long term target price of Rs500.

Alkali Metals Limited is engaged in the business activities of manufacture of bulk drug, intermediaries, such as organic and inorganic chemical, and fine chemicals. The company's products include Sodium Derivatives, Pyridine Derivatives and Fine Chemicals. It manufactures a range of products, including Alkali Metal Derivatives, Tetrazoles and Cyclic Compounds. The company manufactures its products under three categories: Sodium derivatives Pyridine derivatives and Fine chemicals. Its products are amides, hydrides, alkoxides, azides, tetrazoles, pyridine compounds, cyclic compounds, drug and pharmaceutical intermediates, and specialty fine chemicals. These products have huge potential and the company was successful in negotiating with new customers adding to the existing list. The company holds very valuable land parcels and has three manufacturing units, at Uppal, Dommara Pochampally and JNPC Visakhapatnam. Strong buying interest was seen in the counter in recent days. Buy for short term target of Rs175 and long term target of Rs300.

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