Contrarians in sight amid low volumes-led pull back rally

Spooked by the hawkish commentary of the US Federal Reserve, which has ruled out meeting its two per cent inflation target in 2025, renewed selling from FIIs, weak depreciating rupee, specific issues like slowing growth concerns and flat corporate earnings in Q2; the domestic stock markets erased all the last four weeks gains and posted biggest weekly fall in more than 2 years. Industry observers suggest buying insurance stocks since tax cut is more or less definite in next meeting of the GST Council. With no major domestic triggers in sight and subdued expectations over impending Q3 earnings season; the stock market participants would track global trends and FII trading activity in coming sessions. Expect a mild pull back rally on low volumes suggest contrarians. Sector-specific and stock-specific moves are indicated. Do proper risk management and refrain from taking complacent bets for the time being. The week ahead will be a holiday shortened week with major global markets remaining closed on Wednesday December 25, 2025, on account of the Christmas holiday. There will be an early closing in many major markets on Tuesday, December 24, 2024, viz. US, Australia, United Kingdom, Hong Kong, France and Singapore. The coming week in India is also a truncated one with Christmas holiday on Wednesday.

F&O / SECTOR WATCH

Following the weakness in the cash market, derivatives segment witnessed a sharp selling and initiation of fresh shorts. Both the Nifty and the Bank Nifty fell nearly five per cent on a weekly basis. In the options market, the prominent Call Open Interest for the Nifty was seen at the 24,000 and 24,200 strikes, while the notable Put Open Interest was at the 23,500 and 23,200 strikes. For the Bank Nifty, the prominent Call Open Interest was seen at the 52,000 and 51,500 strikes, whereas notable Put Open Interest was at the 50,000 strike. Implied Volatility (IV) for Nifty’s Call options settled at 13.77 per cent, while Put options concluded at 14.39 per cent. The India VIX, a key market volatility indicator, closed the week at 14.51 per cent. The Put-Call Ratio of Open Interest (PCR OI) for the week was 0.75. From a technical perspective, the Nifty broke below the 100 EMA (Exponential Moving Average) after facing resistance at the neckline of the inverted head and shoulders pattern and also fell below the 200EMA on the daily chart, while the Bank Nifty continues to trade above its 200 EMA. Expect a ‘dead cat’ bounce in the week ahead; the levels of 23,750 and 23,830 would act as potential resistance points. The supports come in at 23,500 and 23,285 levels on the lower side. All the sectoral indices showed corrections on the weekly charts, closing in the red. The Healthcare and Pharma sectors were the only exceptions, posting modest gains, while the biggest losers were the Metal, PSU Banks, and Commodities sectors. In 2024, India became the third largest automobile market in the world. Industry observers say 2025 could be the reset year, with more hits than misses. In 2024, commodity prices have been more or less stable, with no major disruptions in supply. With high stock levels across the network and factories, discounts have been at an all-time high. Despite this continuous market pressure, CY2025 could see PV volumes touch 42-43 lakh units, a record high in sales. Start accumulating major automobile stocks in the present downturn.

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

STOCK PICK

Tinna Rubber and Infrastructure Ltd is a leading player in tyre recycling, converting waste tires into high-value products like crumb rubber and modified bitumen, which are extensively used in road construction. To address this growing demand, the company recently commissioned a new manufacturing unit, enhancing its capacity by 50%.Buy on declines for medium-term target of Rs2,750.