FIIs to set the tone for near-term direction

Amid weak global cues including concerns over higher interest rates, Chinese slowdown, rising inflation, weakening currency and higher bond yields; Indian equity market witnessed selling for the fourth consecutive week, a first in last 15 months. The BSE Sensex shed 0.57 per cent or 373.99 points to end at 64,948.66 points, and NSE Nifty fell 0.60 per cent or 118.1 points to close at 19,310.20 points. After outperforming the benchmark indices in the last couple of months, during the week ended, the BSE Mid-cap Index shed 0.5 per cent and the BSE Small-cap index ended on a flat note. On the sectoral front, BSE Metal index shed 4 per cent, BSE Telecom index fell 2 per cent, and BSE Oil & Gas index fell 1.2 per cent, while BSE Power index added 0.5 per cent. FIIs remained sellers for the fourth consecutive week with sales of Rs3,379.31 crore, while DIIs continued to support with purchases of Rs3,892.3 crore.

A weak monsoon condition has prevailed over most parts of India resulting into deficient monsoon in August raising fears of El Nino effect again. Global rating agency Moody’s affirmed its Baa3 rating on India and maintained the stable outlook, but warned of political issues and even cited the example of the ongoing violence in Manipur. India’s key rating weakness, remains the government’s financial situation. The rating agency feels that the Centre will find it challenging to achieve its fiscal deficit target of 4.5 per cent of GDP by 2025-26. Macro-economic indicators, trends in global stock markets, and Foreign Institutional Investors’ (FIIs) activities will be pivotal for the near term direction of the equity market. Jio Financial Services, which demerged from Reliance Industries last month, is set to be listed on August 21. It is pertinent to note that the company announced its tie up with Blackrock, world’s largest asset manager, to float a mutual fund company. Together, the partnership will introduce a new player to the India market targeting initial investment of $300 million. Watch out for disruptions in Mutual Fund and NBFC sectors.

F& O/ SECTOR WATCH:

Mirroring the weakness in the underlying cash market over the past four consecutive weeks, the derivative segment is witnessing shrinkage in volumes. More number of stock futures are in “ban” list these days. The Bank Nifty is also on weak wicket as compared to the Nifty over the same period. Analysing option data, the Nifty call options showed the highest open interest at the 19,400 level, while the highest open interest for put options was concentrated around the 19,300 level. Regarding implied volatility (IV), Nifty call options settled at 10.32 per cent, while put options concluded at 11.03 per cent. Stock futures looking good are AU Small Finance Bank, DLF, Godrej Properties, Tata Power, Max Financials, Manappuram, Syngene and Titan. Stock futures looking weak are ICICI Prudential, Gujarat Gas, Kotak Bank, Metropolis, SAIL and Tata Chemicals.

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