Markets take a breather as Omicron fears recede

Amidst heightened volatility, enthused by reports that the new Covid variant Omicron is being less impactful, more Dovish than expected RBI monetary policy, good macroeconomic data and positive global cues; markets managed to extend the gains for the second consecutive week.

The BSE Sensex rallied 1,090.21 points or 1.89 percent to 58,786.67, and the NSE Nifty jumped 314.60 points or 1.83 percent to 17,511.30 points. The broader markets also joined the bulls' party with the BSE Midcap and Smallcap indices rising two percent and 3 percent respectively. FIIs continued to be net sellers to the tune of Rs16,235 crore in the current month while DIIs made Rs 13,700 crore of net buying in December. It is pertinent to observe that while DIIs have been net purchasers for last ten months, FIIs have been net sellers for the last three months. on Covid-19 front.

India has reported very few Omicron variant cases (only 30 till date), and all of them are mild. However, the market will react to any sharp increase in the number negatively. Extremely Dovish commentary from RBI Governor clearly showcases willingness to sustain the ongoing economic recovery without any hiccups. With buoyant tax collections and steady economic recovery, expectations over forthcoming Union Budget are already floating. Post reappointment of Powell as US Fed Chairman, US market movements during last week suggest that "the market is now comfortable with this idea that the Fed is going to have a more accelerated path to tapering and other forms of policy normalization. Near term direction of the markets will be dictated majorly by the US Federal Reserve commentary, November inflation and the data on Omicron."

The IPO market will continue to be busy as four IPOs - Medplus Health Services, Data Patterns, HP Adhesives and Supriya Lifescience - will open for subscription. Apart from these, two IPOs - CE Info Systems (MapmyIndia) and Metro Brands that already open for subscription will close on December 13 and December 14 respectively. Tega Industries is poised for a strong listing of above Rs750.

Market Musings: Actions speak louder than words. Business leaders are often happy to tell you all the reasons why their stock is a buy. But the actions of company insiders can tell a different story. Amid soaring market valuations, company founders and leaders across the world are unloading their stock at historic levels, with some selling shares in their businesses for the first time in years. In the US itself, 48 top executives have collected more than $200 million each from stock sales, nearly four times the average number of insiders from 2016 through 2020. Led by Elon Musk who has sold stock close to $10 billion, sellers include Google founders Larry Page and Sergey Brin, heirs to the Walmart, Mark Zuckerberg, chief executive of Facebook and Microsoft Corp. CEO Satya Nadella. In India flurry of IPO's from several Start Ups have seen 'Offer for Sale' from the promoters. Old timers of markets say it is a signal that "These guys have been telling you all year that the market is overheated."

People are clearly being opportunistic. If you see a pattern of leaders getting stock option grants and then selling a portion, it is not a major concern. But if you see a pattern of selling across the board without a cause, it may be a good time to take note. Some investment researchers look for this type of pattern. It's more notable when it is not offset by a similar level of buying. Looking at insider buying and selling can be a helpful sign that may help you predict future swings in stock prices. But it shouldn't be your only source of information.

Quote of the week: It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong — George Soros

Too many investors become obsessed with being right, even when the gains are small. Winning big and cutting your losses when you're wrong are more important than being right.

F&O / SECTOR WATCH

Mirroring the renewed optimism in the cash markets, derivatives segment witnessed robust trading. On option front, Maximum Call Open Interest (OI) was seen at 18000 strike followed by 17500 &17600 strikes, and Call writing was seen at 18000 then 18300 & 18100 strikes. Maximum Put OI was seen at 17400 followed by 17200 & 17500 strikes, and Put writing was seen at 17400 then 17200 &17000 strikes. Implied volatility (IV) of Calls closed at 14.26 per cent, while that for Put options closed at 14.96. The Nifty VIX was down by 13 percent for the week and closed at 16.6 level. PCR of OI for the week closed at 1.45. On the technical front, the Nifty has managed to close above its 100-day exponential moving average. Option data largely indicates that the Nifty could see a trading range of 17200 to 17800 levels in coming sessions. If the Nifty crosses and sustains above 17600 level, short covering may propel the Nifty towards 17750 level. Capital Adequacy Ratio (CAR) of PSBs increased to 14.3 per cent at the end of June, 2021 while the provision coverage ratio of public sector banks rose to an 8-year high of 84 per cent.

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