Mounting pressure on equity markets

Succumbing to weak global cues, rising uncertainty over growth outlook, rate hike fears, spike in oil prices and subdued FII buying; the domestic equity market snapped a five-week gaining streak and lost little over one percent during the week ended. After starting the week on negative note, the market saw range bound movement for the rest of the week. BSE Sensex shed 812.28 points (1.32%) to end at 58,833.87 and NSE Nifty fell 199.55 points (1.12%) to close at 17558.9 levels. Despite last week's correction both the Sensex and Nifty gained over two percent each in the current month.

Outperforming the benchmark indices, in the broader market the Small-cap index gained nearly one percent and the BSE Mid-cap Index added 0.6 percent. Reflecting the uncertainty ahead of US Fed comments, FIIs bought only Rs 450.36 crore of equities, while DIIs sold equities worth of Rs503.32 crore. FIIs bought equities worth Rs18,420.9 crore till date in August, and DIIs sold equities worth Rs6,555.99 crore. Indian rupee fell 9 paise to end at 79.87 per dollar during the week ended. On the expected lines, Powell's comments at Jackson Hole Symposium indicated that stringent measures would continue until the inflation and the other macroeconomic figures reached the desired levels. Following its comments, the dollar strengthened, gold declined, and the US markets also reacted in a very negative manner with the Dow Jones Industrial Average falling sharply by more than 1,000 points. His comments disappointed investors who had hoped inflation had peaked and the Fed would shift from raising rates to lowering them sometime next year. Before the next Fed meeting, market players will debate whether interest rates should be raised by 0.5 or 0.75 percentage point. In the week ahead, at the start the market may react negatively to Jerome Powell's comments and thereafter is expected to see heightened volatility and consolidation, with focus on global cues, commentary of Mukesh Ambani at Reliance Industries' AGM, macroeconomic data, and monthly auto sales numbers. The coming week is likely to stay highly stock-specific in nature and it is unlikely that any particular pocket or group of stocks or any particular sector dominating the landscape. Expect some risk averse knee-jerk reactions to the weak global trade setup can't be ruled out. A highly selective and cautious approach is advised for the coming week. The market will remain shut on August 31 for Ganesh Chaturthi.

Listening Post: Successful investing requires one to constantly change, learn and adapt to new techniques and technological forces, and know what not to change. It also involves the acceptance of personal responsibility for outcomes that cannot be controlled, which is often not an attractive position to accept. The basic concept behind value investing is that if an investor buys a stock at a price significantly below its intrinsic value, sooner or later, the price catches up with the value. But at times, the price may not catch up with the value and so investors need to look at other ways of value discovery.

Investors have to look at progressive value creation rather than looking at a static picture of value. Investors should focus on intrinsic value, maintain a long-term horizon, avoid short-term value traps, focus on corporate masterpieces and resist fads and popular beliefs.

Quote of the week: The individual investor should act consistently as an investor and not as a speculator — Ben Graham

You are an investor, not someone who can predict the future. Base your decisions on real facts and analysis rather than risky, speculative forecasts.

F&O / SECTOR WATCH

Settlement week witnessed brisk trading in select stock futures. Rollovers in Nifty Futures increased at 82 per cent (last month 76%). On other hand, market wide rollovers stood at 92 per cent (last month's market wide 91%). September series started on a muted note as Nifty ended the week above 17500 mark, while Bank Nifty ended below 39000 level. On the option front, Call writers seen active at 17600 & 17700 strikes, while Put writers added marginal Open Interest at 17500 strike. Implied volatility (IV) of Calls closed at 17.02 per cent, while that for Put options closed at 18.59 per cent. The Nifty VIX for the week closed at 19.57 per cent. PCR of OI for the week closed at 1.61. Nifty is likely to remain under pressure in near term. The next upside momentum is likely to carry it above 17700 level towards 17950 level. On any downside, 17250-17350 zone would act as a strong support zone for Nifty. Support for Bank Nifty is at 38500 & 38000 levels and on upside 39500-39800 zone would offer good resistance. As stock Futures positions have declined clearly stock-specific approach is required. Sectors that can outperform in the September series are banking & financials, chemicals, capital goods, metals, realty and select large midcap counters. Data released recently suggests that the bank credit in India grew by a significant 15.32 per cent, the highest growth since Covid during the last fortnight under review. For the same period, bank deposits also rose by 8.84 per cent to Rs 169.49 lakh crore. The move is expected to impact several listed fertiliser companies in a significant manner. Use declines to accumulate for good returns in next few quarters. Markets are keenly looking for the AGM of RIL wherein the oil-to-consumer conglomerate may offer a road map on listing or strategic sale of businesses including clean energy or even come up with some big-bang announcement on it, something that may just disrupt the sector. Stock futures looking good are Adani Ports, ICICI Bank, Jindal Steel, Kotak Bank, Tata Power, Powergrid, PVR and UPL. Stock futures looking weak are Aurobindo Pharma, Birla Soft, ACC, IPCA Labs, Laurus Labs, Ramco Cement and UBL.