Profit booking in sight amid global uncertainty

Buoyed by declining international crude oil prices, renewed consistent FII inflows and rally in global markets; the domestic markets clocked positive gains after three weeks of consolidation. BSE Sensex rallied nearly 1,000 points to 59,793, and NSE Nifty rose close to 300 points to 17,833. Outperforming the benchmark indices, the Nifty Midcap and Smallcap indices climbed two percent and 3.3 per cent respectively. FII buying has boosted the sentiments in the market and has been the reason for outperformance in the broader markets. For the Nifty, 17800 – 18000 could be the struggling zone wherein profit booking due to global uncertainty can be expected. FIIs net purchase during the week were nearly Rs6,100 crore. In September so far, they have net bought Rs3,837 crore worth of shares on top of Rs22,000 crore of buying in August. The fall in crude oil prices and consistent buying by FIIs helped the Indian rupee appreciate against the US dollar from its recent record low. The rupee settled at 79.67 against the US dollar, against 79.72 a dollar week-on-week, but it strengthened by 49 paise from weekly low. Moody's reaffirmed a stable outlook for India and noted that the country's credit profile reflected important characteristics such as its sizeable diversified economy with high growth potential, relatively robust external position and stable domestic financing base for government debt. India's merchandise exports are expected to grow by 11.4 per cent to hit $114.4 billion during the July-September quarter of the current financial year. However, observers say that the rise in exports during the second quarter of FY23 could be shadowed by softening global commodity prices. Slowdown in major trade partners, inflationary pressures and tight monetary policies around the world could also offset the exports gain. The near-term direction of the market will be dictated by the macroeconomic data, international crude oil prices, rupee movement against dollar and global cues.

After good listing gains logged by Dream Folks and Syrma SGS, primary market has become active again. Tamilnad Mercantile Bank will make its debut on bourses on Thursday. Precision bearing cages manufacturer Harsha Engineers International will launch its IPO on September 14 with a price band of Rs314-330 per share.

Listening Post: Europe is struggling to contain an energy crisis that could lead to rolling blackouts, shuttered factories and a deep recession.The primary cause: Russia has choked off the supplies of cheap natural gas that the continent depended on for years to run factories, generate electricity and heat homes. European officials say its energy blackmail, aimed at pressuring and dividing the European Union as it supports Ukraine against Russia's invasion.That has pushed European governments into a desperate scramble for new supplies and for ways to blunt the impact as economic growth slows and household utility bills rise.Europe's energy crunch could spark flashbacks to the Eurozone crisis. Meaningful reform in the European Union has historically taken a crisis, and this winter seems ripe for energy policy. As with the euro crisis a decade ago, a quick political compromise could risk leaving the job half done. There remains considerable disagreement among politicians in different countries about how best to address what is a heartland issue. While the pressure should help reach some kind of deal, it also raises the risk of missteps. Power-market reform is likely necessary in the long run, but embarking on such a complex task to fix this winter's crunch is risky. The EU's fire fighting response to the Eurozone crisis over a decade ago, which failed to deliver a true banking union, is an awkward precedent. Coordinated action to strengthen Europe's relatively interconnected power markets would be cheaper than national measures, and would also improve overall energy security and avoid delaying decarbonisation. Stock markets should not ignore this issue and brace for its outcome in next few months.

Quote of the week: "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." — Warren Buffett

Be prepared to invest in a down market and to get out in a soaring market, as per the philosophy of Warren Buffett.

F&O / SECTOR WATCH

Mirroring the bullish undercurrent in the cash market and swift sector rotation; derivatives segment witnessed brisk trading. Making good comebacksectorally Nifty IT and PSU Banks logged nearly four per cent gains. In the option segment, maximum Call Open Interest (OI) was seen at 18,000 strike, which could be near-term resistance; and the maximum Put OI was seen at 17,000 strike, followed by 17,500 and 17,700. Bank Nifty continued its outperformance crossing 40,000 level decisivelyto end the week with gains of more than 2.5 per cent.

Implied Volatility (IV) of Calls closed at 16.36 per cent, while that for Put options, it closed at 18.16 per cent. The Nifty VIX for the week closed at 18.31 per cent. PCR of OI for the week closed at 1.42.

For upcoming week, the 18000 points level will act as a key psychological resistance for Nifty while 17600-17550 zone is likely to give support on any downside. Bias is likely to remain in favour of bulls. Use declinesto create fresh longs. Stock-specific action is expected to continue on the back of news flow. Auto Industry sources indicate that pending order book in passenger car segment has crossed 10 lakhs units. Out of total order backlog, Mahindra's new Scorpio N alone have booking of over 1 lakh units. Further, Hyundai and Kia have a pending order book of 1.25 lakh units each. Market leader Maruti Suzuki has a pending order book of over 3 lakh units. Battery manufacturers are also witnessing robust demand. Buy Amara Raja and Exide for unexpected sharp gains.Despite decline in cement prices by ₹10-15/bag due to ongoing monsoons pricesand ramp-up in clinker capacity by Ultratech, Shree Cement and Dalmia Cement; cement stocks are putting up resilient show. Market players expect rerating of the sector after the closure of open offers for Ambuja Cements and ACC by the Adani group are over. Stay invested in the sector.Stock Futures looking good are Aarti Inds, Amara Raja, Axis Bank, Gujarat Gas, Indian Hotels, Tata Power and Zee Tele.Stock futures looking weak areBajaj Auto, Indigo, IPCA Labs, PI Inds, Persistent, MFSL, Tata Motors and UPL.