Amidvolatility led by uncertainties in trade agreement with the US, tepid corporate earnings, persistent FII selling, better domestic macro data, and above normal monsoon; the benchmark indices extended their fall for the third consecutive week. The Sensex shed 742.74 points or 0.90 percent to close at 81,757.73, and the Nifty fell 181.45 points or 0.72 percent to close at 24,968.40.

In this month till date, the Sensex and the Nifty have quietly declined 2 percent each. Consolation for retail investors was that broader markets outperformed during the week ended and both the Mid and Small-cap indices gained 1 percent and 1.5 percent, respectively. The FIIs continued their selling in the third week, with sales worth Rs 6671.57 crore. Expectedly, DIIs extended their buying in the 13th week with purchases worth Rs 9,490.54 crore. It is pertinent to observe that, in this month till date, FIIs sold equities worth Rs 16,955.75 crore, while DIIs bought equities worth Rs 21,893.52 crore.

The Indian rupee weakened to mark its second consecutive weekly loss, as the U.S. dollar rebounded from a more than two-year low and sustained equity outflows pressured domestic markets. The rupee closed at 86.1475, compared to its previous close of 86.0750. Markets are keenly looking forward to the upcoming monsoon session of Parliament. If the government can push through the SEZ Amendment Bill in the monsoon session of Parliament, it will be a fillip for industry feel observers. Rising fertiliser prices pose risk to government’s subsidy estimates with prices in the international market are rising on trade restrictions, tight supplies and steady demand.

On the global front, markets are closely monitoring the outcome of the proposed US-India mini trade agreement. A favourable resolution could strengthen the outlook for export-oriented sectors and enhance India’s relative attractiveness among emerging markets. Meanwhile, the continued moderation in inflation has bolstered expectations of an additional rate cut, which, if materialised, would be supportive of market sentiment. As the earnings season progresses, quarterly updates from index heavyweights will be closely monitored. Strong earnings growth is vital to justify India’s premium valuations.

At the start of the week ahead, market will also react to the earnings of RIL, JSW Steel, HDFC Bank and ICICI Bank. Nearly 286 companies are scheduled to announce their June quarter results over the next six days. Among the Nifty constituents, results are expected from Eicher Motors, UltraTech Cement, Bajaj Finance, Bajaj Finserv, Dr. Reddy’s Laboratories, Infosys, Tata Consumer Products, Nestlé India, SBI Life Insurance, Cipla, Kotak Mahindra Bank, Paytm, IRFC, United Breweries, Zee Entertainment, and Bajaj Housing Finance

Follow market trends and history. Don’t speculate that this particular time will be any different. For example, a major key to investing in a specific stock is its performance over five years.

FUTURES & OPTIONS / SECTOR WATCH

Under the shadow of global uncertainty and weak earnings, both the Nifty and the Bank Nifty ended the week in the red note. The Nifty oscillated within a narrow 276-point range, between 25144.60 on the higher end and 24918.65 on the lower end, before settling mildly lower. Nifty slipped over 0.70%, while Bank Nifty underperformed with a loss of more than 0.80%. In the options market, prominent Call open interest for Nifty was seen at the 25,200 and 25,100 strike, while the notable Put open interest was at the 25,000 and 24,800 strike. For Bank Nifty, the prominent Call open interest was seen at the 57,000 strike, whereas notable Put open interest at the 56,000 strike. Implied volatility (IV) for Nifty’s Call options settled at 10.83%, while Put options concluded at 11.49%. The India VIX, a key indicator of market volatility, concluded the week at 11.24%, suggesting continued complacency in the markets. The Put-Call Ratio Open Interest (PCR OI) stood at 0.99 for the week. While the broader trend remains intact and the Nifty is above key moving averages, it is still within a complex zone of consolidation. It is pertinent to observe that this pause in momentum comes after a sharp up move from the lows near 21743 in April. The immediate resistance for the Nifty is at 25150, followed by 25400. On the lower side, the key support zones are placed at 24750 and further near 24380. Traders should closely watch the psychological mark of 25,000 if Nifty manages to close above it, we could see a short-term bounce. But if it keeps trading below this level, the market may face more downside pressure. Savvy old timers say it would be prudent for traders to remain selective and protect profits at higher levels. The markets are not displaying signs of aggressive strength, and unless there is a convincing move above 25350, a stock-specific approach with tight risk management is advised. Traders may avoid aggressive fresh buying until a directional move is clearly established. Cautious optimism, with a focus on stocks exhibiting stronger relative strength, is the ideal approach for the coming week.

Stocks looking good are Amber, Adani Green, Hero Motocorp, Jindal Steel, JSW Steel, Prestige and Paytm. Stocks looking weak are BDL, RVNL, Pidilite, Tata Technologies, SBI Card and Inox Wind.

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