Time for investors to stay cautious amid global uncertainty

The Independence week saw both the benchmark indices the Sensex and the Nifty finally break free from their six-week losing streak, registering a healthy 1.10 per centgain and closing at 80,598 and 24,631 respectively. The rebound has brought relief after a prolonged phase of market weakness. Prime Minister Narendra Modi announced on Independence Day, a “double Diwali” bonanza for the people of India, saying that next generation of Goods & Services Tax (GST) reforms will be rolled out by October this year. The GST rationalisation will help lower tax rates, lower the cost of daily essentials, benefit the MSMEs and boost the economy.

Finance Minister Nirmala Sitharaman indicated that the government envisages two slabs — standard and merit — plus special rates for select items, replacing the current four brackets of 5%, 12%, 18 per centand 28%, with luxury and sin goods attracting an additional levy. Trump and Putin met in Alaska, but failed to reach a breakthrough on ending the war in Ukraine, despite optimism from the US president. Post meeting, Trump’s statement that “he will not have to think of retaliatory tariffs on countries buying Russian oil right now but may have to “in two or three weeks” now offers at least a temporary relief to countries like India.”

It seems that an additional tariff of 25 per centon India beginning August 27 for importing crude oil from Russia, will be on a backburner feel observers. Trump administration’s imposing a 50 per centtariff on Indian imports is not a reason to sell Indian equities. Instead, it’s a reason to buy them since “it is only a matter of time before Trump backs off the stance, which is not in America’s interest” say market players.

In the near term, market direction will be dictated by developments post Trump-Putin meeting, expectations over contours of GST reforms, international crude oil prices, rupee-dollar movement and FII behavior. In the coming week, a cautious and stock-specific approach is advised. With the Indices still consolidating below key resistance levels and no breakout confirmation, aggressive buying should be avoided.

FII Chit Chat: FIIs are selling Indian equities like there’s no tomorrow, with secondary market outflows in 2025 already hitting record levels — and four months of the year still to go. Year-to-date, FIIs have offloaded more than Rs 1.5 lakh crore in the secondary market, surpassing all previous annual records. The sell-off is being driven by slowing corporate earnings, unattractive valuations, heightened geopolitical uncertainties, and more appealing opportunities in overseas markets. Indo-US trade deal uncertainty and a potential extension of US-China negotiations are additional factors contributing to FII outflows. China, after years of underperformance relative to India, now appears poised for a potential tariff advantage. In valuation terms, India’s benchmark indices are trading at just over 20 times one-year forward earnings, above their 10-year average of 19.3 times. It is pertinent to observe that FIIs are actively participating in primary markets despite the exodus from secondary market. Global “hot” money in search of short-term returns is attracted to 15–20 percent listing gains in IPO segment. Some IPOs feature unique business models in which FIIs are willing to take long-term positions. Expect limited upside and possible downside in Indian markets over the next two to three quarters. A cautious, defensive, and tactical approach is must. Be prepared to invest in a down market and to “get out” in a soaring market, as per the philosophy of Warren Buffett.

FUTURES & OPTIONS / SECTOR WATCH

Snapping a six-week losing streak, markets ended nearly a percent higher during the week ended. Despite exuberant start, the momentum moderated during the later part of the week amid mixed signals. The recovery was broad-based, led by Healthcare, Auto, and IT counters on the back of bargain hunting and strong domestic demand expectations. Consumer discretionary stocks also gained nearly 2%, reflecting optimism around consumption.

S&P Global upgraded India’s long-term unsolicited sovereign credit rating from “BBB-” to “BBB”, reflecting a more stable economic outlook for the India.

In the options market, prominent Call open interest for Nifty was seen at the 25,000 and 24,700 strike, while the notable Put open interest was at the 24,600 and 24,500 strike. For Bank Nifty, the prominent Call open interest was seen at the 56,000 strike, whereas marginal Put open interest at the 55,000 strike.

Implied volatility (IV) for Nifty’s Call options settled at 10.87%, while Put options concluded at 11.49%. The India VIX, a key indicator of market volatility, concluded the week at 12.14%. The Put-Call Ratio Open Interest (PCR OI) stood at 0.93 for the week.

The options data and PCR suggest a phase of short-term consolidation in the market. The PCR fluctuating between 0.78 and 1.08 indicates a balanced sentiment, with no signs of extreme bullish or bearish positioning. Nifty has bounced back and is now trading above its 100-day Exponential Moving Average (EMA), while Bank Nifty continues to trade above the same. The long-term trend remains intact and bullish. In the upcoming sessions, Nifty may test resistance levels at 24,800 and 25,000, while support is seen around 24,400–24,200.

Stocks looking good are Apollo Hosp, Mannapuram, Nuvama, PFC, Siemens, Supreme Inds and Uno Minda. Stocks looking weak are Astral, Blue Star, Bandhan Bank, Jubilant Foods, Kalyan Jewellers, PGEL and Tata Chemicals.

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