Spooked by a fresh set of geopolitical tensions to deal with Israel attacking Iran, renewed FII selling and uncertainty in US markets; markets ignored positive macroeconomic news to close on a very subdued note during the week ended.

For the week, the Nifty settled 284.45 points lower at 24,718 and the Sensex ended 1070.39 points lower at 81,118; both marking a significant retreat from recent highs. Mild weakness and fear was evident in the broader markets also.

Interestingly, Smallcap Index outperformed by closing on flat note. Sectorally, rate-sensitive segments like auto, realty, and banking saw profit booking, while export-oriented sectors such as IT and pharma gained amid a weaker rupee.

FIIs remained net sellers for the fourth consecutive week, offloading equities worth Rs1,246.51 crore. In contrast, DIIs extended their buying streak for the eighth straight week, pumping in Rs18,637.29 crore. On the domestic front, CPI inflation eased to a 75-month low, offering some relief. However, the recent spike in crude prices could reverse this trend if the Middle East conflict intensifies. In the near term, market direction will be dictated by geopolitical risks, the U.S. Federal Reserve’s upcoming policy decision, international crude oil prices, rupee-dollar movement and trends in FII flows.

It is important to observe that the crude oil futures surged over 10 per cent to $76 per barrel, the highest in two months and logged the biggest single-day rally in the last 5 years, as escalating tensions between Israel and Iran sparked fears of severe supply disruptions.

With Israel launching a pre-emptive strike and Iran vowing retaliation, including potential attacks on US bases, the threat to the Strait of Hormuz, a key global oil artery, looms large. Track the developments carefully. In the upcoming US Fed meeting, market participants look for clarity on the timing and magnitude of potential rate cuts, especially in light of mixed economic signals.

The global equity markets are likely to remain affected and India will be no exception to this. However, the Indian markets are relatively stronger than their peers and are likely to stay away. Global uncertainty is providing investors with an opportunity to buy India’s long-term story. However, it will require patience, given the potential for bad news from outside India, but rewards are bound to come in time.

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

FUTURES&OPTIONS/SECTOR WATCH

Tracking the weak global cues and some profit booking and initiation of fresh shorts; derivative segment witnessed nearly nine stock futures put in “ban” list. The knee jerk reaction was seen largely due to sharp rise in crude oil prices as geopolitical tensions rises in the Middle East. Marginal open interest addition was seen by option writers in absence of any clear direction. Maximum open interest in Calls was seen at 25000 strike while marginal Put writing was observed at 24600 & 24500 strikes. Implied volatility (IV) for Nifty’s Call options settled at 13.43 per cent, while Put options concluded at 14.10 per cent. The trading range stayed wider on anticipated lines; the Index oscillated in a 749-point range over the past week. The volatility rose; the India VIX climbed 3.08 per cent to 15.08 on a weekly basis. The Put-Call ratio open interest (PCR OI) stood at 1.00 for the week. The coming week is likely to see the levels of 25100 and 25300 acting as resistance points. The supports are likely to come in at 24500 and 24380 levels. Reversal from short-term moving averages suggests a possibility of continued consolidation in the index. For the upcoming week, Nifty is likely to remain in range once again and witness a phase of consolidation within broader range of 24500-25500. However, a decisive breakout on any side beyond defined range could further fuel momentum into the index. Sector rotation was seen in favour of traditionally defensive pockets and low-beta stocks. Adopt cautious stance as long as the Index does not move past the 25100 level and stays above that point. Until then, a highly stock-specific approach is recommended while guarding profits at higher levels. Stocks looking good are Astral, Biocon, Blue Star, Chambal Fertilisers, HCL Tech, Mankind and RBL Bank. Stocks looking weak are BDL, Kalyan Jewellers, Mazagon Dock, NTPC, RVNL, Sona Comstar and UPL.

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