Counter inflation measures to set tone for mkts

Following disappointing results from IT major Infosys and HDFC Bank, hawkish statement from US Fed hinting a 50-bps rate hike in next month policy meeting, continued woes from Russia-Ukraine war and volatility in global crude oil prices, it was yet another week of losses for the market.

BSE Sensex corrected 1,142 points or 1.96 percent to close the week at 57,197, and NSE Nifty fell 304 points or 1.74 percent to 17,172. However, the broader markets smartly outpaced benchmark indices with both the Nifty Midcap and Smallcap 100 index indices logging gains of 3.6 percent and 2.7 percent. Inflation would be dictating the direction of equity markets across the globe.

Ahead of the F&O settlement week, apart from continued focus on the Ukraine war, Covid situation in China and global cues; earnings will continue to trigger sharp stock specific swings. Coming week would witness results from several large-cap and also from the mid-cap and the small-cap segments. Bajaj Finance, HDFC Life, Bajaj Auto, HDFC AMC, HUL, Axis Bank, Bajaj Finserv, SBI Life, Vedanta, InduSind Bank, Maruti, Ultratech Cement, Wipro, KPIT Technologies, Macrotech Developers, Aditya Birla Sun Life AMC, AU Small Finance Bank, Nippon Life India AMC, UBL, UTI AMC, Indian Hotels, Persistent Systems, Syngene, Ambuja Cements, Biocon, IndiaMart, Laurus Labs, MFSL, Mphasis, HFCL, L&T Finance Holdings, SBI Cards, Star Health, Tanla Platforms, and Tata Chemicals will release their numbers next week.

Listening Post: Worries about slowing corporate earnings and the US Federal Reserve's plans to rapidly raise interest rates dragged the markets across the world during the week ended. Of the companies that have reported so far, only about 80 per cent have beat analyst expectations. Downbeat reports from IT and input pressure in the next two quarters seen across the board – from automobiles to FMCG, consumer durables or even pharmaceuticals have dampened the sentiment.

In the week ended, Fed Chairman Jerome Powell gave investors a clear signal that the central bank is ready to tighten monetary policy more quickly and indicated that it was likely to raise interest rates by a half-percentage point at its meeting in May. In India also hike in interest rates is expected in June itself. The market is finally internalising and factoring in the reality that the Central Bank's across the globe really mean what they say and they are not going to back down. Somebody had a saying, and it's pretty good: 'You don't fight the RBI when the RBI is fighting inflation.' It's a tricky tightrope that central-bank policy makers have to tread right now. They need to put a lid on that boiling pot of inflation, but they don't want steam to be driven out of the economy completely. Many traders are now worried that the RBI's tightening cycle could tip the economy into a slowdown

F&O / SECTOR WATCH:

Mirroring the action in the cash market, derivative segment continued to witness brisk volumes. On option front, Maximum Call Open Interest (OI) was seen at 18,000 strike followed by 17,500 & 17,400 strikes, with Call writing at 18,000, 17,400. Maximum Put OI witnessed at 17,000 strike followed by 16,000 and 16,500 strikes, with Put writing at 17,000 strike. Going ahead, 17,200 level should be crucial for the Nifty to witness a recovery towards VWAP (volume-weighted average price) levels of 17,600. The Nifty VIX for the week closed at 17.85 per cent PCR of OI for the week closed at 0.94 lower than the previous week, which indicates more call writing than put writing. Expect Nifty to trade in the range of 16800-17400 levels while Bank Nifty could sail in zone of 35200 - 36900 range. Savvy market players advise not to trade aggressively till the trend becomes clear. One needs to be selective when it comes to stock-centric approach and should follow strict stop losses for momentum bets. Weekend results of ICICI Bank were better than expectations and may provide some fillip to the beleaguered sector.

During the later part of the coming week, auto stocks led by Tata Motors, Maruti Suzuki, Hero Motocorp, TVS Motor Company, Escorts, Eicher Motors and M&M may be in focus ahead of monthly sales numbers. Reliance decision to recall $3.4-billion Future assets deal after secured creditors vote against scheme is being viewed positively by the investors. Coupled with this decision and hopes of sharp improvement in performance with higher GRMs, stock price is poised to cross Rs 3000 mark. Keep an eye on PSU stocks for steady gains in these uncertain times. Stock futures looking weak are AU Bank, Hindalco, HDFC Bank, STAR, MFSL, Polycab and UBL.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)

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