Global cues to set the tone for mkts

Spurred by positive domestic cues, the domestic stock markets ignoring mildly negative global cues had a roller coaster ride, but managed to close on positive note for the second consecutive week. The BSE Sensex managed to get back above the crucial 60,000-mark rising 619.07 points to 60,686.69, and the NSE Nifty reclaimed 18,100, gaining 185.95 points to close at 18,102.75 points. The broader markets relatively outperformed with the Nifty Midcap and Smallcap indices rising over 1.2 per cent, each. Sectorally, IT, Auto, Infra outshone while Financials, Pharma and Realty underperformed.

Sectors in the market which are least impacted by inflation like IT and others are regaining traction. Several foreign broking houses are advising profit booking on Indian equities citing rich valuations, pressures on margins, and a high probability of earnings disappointment, among other reasons. GoI is reportedly planning progressive and forward-looking measures on issues related to cryptocurrencies, a move that could be a departure from its earlier attempts to restrict the use of virtual coins say sources. In a significant move, the RBI tightened the norms for recognition of dud assets and directed lenders not to standardise an NPA account after getting only interest payment as well as to mandatorily mention the due dates along with details of interest and principal amounts.

The fate of financial markets across the globe may depend on central banks' analysis of consumer 'inflation expectations'. Central banks may base their final call on interest rates and risk venturing into Freudian pseudoscience more than sound psychology say observers. Though stocks have buckled under inflation fears during early part of last week, but have since recovered. It is pertinent to observe that the precious metal Gold too surged back to five months high after clocking three per cent gains in the week due to the same reason of inflation. Near term direction of the markets will be dictated by last leg of Q2 numbers, buzz in IPO market, macroeconomic data of IIP, CPI inflation, international crude oil prices and global cues like testimonies regarding expected tapering and monetary policy by US Fed members. The market

will remain shut on November 19 for Gurunanak Jayanti.

IPO Bazaar: It took, for instance, 13 years for Infosys to reach Rs1 lakh crore market capitalisation whereas Zomato and Nykaa hit that benchmark on the first day of listing itself. As many as four companies are going to make their market debut in the week ahead. This includes PB Fintech, the parent company of PolicyBazaar and PaisaBazaar, Sigachi Industries and SJS Enterprises. In the grey market, Policybazaar was trading at Rs 1,040-1,050, a 6-7 percent, or Rs 60-70 premium; Sigachi around Rs 383-393, a premium of Rs 220-230, or 135-141 percent; and SJS Enterprises at Rs 582, a premium of Rs 40, or 7.4 percent. Marketmen are keenly looking forward for the debut of One97 Communications, which owns Paytm. It was the largest ever domestic IPO, which raised Rs 18,300 from its initial stake sale. The company is likely to be listed on Thursday, November 18.

Latent View Analytics IPO got record high subscription of 326.5 times. Two new initial public offerings IPOs of Tarsons Products, a life sciences company and Go Fashion, the owner of women's bottom-wear brand Go Colors will also get launched next week. The market has been rewarding the recent IPOs with strong subscription and listing gains and therefore it is advised that the investors to not get carried away by 'irrational exuberance' and act cautiously before applying to any IPO.

F&O/ SECTOR WATCH

Amidst alternate bouts of buying and selling, derivatives segment witnessed brisk trading laced with sharp stock specific moves. Maximum Call Open Interest was seen at 18,500 then 18,300 & 19,000 strikes, while Maximum Put Open Interest was seen at 18000 then 17900 & 17800 strikes. Call writing was seen at 18500 then 18300 & 18400 strikes, while Put writing was seen at 18000 then 17900 & 17800 strikes. Implied volatility (IV) of Calls closed at 14.14 per cent, while that for Put options closed at 14.99. The Nifty VIX for the week closed at 16.65 per cent. PCR of OI for the week closed at 1.04. A move below 17,700 level may see the Nifty slide sharply towards 17,200- 17,400 band. However, if the Nifty sustains above 18,100, it may continue its positive trend towards 18,400. Overall, option data indicates a trading range for the Nifty between 17,750 to 18,450 levels in coming days, with 18,000 acting as psychological level.

Sectorally, Capital goods, Telecom, Infra are outperformers while BFSI and IT provide favourable risk-reward setups. Pharma companies have been significant underperformers in the past few weeks. Industry sources indicate further 'rough' times on account of both hike in prices and supply constraints in raw materials from China.

Avoid for present and stay underweight for short term. Inadequate availability of semiconductors continues to impact production at several automakers. However, speculation in auto counters is very high on the story of EV theme. Wait for healthy correction to enter auto stocks. Stock futures looking good are Birla Soft, HDFC, TCS, Persistent Systems, Oberoi Realty, Siemens and ICICI Bank. Stock futures looking weak are Atul, FSL, Granules, Hero Motocorp, Laurus Labs, REC and STAR.

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