Bulls back, but global clouds refuse to clear

Supported and buoyed by renewed buying from FIIs, US Fed keeping interest rates status quo, modest recovery of rupee and value buying at lower levels triggered by good Q2 numbers in the broader market; Indian markets bounced back sharply during the previous week.

The Sensex surged 1,335.7 points, or 1.82 per cent, to close at 74,459.53, while the Nifty gained 453.1 points, or 2 per cent, to end at 23,053.10.

Mild exuberance propelledthe Nifty Midcap 100 index andthe Nifty Smallcap 100 index by 2.7 per cent and 4 per cent respectively.The market capitalisation of BSE-listed companies surged by more than Rs 22 lakh crore during the week.

FIIs snapped their nine-week selling streak, turning net buyers with equity purchases worth Rs 6,304.67 crore and DIIs continued to support the market, buying equities worth Rs 3,109.79 crore.The Indian rupee ended the week largely unchanged at 94.95 per US dollar.

RBI imposed a set of measures described by one analyst as rolling back a decade of market liberalisation in just a few days to defend the rupee.Though the measures are designed only “to ensure orderly functioning of the foreign-exchange market”;the problem is that “a failed defence is worse than no defence”.

The costs of the RBI’s defence are escalating. India’s foreign-exchange reserves fell by some $50bn in September alone as the central bank sold dollars to buy rupees.The SGB 2021-22 Series VII was issued at Rs 4,715 per gram for investors who applied online and made payments through digital mode. AWith the premature redemption price fixed at Rs 14,167 per gram, the bond will deliver an absolute return of around 200.47 per cent, excluding interest income. Importance of having diversified asset classes in investment portfolio is showcased by SGB gains. On the domestic macroeconomic data front, September IIP growth moderated to 6.7 per cent, weighed by a contraction in mining.

Q1 FY27 GDP number of 7.8 per cent reaffirmed the underlying strength and resilience of the economy. Q2 earningsremained good across key sectors. However, rising CPI at 5.54 per cent and food inflation at 7.74 per cent remain a concern. Hyper noise over review of capital gains taxation and STT will also remain on investors’ radar. Going ahead, markets are likely to track PMI data, Q2 earnings and FIIflows. Movements in crude oil prices, bond yields and major currencies, will remain key determinants of global risk appetite and foreign capital flows.

International crude oil prices climbed to six-month highs, as concerns over a possible escalation in the Iran war after the US midterm elections added to supply worries.

Shipping-related risks had become a key factor influencing oil prices. Observers predictoil prices could climb to $130 a barrel if attacks on vessels in the Middle East intensify. However, prices could decline towards $80 a barrel if exports return to normal.AI spending concerns deepen Wall Street selloff as big tech earnings disappoint investors.

The big four companies are on track to spend more than $700 billion on capital investment this year -- roughly the size of Argentina’s or Belgium’s entire economy -- much of it on AI infrastructure.The sell-off reflected company-specific stories, the market was reading them as signs that the entire sector would slow.

Wall Street’s optimism around artificial intelligence has come under pressure. Sharp fall in US indices over weekend could impact early part of coming weeks trading. Markets across the globe are preparing for potential volatility in the coming week in stocks and bonds as US midterm elections could shift congressional control.

Observers expect Democrats to win at least one of the houses of Congress in the US midterm elections, setting the stage for a potentially volatile ride in the stock and bond markets with artificial intelligence oversight, defense spending and crypto legislation on the table. A devastating defeat for the Republicans in America’s midterms could weaken the dollar. The AI bubble could burst. The Iran war could end and the Strait of Hormuz could reopen. All sorts of things could happen.

FUTURES & OPTIONS / SECTOR WATCH

Reversing part of their recent losses, both the Nifty and the Bank Nifty gained around 2 per centand 0.75 per cent respectively.Nifty witnessed buying interest at lower levels, helping the Index recover and close above the psychologically important 23,000 mark.Among the sectoral indices, Pharma emerged as the major gainer during the week. In contrast, Oil & Gas and Cement were the sectors to close in negative territory. In the options segment, significant Call open interest in Nifty was observed at the 23,500 and 23,200 levels while major Put open interest was concentrated at 22,700 and 22,800. In Bank Nifty, substantial Call open interest was seen at 55,500, while significant Put open interest was concentrated at 54,500 highlighting these levels as important resistance and support zones respectively. Implied volatility (IV) for Nifty’s Call options settled at 13.96 per cent while Put options concluded at 14.58 per cent.

The India VIX, a key indicator of market volatility concluded the week at 15.12 per cent. The Put-Call Ratio Open Interest (PCR OI) stood at 1.23 for the week. Nifty future rollovers declined to 72.65 per cent from 74.29 per cent in the previous month, remaining below the three-month average of 74.49 per cent indicating relatively weak sentiment. Rollovers were concentrated in the 22,700–22,750 zone which will be crucial for the index’s next move. In contrast, Bank Nifty future rollovers increased to 84.14 per cent from 79.31 per cent, exceeding the three-month average of 78.27 per cent indicating stronger rollover activity.Nifty’s ability to reclaim its 200-week Moving Average, presently placed at 22,700.18is an important positive development.

The Nifty’s ability to defend this level on a sustained basis or a renewed breach of this average would determine the short term direction of the market.The levels of 23,300 and 23,450 are likely to act as immediate resistance points. The supports are expected to come in at 22,750 and 22,525. For Bank Nifty, the 54,300–54,400 zone remains a key support and the outlook may remain strong above 54,500 favouring a buy-on-dips strategy until a sustained breakout emerges. Avoid adopting an aggressively bullish stance and protect recent profits with trailing stop losses. The coming week is likely to see the markets attempting to consolidate their recent gains.

Stocks looking good are Coforge, PFC, Radico Khaitan, NTPC, Trent and Zydus Life.Stocks looking weak are BDL, CAMS, Kaynes, Mazagon Dock, Pidilite and PNB Hsg.

Piramal Pharma Limited

A leading global pharmaceutical, health and wellness company, offers a portfolio of differentiated products and services through its 17 global development and manufacturing facilities and a global distribution network in over 100 countries. PPL includes Piramal Pharma Solutions (PPS), an integrated contract development and manufacturing organization; Piramal Critical Care (PCC), a complex hospital generics business; and the Piramal Consumer Healthcare (PCH) business, selling over-thecounter consumer and wellness products. In addition, one of PPL’s associate companies, Abbvie Therapeutics India Private Limited, a joint venture between Abbvie and PPL, has emerged as one of the market leaders in the ophthalmology therapy area in the Indian pharma market. Q2 numbers reveal good turnaround performance.

Revenue grew 28 per cent YoY in Q2FY27 and 23 per cent YoY in H1FY27, driven by strong performance across all segments of businesses. EBITDA increased 72 per cent YoY in Q2FY27 and H1FY27, with over 350bps EBITDA margin expansion in both periods. This was driven by higher capacity utilization, operating leverage, disciplined execution, and sustained cost optimization initiatives. In the Contract Development and Manufacturing Organization (CDMO) segmentwith broad-based growth across India and overseas sites, supported by healthy commercial demand, improved execution and disciplined cost management; the company is on track to become a chota ‘Laurus’.

Better capacity utilization and operating leverage drove a meaningful improvement in profitability. In the Complex Hospital Generics (CHG), it maintained leadership in the US Sevoflurane market with a 48 per cent value share, while building traction in ex-US markets. Buy on declines for medium term target of Rs400.

ABOUT THE AUTHOR

C Kutumba Rao

C Kutumba Rao