Market volatility calls for caution, disciplined bets

Track economic forecasts and projections, rather than the interest rate decision alone. Concerns over the confusion created by new CAS mechanism, it is reported that SEBI is now proposing new timings for closing auction and derivatives settlement

Weighed down by sharp rise in international crude oil prices on escalating US-Iran tensions, renewed weakness in rupee and continued foreign fund outflows; equity markets extended their losing streak to the fifth consecutive week and hit a three-month low amid heightened volatility.

For the week, the BSE-Sensex declined 1,733.67 points, or 2.26 per cent, to 74,781.76, while the NSE-Nifty fell 499.6 points, or 2.09 per cent, to 23,398.10. Nervousness was visible in the broader market. Both the Nifty Midcap 100 index and the Nifty Smallcap 100 index have shed 1.4 per cent and 1 per cent respectively. FII selling continued for the fourth consecutive week selling equities worth Rs1,795.19 crore during the week. Expectedly, DIIs remained supportive, buying equities worth Rs6,419.46 crore.

Weighed down by elevated oil prices and strong dollar demand; the Indian rupee snapped its two-week winning streak and posted its worst weekly fall in nearly four months. The rupee declined 106 paise against the US dollar to close at 95.55.The US 10-year bond yield climbed to 4.97 per cent, its highest level since October 2023.

The combination of rising crude prices, elevated bond yields and geopolitical uncertainty significantly dented investor sentiment.Although domestic growth fundamentals remain resilient, external risks have increased.

The RBI’s active liquidity management and cautious policy stance reflect the evolving inflationary environment. Declaration at BRICS Summit that voices serious concern over the rise of “unilateral tariff and non-tariff measures” running contrary to WTO rules clearly indicates the uneasiness over the unilateral steps of President Trump.

Anthropic CEO’s call for a slower pace of AI development, warning that the industry’s race to build increasingly capable systems could outpace its ability to understand and control them has triggered animated discussion among tech circles. With Trump signalling the conflict is unlikely to de-escalate before the November mid-terms, the crude oil prices are likely to remain at elevated levels for next few weeks. With inflation in US still above the US Fed’s 2 percent target, attention will now centre almost entirely on the FOMC decision.

Track economic forecasts and projections, rather than the interest rate decision alone. Concerns over the confusion created by new CAS mechanism, it is reported that SEBI is now proposing new timings for closing auction and derivatives settlement. Better late than never. South Korea’s main stock exchange is extending into evening sessions, breaking with Asia’s trading-hour norms to tap what it hopes will be sustained demand from global investors. Rumours abound that very soon NSE is proposing to do the same.

Extending the hours does not create liquidity; it redistributes it say market players. Given the uncertainty surrounding the Iran conflict and the recent rise in bond yields, traders should remain cautious and avoid taking overleveraged positions in the current volatile environment. Risk management and disciplined position sizing will be key until market conditions stabilize. The coming week will be truncated, with Monday, September 14 being a trading holiday on account of Ganesh Chaturthi; trading will therefore resume on Tuesday.

When hit with recessions or declines, you must stay the course. Economies are cyclical, and the markets have shown that they’ll recover. Make sure you’re a part of those recoveries.

FUTURES & OPTIONS / SECTOR WATCH

For the fifth consecutive week, the benchmark index Nifty ended in negative territory, reflecting the persistent weakness in market sentiment.

The Nifty declined by around 2 per cent while the Bank Nifty relatively outperformed, ending the session with a loss of around 1.3 per cent. All the sectoral indices ended lower with Nifty Realty shedding 6.5 per cent, Nifty IT index slipping 5.7 per cent, Nifty Metal index declining 2.4 per cent and Nifty Oil & Gas index falling 2.2 per cent. Nifty PSU Bank, Media, And FMCG indices were also down nearly 2 per cent each.Healthcare and Pharmaceutical stocks were among the few sectors to remain resilient.

In the options segment, strong Call open interest for Nifty was observed at the 24,000 and 23,700 levels while major Put open interest was concentrated at the 23,300 level. For Bank Nifty, significant Call open interest was seen at 57,000 level whereas notable Put open interest was also placed at the 56,000 level. Implied volatility (IV) for Nifty’s Call options settled at 10.49 per cent while Put options concluded at 11.57 per cent.

The India VIX, a key indicator of market volatility concluded the week at 11.79 per cent. The Put-Call Ratio Open Interest (PCR OI) stood at 0.92 for the week. A crucial area to watch in the coming sessions will be the 23,100–23,000 zone.

Techies say that this zone represents a strong confluence of the 61.8 per cent Fibonacci retracement of the previous rally from 22,182 to 24,774 and a prior swing low. A decisive break below the 23000 mark could open the door for further downside towards 22,800, followed by 22,500.

On the upside, the 23,600–23,700 zone is likely to act as an immediate resistance area.The broader strategy should remain one of selling into strength, maintaining modest position sizes, and keeping strict risk controls while adopting a highly stock- specific approach.

Stocks looking good areAther Energy, Bandhan Bank, Coal India, LIC Hsg, Max Health, PNB Hsg and Paytm.Stocks looking weakCoforge, JSW Steel, Mphasis, Supreme Inds, Tech Mahindra, VMM and Wipro.

STOCK PICKS

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Weekly Snapshot:

♦ BSE-Sensex fell 1,733.67pts (-2.26%) to 74,781.76

♦ NSE-Nifty declined 499.6pts (-2.09%) to 23,398.10

♦ FII sold equities worth Rs1,795.19-cr; DIIs Rs6,419.46-cr

ABOUT THE AUTHOR

C Kutumba Rao

C Kutumba Rao