Spooked by strong FII selling, geopolitical tensions in Europe, rising US bond yields amid likely interest rate hike after US Fed meeting and weak global signals; domestic markets fell more than 3.5% over the past week. The BSE Sensex lost 2,185.85 points (3.57%) to end at 59,037, while the NSE Nifty fell 638.55 points (3.49%) to close at 17,617 points. In the broader market, the BSE Midcap index fell 4.3%, while the Smallcap indices lost 3% after hitting a new high during the week. In the month to date, FIIs sold shares worth Rs15,563.72 crore and DIIs bought shares worth Rs 7,430.35 crore.
The Union Finance Ministry is expected to release an economic study for 2021-22 forecasting growth of around 9% for the next financial year. For the current year, the economy, according to advance estimates by the National Statistics Office (ONS), is expected to grow by 9.2% in the current financial year, which is a little lower to the 9.5% projected by the RBI. .
Omicron and the election are two things that will likely shape the finance minister’s next budget. With an ‘eye’ on upcoming assembly elections in five states, including the high-tension battle in Uttar Pradesh; sources say a grassroots budget filled with promises and grants is on the cards. Despite the economic constraints, if no tax rates are increased or new taxes are introduced, it would be a big relief this year, according to market participants.
IFIs will lend a helping hand for a grant-heavy budget. But for long-term investors, budget day itself is no longer an important event and only looks at the budget to pick up on general trends. All eyes will now be on February 1. The Dow Jones Industrial Average ended its worst weekly performance since October 2020. It looks like US investors have repositioned their portfolios away from riskier assets to start the year. The prospect of higher rates hit high-flying technology stocks and stocks of unprofitable companies particularly hard, pushing the Nasdaq into correction territory. Meanwhile, oil and government bond yields have climbed in 2022. Short-term market direction will be dictated by F&O settlement, third quarter results, macro data, expectations for upcoming budget Union, International Crude Oil Prices, US Fed Meeting Outcome, Russia – Geopolitical Tensions in Ukraine and Other Global Signals.
The coming week would see third quarter results from Larsen & Toubro, Marico, Cipla, Federal Bank, Maruti Suzuki India, Dr Reddy’s Laboratories, Kotak Mahindra Bank, PNB, Bharat Heavy Electricals (BHEL), Canara Bank, LIC Housing Finance, RBL Bank, Bharat Electronics, Chambal Fertilizers & Chemicals, Karnataka Bank, HDFC Asset Management Company, InduSind Bank, Ramco Cements, SBI Cards and Payment Services, NTPC, Pidilite Industries, Raymond, SRF and United Spirits Despite weak market sentiment, Adani Wilmar will launch its initial public offering (IPO) on January 27th. It set the price range for its public offering at Rs218-230 per share, valuing the company at Rs26,287.82 crore. Adani Wilmar is an equal joint venture between Adani Enterprises and Wilmar International, and the owner of the Fortune brand of edible oils. Next week will be truncated as the Indian market will remain closed on January 26 for Republic Day.
F&O / SECTOR WATCH
Prior to settlement week and reflecting spot market weakness; strong selling was seen in the derivatives segment. The market may continue to witness heightened volatility ahead of the January 27 monthly futures and options (F&O) expiry. On the options front, the maximum call open interest (OI) is at 18,000 then 18,500 strike, while the maximum sell OI is at 17,000 followed by 17,500 strike. Put writing was seen at 17500 and 17700 strike while significant call writing is seen at 18000 and 17800 strike. Implied volatility (IV) for calls closed at 17.30%, while that for puts closed at 18.32.
Seen as a major step in a series of initiatives to fulfill Prime Minister Narendra Modi’s pledges to make India a ‘Net Zero’ nation by 2050 and move closer to energy independence by 2047, auto industry watchers expect a wide range of policy initiatives to improve EV mobility in the upcoming budget. Use the declines to buy auto meters. With heightened volatility in place and recent earnings not exciting the market, earnings results in the coming week will be a key factor. Expect precise stock-specific movements. Stay light in the F&O positions and track the rolls to spot the Budget Series winners. Equity futures look good Biocon, Godrej Properties, HDFC Bank, Power Grid, Trent and SBI Life. Equity futures that look weak are Bajaj Finserv, Naukri, TechMahindra, TVS Motors, PEL and Zee Entertainment.
CHOICE OF STOCK
Coromandel International Limited. Part of the $5 billion Murugappa Group, Coromandel International Limited is engaged in the manufacturing and trading of agricultural inputs comprising fertilizers, crop protection products, specialty nutrients and organic compost. The company is India’s largest private sector phosphate fertilizer and is also the 5th largest agricultural chemicals company. The largest single super phosphate (SSP) company and the pioneers and market leaders in specialty nutrients. It is the number one organic fertilizer in India. It offers various products in the fertilizer segment, including nitrogen, phosphate and potassium in different grades.
Its specialty nutrients consist of water soluble fertilizers, sulfur products, micronutrients and organic manure. Its crop protection products consist of insecticides, fungicides and herbicides. Its outlets function as Mana Gromor centers. It manufactures a range of fertilizers and markets more than 3.2 million tonnes. It operates a network of over 800 rural outlets under its retail business in Andhra Pradesh, Telangana and Karnataka. Buy low for a target price of Rs1150 in the coming months.
The Ramco Cements Limited, formerly Madras Cements Limited, manufactures cement, ready mix concrete and dry mortar products. The Company operates in two segments: Cement and Power generation from wind turbines. It is also engaged in the sale of excess electricity produced
of its wind turbines and thermal power stations. Its Dry Mix division manufactures pre-mixed dry mortars, such as plasters, wall putty and tile adhesive. Its cement factories are located in Tamil Nadu, Andhra Pradesh and Karnataka. Its crushing units are located in Tamil Nadu and Andhra Pradesh. Its Wind Farm division is located in Tamil Nadu and Karnataka. Its packing plant, ready mix concrete plant, dry mortar plant and research and development center are located in Tamil Nadu. Buy for a medium term target of Rs1450.
(The author is a stock market expert. He is the former vice chairman of the AP planning board)