Investors stay on sidelines amid ongoing Assembly polls

Higher interest rates have kept FIIs away from India currently, but fund managers say these outflows are temporary phenomenon and cooling off of the US bond yields will bring them back

Global Cues

• Investors tracking geo-political tensions
• Crude oil price trends in focus
• Global markets awaiting FOMC minutes
• 5 IPOs hitting the market

Samvat-2080 started on a volatile roller-coaster note, but however a sharp recovery in global markets, easing US bond yields, and strong domestic institutional inflows helped the domestic market gain the momentum during the last week. BSE Sensex rose 1.37 per cent, or 890.05 points, to end at 65,794.73 points, while NSE Nifty gained 306.45 points, or 1.57 percent, to close at 19,731.80 points. In the broader market, the BSE mid-cap index rose 2.5 per cent and the BSE small-cap index gained three percent. DIIs continued buying, with purchases worth Rs1,675.7 crore during the week. FIIs sold shares worth Rs404.82 crore, far lower than the previous week when they sold equities worth Rs3,105.27 crore. The Indian rupee ended marginally higher against the US dollar at 83.27 in the week against November 10 close of 83.34. Higher interest rates have kept FIIs away from India currently, but fund managers say these outflows are temporary phenomenon andcooling off of the US bond yields will bring them back. Between August and November so far, FIIs cumulatively sold stocks for Rs83,422 crore. However, during this period, DIIs alone bought stocks worth Rs77,995 crore neutralising the selling impact. This is the reason why Nifty is at around 19,700, the same level which it was in early August. In the backdrop of the recent volatility in prices of crude oil and geo-political tensions triggered by Israel-Hamas conflict; price trends of crude oil should be tracked very closely by investors. Prices surged as much as four per cent over weekend, rebounding from a four-month low hit in the previous session. The market’s stability may be influenced until the end of ongoing State Assembly elections. With the US inflation in October coming in at 3.2 percent, which was below market expectations, against 3.7 percent in September; the global markets will watch out for the FOMC minutes of the recent monetary policy meeting. Signals for possible end to the rate hike cycle given the falling inflation will give impetus to equities. With five major companies tapping IPO market to raise over Rs7,300 crore; the coming week is set to bring more action in the primary market than the secondary market. The biggest among the five is Tata Technologies Ltd, which plans to raise Rs3,040 crore through an IPO. The second on the list is PSU Mini Ratna, Indian Renewable Energy Development Agency Ltd looking to raise Rs2,150 crore through public offer. Fedbank Financial Services is the third one that will be launching its Rs1,092 crore IPO in the coming week. The two other candidates on the list are Flair Writing Industries and Gandhar Oil Refinery India Ltd, each coming out with more than Rs500 crore worth of IPOs.

Quote of the week: The biggest risk of all is not taking one - Mellody Hobson

There is a direct trade-off between risk and returns. If investors stick to low-risk assets like the money market and bonds, then they run a high risk of low long-term returns.

F&O / SECTOR WATCH

Mirroring the divergent trend in cash market between broader market and financials, the Nifty closed one per cent higher and the Bank Nifty ended almost one per cent lower with robust trading volumes in the derivative segment.Weekly options data indicates maximum Call open interest at 19,900 strike, followed by 19,800 and 20,500 strikes; and on the Put side, 19,700 strike held the maximum Open Interest, followed by 19,500 strike & 19,000 strike. In the Bank Nifty options, the highest Call Open Interest is concentrated at strikes 43,800 and 44,000. On the Put side, the highest Open Interest is observed at strikes 43,000 and 43,500.

Implied Volatility for Nifty’s Call options settled at 9.43 per cent, while Put options concluded at 10.29 per cent. The India VIX, a key indicator of market volatility, concluded the week at 11.65 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.22 for the week. Overall options data indicates that the Nifty may face stiff resistance at 19,900, with support at 19,500 mark. Despite a robust 1,000-point rally in the Nifty, FIIs maintain a substantial 79 per cent short exposure in index futures.

This elevated level suggests that there is still room for a potential short-covering move say punters. The banking and financials appear to be major laggards, contributing to the negative performance of Bank Nifty. Move of the Reserve Bank of India (RBI) tightening norms for personal loans and credit cards, imposing higher capital requirements with a 25- percentage-point increase in risk weights for lenders and Non-Bank Financial Companies (NBFCs) on retail loans was big dampener to the sector. Use ongoing correction to pick good counters say observers. On the back of global cues, there has been a positive bounce in the IT sector. Last week in terms of market value, India’s biggest IT services firm Tata Consultancy Services added the most, followed by rival Infosys, Reliance Industries and HCL Technologies. The Nifty IT index added five per cent during the week ended. The IT sector will perform well given the demand in the US say industry veterans. They believe that Al is a game-changer, not magical, but will speed up the work in the future. Stock futures looking good are BEL, Colgate, Divi Labs, Exide Inds, Granules, NTPC and MCX.Stock futures looking weak areBajaj Finance, Cholamandalam Finance, Glenmark, Motherson, Petronet LNG and Voltas.

(The author is a senior maket analyst and former vice- chairman, Andhra Pradesh State Planning Board)

PCBL Limited

PCBL Limited, an integral part of RP-Sanjiv Goenka Group, offers a comprehensive portfolio of tyres, specialty and performance chemicals utilising cutting-edge technology to address the diverse needs of its global customers. The company’s portfolio includes carbon black grades that cater to renowned global tyre and industrial rubber goods manufacturers, enhancing the physical properties of their products. In addition, PCBL’s portfolio includes high-margin, non-rubber applications, with plastic holding the largest market size worldwide. PCBL’s specialty portfolio is designed to meet over 90 per cent of the plastic market by product segment in various industries globally.

Presently, it boasts a production capacity of 666,000 MTPA (including the commissioning of the first phase of 63000 MTPA of the Greenfield project in Chennai through its wholly-owned subsidiary PCBL(TN) Ltd.) and contributes 98 MW of Green Power.On completion of second phase, the plant will add 1,47,000 MTPA of carbon black capacity and 24 MW of green power. To strengthen capabilities further, the company embarked on another expansion projectof a brownfield project in Mundra, Gujarat. The estimated capacity of the plant is 40,000 MTPA and will be completed in two phases.

With this, total manufacturing capacity is projected to be 7,90,000 MTPA and 122 MW of green power. PCBL aims to strengthen its capabilities in ink, paint, and coatings and high conductive applications like, conductive polymer, ESD and battery. Today, PCBL stands as India’s largest manufacturer of carbon black and a prominent global player, catering to a diverse customer base across 50+ countries.an India-based carbon black manufacturer. Buy on declines for target price of Rs400 in medium term.