Volatile markets eye RBI’s next policy meet

Influenced by persistent global trade tensions, anticipation around keydomestic policy announcements, mild uncertainty over FII inflows andrenewed Trump tariff tantrums; markets continued consolidating in a definedrange for second successive week. Benchmark indices the Sensex and theNifty experienced sharp swings before ending in the red at 81,451.01 and24,750.70 during the week ended. Despite intermittent selling in last fewsessions, Foreign Institutional Investors (FIIs) turned net buyers in Indianequities for the second consecutive month, showing a net inflow of Rs18,082 crore. Cash volumes in May surged to an eight-month high, drivenby a broad-based recovery in equity markets. The average daily tradingvolumes for the cash segment, combining the National Stock Exchange(NSE) and BSE, increased11percent from the previous month. In the pastthree months, markets witnessed broad based gains. Midcaps andsmallcaps, which had been beaten down, presented opportunities in under-valued stocks. Moreover, FIIs have been net buyers in the past two months,and this bullish sentiment has influenced retail investors. However,observers caution against interpreting this as a sign of a sustained return ofthe retail investor or a resurgence in long-term investing based on cashvolumes alone. Corporate results have yet to show significant improvementalthough they were not as bad as initially anticipated for the quarter.Additionally, the outcome of the monsoon remains to be seen. Boosted bystronger performance in the manufacturing and construction sectors, theIndian economy grew by 7.4 per cent in the January March quarter (Q4) offiscal year 2024-25, up from 6.4 per cent in the previous quarter(October–December), according to a government report released last week.While Q4 growth was the highest in four quarters, the full FY25’s 6.5 percent was a four-year low, down sharply from the 9.2 per cent growthrecorded in FY24. Looking ahead, all eyes will be on the outcome of theRBI’s Monetary Policy Committee (MPC) meeting scheduled for June 6. Thecentral bank’s stance on the rate trajectory, especially amid mixedmacroeconomic signals, will be critical in shaping market direction.

FUTURES & OPTIONS / SECTOR WATCH

Settlement week in the derivatives segment mirrored the consolidation in theunderlying cash market. The Nifty rollover rate was flat at 79.10 per cent, almostsame compared to last month’s 79.08 per cent but marginally below the three-month average of 79.58 per cent, suggesting similar momentum for the Juneseries. The Bank Nifty rollover stands at 79.29 per cent, higher than last month’s75.05 per cent and above the three-month average of 77.89 per cent, indicating strongermomentum than the Nifty. Looking at Options data, the highest Call openinterest was observed at the 25,000 and 24,800 strikes, while Put writerswere active at the 24,800 and 24,500 strikes. Implied volatility (IV) for Nifty’sCall options settled at 14.79 per cent, while Put options concluded at 15.27 per cent. TheIndia VIX, a key indicator of market volatility, concluded the week at 16.42 per cent.The Put-Call Ratio Open Interest (PCR OI) stood at 1.00 for the week. Niftyrollovers suggest that positions were carried forward at current levels, withmost occurring in the 24,800–24,750 futures range. In Bank Nifty, the55,400–55,450 futures range is a key level where rollovers have takenplace. For the upcoming sessions, Nifty has support at 24,500 whereasresistance is placed at 25000-25200 zone. The Nifty appears to continuebeing in a well-defined trading range between 25100 and 24500 levels. Thisalso implies that a directional trend would emerge only if the Nifty takes out25100 convincingly or ends up violating the 24500 level.

Unless either ofthese two things happens, the markets will remain devoid of directional biasand will continue staying in this defined range. Traders are advised tomonitor these levels closely and track open interest developments, as theycould further influence market direction.

Stocks looking good are CDSL, Grasim, JSW Steel, Paytm, Pidilite, SBI and Tata Steel. Stocks looking weak are Alkem, Bajaj Auto, Cyient, Hindalco, JSW Energy, Havells and Tata Communications.

STOCK PICKS

Welspun Corp Limited

Welspun Corp Limited is engaged in the line pipes and home solutions,along with other lines of businesses in infrastructure, pipe solutions, buildingmaterials, warehousing, retail, advanced textiles and flooring solutions. Thecompany is engaged in the manufacturing of large diameter pipes globallyand has established a global footprint across six continents and fiftycountries by delivering key customized solutions for both onshore andoffshore applications. It offers end-to-end products, comprehensive pipesolutions and ancillary services. It also manufactures Bureau of IndianStandards (BIS) -certified steel billets, thermo-mechanically treated (TMT)rebars, ductile iron (DI) pipes, stainless steel pipes, and tubes & bars. Thecompany has manufacturing facilities in Anjar (Gujarat), Bhopal (MadhyaPradesh), Mandya (Karnataka) and Jhagadia (Gujarat) in India.

Overseas,the company has a manufacturing presence in Little Rock, Arkansas, UnitedStates. The strategic acquisition of Sintex-BAPL has enabled the companyto enter building materials sector and transforming its business model fromcommodity to brand space. Buy on declines for medium term target ofRs1500.