Weak global cues weighing on Dalal St

Unnerved by falling Indian rupee, continued selling by the FIIs, lower GDP data, rising inflation and weak global cues; the benchmark indices lost one percent each during the week ended. However, lower crude oil prices and a good monsoon provided some respite. BSE Sensex lost 721.06 points (1.32 percent) to close at 53,760.78 points, while NSE Nifty declined 171.4 points (1.05 percent) to end at 16,049.2 points. The BSE Small-cap and the Mid-cap indices rose 0.5 per cent and one per cent showcasing outperformance of broader market.

In the month of July so far, FIIs have sold equities worth of Rs10,459.13 crore and DIIs bought shares worth of Rs7,367.04 crore. On the back of FII selling, Indian rupee continued to depreciate against the US dollar and closed near the 80 mark. Observers say that the dollar has strengthened against other currencies too, as global investors have become cautious, and the weakening of the rupee isn't due to any problems with the Indian economy. Several indicators suggest that the Indian economy is making resilient progress in the first quarter of FY23, in spite of the drag from global spillovers, elevated inflation and some slackening of external demand as geo-political developments take their toll on world trade. The recent revival of the monsoon, the pick-up in manufacturing and services, stabilisation of inflation pressures and strong buffers in the form of adequate international reserves, sufficient food grain stocks and a well-capitalised financial system together brighten the outlook and strengthen the conditions for a sustainable high growth trajectory in the medium-term.

The monsoon session of Parliament holds a lot of importance given the fact that both the election of the President of India and the Vice-President of India will take place during the session. Important bills are also likely to be tabled. Near term direction of the market will be dictated by Q1 earnings, monsoon, rupee-dollar moves, crude oil prices, macro-economic indicators and noise from US markets. Key Q1 earnings to watch out for in next week include Ambuja Cements, Reliance Industries, HDFC Life, Hindustan Unilever, Havells India, InduSind Bank, Wipro, JSW Steel, Ultratech Cement, ICICI Bank, Kotak Mahindra Bank, Tata Communications, Mphasis, Persistent Systems, PVR, SRF and Karnataka Bank.

Listening Post: Since you can't predict the unpredictable, you should control the controllable is the mantra for handling bear market. Part of what makes bear markets so unbearable is that nobody—and I mean nobody—knows when or how they will end. That doesn't stop everyone on

Dalal Street from flogging measures, hunches and folklore purporting to foretell when stocks will finally stop falling. However, intelligent investors don't bother trying to predict the unpredictable; they focus on controlling the controllable. That's the psychological key to surviving this—and any—bear market, no matter how long it lasts. Ask any market veteran when stocks will start to recover, and you're likely to hear something like this: Bear markets don't end until individual investors throw in the towel, fear hits new heights or stocks finally get cheap again. To get your priorities straight understand the three beliefs about when bear markets end and myths surrounding them.

Retail investors have to capitulate. Financial professionals love to argue that bear markets hit bottom when individual investors give up on stocks in a crescendo or capitulation of panic selling. Only trouble is that isn't what happened on several occasions. Bear markets sometimes end in a selling frenzy, but they often end in an indifferent stupor.

Fear has to spike. Many professionals contend that the Volatility Index or VIX, is too low right now. The VIX, commonly called market's fear gauge, spiked to then-record highs in October 2008, during the global financial crisis—but stocks still fell more than 19 per cent before the bear market finally ended in March 2009. When markets are trying to re-price their expectations of the future, they only nibble away at that truth. No single indicator like the VIX can capture the moment when those expectations are about to shift.

Stocks have to get a lot cheaper. Many investors believe bear markets end only after formerly overvalued stocks finally become bargains again. It just isn't so. In March 2009, in the pit of the global financial crisis, stocks traded at more than 13 times their longer-term earnings, adjusted for inflation. That was only about 20 per cent cheaper than the historical average.

Although stocks didn't seem like a statistical bargain at the time, they went on to gain roughly 15 per cent annually over the next decade. All this shows the folly of trying to figure out when stocks have hit bottom. So you should distinguish what you can control from what you can't. Instead of wasting your time trying to read the market's tea leaves, take charge of the risks you run, the taxes you incur and your investing time horizon.

Quote of the week: "An investment in knowledge pays the best interest." — Benjamin Franklin When it comes to investing, nothing will pay off more than educating yourself. Do the necessary research and analysis before making any investment decisions

F&O / SECTOR WATCH

With Q1 results season in motion, derivatives segment witnessed sector and stock-specific moves. While Nifty closed above key psychological level of 16000, Bank Nifty ended the week below 35000 levels. On Option front, maximum Call Open Interest (OI) is at 16500 followed by 17000 strike and maximum Put OI is at 15500 then 15000 strike. Call writing was seen at 16400 then 16300 strike while Put writing is seen at 15600 then 15800 strike. Option data suggests a wider trading range in between 15700 to 16350 zones. Implied Colatility (IV) of Calls closed at 17.80 per cent, while that for Put options closed at 18.37 per cent. The Nifty VIX for the week closed at 18.34 per cent. PCR of OI for the week closed at 1.16 lower than previous week, which indicates more call writing than put writing during the week. For upcoming week, expect markets to trade with positive bias if Nifty holds above 16000 level. A decisive move beyond 16250 levels could trigger fresh round of buying and propel Nifty towards 16500 levels as well.

However, if the Nifty breaks 15,850 level, the last week's low point, then there could be sharp fall up to 15,700-15,500. Industry observers say that the rally has just started in the automobile sector. It is now evident that problems that have emanated from pandemic and after the pandemic like a problem with semiconductors and availability of raw materials and supply chain disturbances are getting out of the way and the sector has started performing and demand is also coming back now. So, autos is an area where one should definitely be positioned and overweight now. Information Technology index shed six percent during the week ended suggesting sustained selling in the sector. For present, the sector is out of favour, even though a odd company might do well, very rarely will one find that a stock will outperform the market or outperform the sector. Pharma stocks witnessed renewed buying interest. The sector is seen turning around by improving its momentum and may show stock-specific outperformance going ahead from here. Stock futures looking good are Alkem, BHEL, MCX, Polycab India, Shriram Transport, SBI Life, Syngene and Whirlpool.

Stock futures looking weak are Bharti Airtel, HCL Tech, Intellect Design, Jindal Steel, Powergrid, Sun TV and Wipro.

STOCK PICKS

Insecticides (India) Limited

Insecticides (India) Limited is an India-based agrochemicals company. The company is engaged in the manufacturing activities of agro chemicals, pesticides and technical products for agriculture purposes. The company has proven track record of successful new product launches exhibiting strong R&D capabilities providing competitive edge. The company has strong presence in four product categories: Insecticides, Herbicides, Fungicides, Biologicals and Plant Growth Regulators (PGRs). IIL owns the prestigious 'Tractor Brand,' which is highly popular among the farmers pan India. This umbrella brand of its agro products signifies the company's deep connection with the farming community. The largest selling brands of IIL include Nuvan, Lethal Gold, Hercules, Pulsar, Green Label, Hakama and lethal super etc. State-of-the-art manufacturing facilities in Chopanki (Rajasthan), Samba & Udhampur (J&K) and Dahej (Gujarat). The company has set up formulation facility in Dahez SEZ area for supplying innovative formulations. The company's products are available in over 100 formulations and approximately 22 technicals. It caters to both domestic and international markets. Last year, the company has completed buyback of its fully paid-up Equity Shares of face value of Rs10 each at a price not exceeding Rs575 per equity share. Buy on declines for medium term target of Rs1,600.

Lumax Auto Technologies Limited

Lumax Auto Technologies Limited is an India-based automotive company, which is engaged in the aftermarket sales of automotive parts. The company is engaged in the business of dealing and manufacturing automotive lighting equipment and automotive components. It also manufactures and supplies gear levers for electric cars, plastic molded parts and frame chassis. Product portfolio comprises integrated plastic modules, 2Ws chassis, 2W/3W lighting, gear shifters, emission systems, transmission products, seat frames, after market, telematics products & services, oxygen sensors, on-board antennas, electric devices and components, including software related to the automotive industry. It supplies its products to original equipment manufacturers (OEMs) in India and across the world. The company manufactures various products, which include headlamp, tail lamp, seat frame and adjustor motor. It has approximately 33 manufacturing facilities. The company's subsidiaries include Lumax Energy Solutions Private Limited and Velomax Mobility Private Limited. The company has sixteen state-of-the-art manufacturing facilities spread across five states and seven international partnerships with global giants such as Mannoh (Japan), Yokowo (Japan), Jopp (Germany), Cornaglia (Italy), FAE (Spain), Ituran (Israel) and Alps Alpine (Japan). Use corrections to buy for medium term target price of Rs400.