Global cues to set the tone for mkts

Buoyed by the easing of nervousness around Evergrande crisis, US Fed meet outcome, buying by DIIs and positive macroeconomic environment; the benchmark indices scaled fresh record highs during the week ended.

The BSE Sensex rose 1,032.58 points, or 1.75 percent, to 60,048.47, and the NSE Nifty jumped 268.05 points, or 1.52 percent, to 17,853.20, taking the five-week gains to 8.5 percent in the indices. Heightened interest in the index counters led to underperformance of the broader market.

In the absence of any major domestic cues, the market is expected to focus on global developments for direction and could see some volatility given the F&O expiry in the coming week. DIIs have net bought Rs 3,048 crore worth of shares, whereas FIIs have net sold Rs 8.38 crore worth of shares in the week ended.

Strong buoyancy in revenue collections may help in the public capital expenditure this fiscal to be very close to the budget estimate. Tax cuts to stimulate growth are unlikely from hereon. It is pertinent to observe that the Finance Ministry has withdrawn expenditure curb on various Central Ministries and Departments with immediate effect.

Meetings with the global rating agencies by the finance ministry officials have reportedly been fruitful and sovereign rating upgrade is on cards in next few quarters say sources. Prime Minister Narendra Modi's three-day visit to the United States is expected to give fillip to key sectors ranging from drones to 5G, semiconductor, and solar.

Near term trend will be dictated by F&O expiry, auto sales data, macro-economic data, crude oil prices, rupee movement and global cues like unfolding of Evergrande crises. Bandh call on September 27 by farmers and trade unions received support from all opposition parties; expected to impact bank services, road and rail transport.

The IPO mart will keep buzzing next week as well. The initial public offer of Aditya Birla Sun Life AMC, sold in the price band of Rs695-712 per equity share, will open on September 29 and will close on October

1. Paras Defence and Space Technologies, which saw record subscriptions, will likely debut on bourses on October 1.

Heard on the Street: India is no exception to a global IPO frenzy, in which companies ranging from technology start-ups to jewellers and drug makers have raised about a record $476 billion worldwide this year.

Liquidity, low interest rates and demand from retail investors are spurring firms to go public. The IPO market of India is in a feeding frenzy and has reached Rs70,000 crore and is likely to grow further, as a series of companies are lining up with their public offer in the coming months.

Zomato, the online food delivery behemoth, is in a sense is leading this market growth. The start-up went public in July, and despite its mediocre growth prospects and losses in consecutive financial years, its shares have soared more than 70 per cent.

This surprising rise has certainly given a notion that similar, profit challenged start-ups can find an equal response from prospective investors. Zomato IPO has shown that the Indian public market investors have shown that they do indeed value the role of disruption and growth.

India's 3 most valuable start-ups are gearing up for their market debut by the end of this year. Paytm, India's leading digital payments company has filed its documents for the preliminary offering.

With this public offering, the company has plans to raise about Rs166 billion ($2.2 billion). Moreover, if Paytm's IPO can reach its predicted level, it will be India's largest stock market debut ever, surpassing Coal India's Rs150 billion public offerings in 2010. Additionally, e-commerce giant Flipkart is also planning an IPO.

According to the reports, the company can go public as soon as the fourth quarter of FY2021 – 2022. Also, the digital education startup Byju's, currently valued at $16.5 billion, is getting advice to take advantage of this 'red hot' market.

However, the company is now focusing on planned and substantial acquisitions, and they are willing to put their plans of going public on hold till the end of this fiscal year. This hysteria is not likely to dial down easily.

Such is the hysteria that PhonePe, a payment startup Walmart acquired as part of its Flipkart deal, is considering shifting its incorporation back to India from Singapore to capture local investor attention, according to two people familiar with the matter who did not want to be identified.

The regulatory upheaval in China has also sent investors looking for promising opportunities in countries with more predictable government policies. If global investors have to pick an emerging market, the balance is tilting in India's favour after the regulatory action in the China internet ecosystem.

Stock markets go through occasional periods of ups and downs. That's part of the game in the short-run. And that's often juxtaposed with equity IPOs. While investing in IPO, look beyond the listing gains. Rather think long-term and focus on companies with good promoters and governance track record and whose shares are available at 'decent' valuations.

Quote of the week: It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong. — George Soros

Too many investors become obsessed with being right, even when the gains are small. Winning big and cutting your losses when you're wrong are more important than being right.

F&O / SECTOR WATCH

Ahead of the settlement week, on the back of benchmark indices scaling new highs, the derivative segment witnessed robust trading volumes. Maximum Call Open Interest (OI) was seen at 18500 followed by 18000 and 17900 strikes, while maximum Put OI was seen at 17000 followed by 17500, 17700 & 17800 strikes.

Call writing was seen at 18500 then 18000 & 17900 strikes with unwinding at 17700 and 17800 strikes, while Put writing was seen at 17900 then 17700 & 17800 strikes with unwinding at 17600 strike.

The maximum options pain point of the September series is at 17,600 level. This level is expected to act as immediate support for the Nifty and 18000 should act as a psychological hurdle in the near term.

Implied Volatility (IV) of Calls closed at 14.78 per cent, while that for Put options closed at 15.20 per cent. The Nifty VIX for the week closed at 16.60 per cent. PCR of OI for the week closed at 1.31. Ahead of the expiry of the September series, expect volatile trading in Bank Nifty.

Immediate resistances are at 37625 –37800 and expect support in the region of 36875–36500. The first sign of real weakness in Nifty Bank would come only if Nifty Bank starts sliding below the lower range of 36450-36400. Auto sector has been a big underperformer in the current financial year so far.

Auto sales numbers for the month of September, which will start flowing in from October 1, will be closely watched by the street. Industry observers feel that sales are expected to be impacted by the chip shortage but the same could improve towards later part of Q4CY21.

Tata Motors, Maruti Suzuki, Mahindra &Mahindra, Eicher Motors, Bajaj Auto, TVS Motor Company, Ashok Leyland, Hero Motocorp and Escorts will be in focus.

Realty stocks witnessed huge buying interest during the week ended. BSE Realty index hit a record high of 4,067.71, before closing with gains of 21.3 percent at 4,002.46 and saw 1,000 points rally in the last fortnight.

Stocks including Oberoi Realty, DLF and others touched record highs. Use declines to buy into the sector. Stock futures looking good are Axis Bank, HDFC, ICICI Bank, Pidilite Inds, Sun TV and Tata Motors. Stock futures looking weak are IGL, Lupin, Lal Path Labs, Gujarat Gas, Canfin Homes and Tata Steel.

TGV SRAAC Limited

TGV SRAAC Limited, formerly Sree Rayalaseema Alkalies and Allied Chemicals Limited, is a producer of chlor-alkali products and manufactures castor derivatives and fatty acids. The three segments, the company is engaged in chemicals, oils and fats, and power sectors. The chemicals segment products mainly contain Causc Soda (Lye &Flakes), Potassium Hydroxide, chlorine, hydrochloric acid, Sodium Hypochlorite and Chloromethanes, etc. Oils & Fats Segment contains Castor oil derivatives, Soap noodles, Hydroxy Stearic Acid, etc., products.

The main product Caustic Soda after witnessing cyclical downturn till March 2021 has witnessed huge surge in prices by over 30 to 35%. It is to state that there are signs of recovery for this sector with revival in demand from end use Industries. The Caustic Soda– Chlorine industry in India is mainly driven by Caustic Soda unlike rest of the world where Chlorine plays important role. This situation is expected to change as capacity addition of PVC with high volumes slated during 2020-25.

These indications are good for Caustic Soda industries. In order to accord value addition to Chlorine the by-product of the company, a manufacturing facility for Chloromethanes was set up. With the completion of modernisation of Caustic Soda division, encouraging market conditions for company's products, efforts made in controlling cost, the outlook of the company is expected to be satisfactory. Buy for medium term target of Rs80.

Elecon Engineering Company Limited is engaged in the manufacture of material handling equipment, industrial geared motors and reducers, mining equipment and casting processes. The company's segments include Material Handling Equipment, Transmission Equipment and Others. It is also engaged in designing and manufacturing worm gears; parallel shaft and right angle shaft; helical and spiral level helical gears; fluid geared and flexible couplings, as well as planetary gear boxes. Its products include ET Series, EON Series, ETS Series, EOS Series, ET Series Demo, Cooling Tower Gear Boxes and Dual Tandem Gear Boxes.

Its power transmission includes windmill gear, elevator traction machines, marine gear, loose gear and special gear. Its alternate energy includes wind turbines. Its Foundry Division includes material handling, mining and earth moving, power transmission, crusher and cement. The company offers its equipment for sectors, such as fertilizer, cement, coal and mining.

There are strong rumours of L&T picking up stake in the company at a significant premium to current market price. Recovery in the economy and improving outlook for Capita Goods companies makes Elecon Engineering good buy at current levels for target price of Rs325.