A gamut of factors influencing stock market

Spooked by downgrades of Indian equities by global brokerage houses - Morgan Stanley and Nomura- hectic profit booking by FIIs and DIIs, mixed Q2 earnings reflecting inflationary pressure in margin due to higher input prices and fear of 'highs'; the markets suffered the biggest weekly fall in last eight months during the week ended October 22, 2021. The BSE Sensex closed below psychological 60,000 mark, declining 1,514.69 points to 59,306.93 points, and the NSE Nifty broke 18,000 level, down 443.25 points to 17,671.65. Broader markets also witnessed sharp correction with both the Nifty Midcap and the Smallcap indices falling nearly two per cent. Net sales of FIIs during October amount to a staggering Rs25,572 crore compared to net buying of Rs4,471 crore by DIIs during the month. Continuous FII selling has turned sentiment weak and nervousness gripped the markets. With successive increase in petrol and diesel prices to new highs, cascading effect on inflation is not ruled out. The new variant of coronavirus is a concern across the globe as its latest mutation named, AY4.2, has been on the rise in the United Kingdom and other parts of globe. However, the new variant is a rare phenomenon in India thus far, but a few cases in southern Indian states have been reported. Do not ignore news on Covid front. The US Fed Policy meeting is scheduled to be held on November 2-3; global investors will closely watch the commentary related to tapering schedule and indication of interest rate hikes give the threat of inflation.

Near term trend will be dictated by Q2 earnings, US Fed meeting outcome, macroeconomic data like PMI numbers, FIIs attitude towards Indian equities, international crude oil prices, rupee-dollar movement and other global cues.

Key Q2 earnings to watch in the coming week are HDFC, Tata Motors, Bharti Airtel, State Bank of India, Sun Pharma, Eicher Motors, HPCL, Divi Laboratories, and IRCTC. Stock exchanges will conduct the customary one-hour special 'Muhurat' trading between 6:15 pm and 7:15 pm on Diwali, November 4, a time beyond normal trading hours, but fixed as per the astrologically defined auspicious moments of the day.

IPO Bazaar: The IPOs of FSN E-Commerce Ventures Ltd (Nykaa) and Fino Payments Bank are currently open for public subscription. In the next four weeks, five firms including Paytm parent One97 Communications, Policy Bazaar parent PB Fintech, Sigachi Industries, and SJS Enterprises have lined up their IPOs to raise over Rs27,000 crore collectively. So far in 2021, as many as 41 companies have floated their IPOs to raise Rs66,915 crore. IPO bubble gets inflated every few years and the IPOs will keep coming till the market remains favourable. It is pertinent to remember that just because an IPO is a much fancied one or is very heavily oversubscribed doesn't mean that it will do well in the coming years. Profit booking was seen in secondary market to invest in the large pipeline of IPOs which are planning to raise nearly Rs35,000 crore in the next two weeks. Movement of funds from secondary market to IPO market will definitely impact liquidity in secondary markets say savvy market players.

Quote of the week: "Know what you own, and know why you own it"

— Peter Lynch

Do your homework before making a decision. Once you've made a decision, make sure to re-evaluate your portfolio on a timely basis. A wise holding today may not be a wise holding in the future.

F&O / SECTOR WATCH

Mirroring the heightened volatility and sharp whipsaw movements in the cash market, the derivatives settlement week witnessed sharp bouts of selling from bears. The November series started off on a week note as the NSE Nifty fell way below 18,000 mark and corrected nearly five percent from its record high levels. Nifty slipped below 17700 mark, while Bank Nifty also ended the week with loss of more than 2.5 per cent. Weak sentiment also contributed to relatively weak rollovers. Maximum Call Open Interest was seen at 18000 then 19000 and 18500 strikes, while Put Open Interest was seen at 17000 then 17500 strike. Implied Volatility (IV) of calls closed at 16.61 per cent, while that for Put options closed at 16.22 per cent. The Nifty VIX for the week closed at 17.91 per cent and is expected to remain volatile. PCR of OI for the week closed at 1.21. On downside, 17500 would act as immediate support for the Nifty, while 17800-17900 zone could limit any sharp upside. Option data indicated that the Nifty could trade in a wide trading range of 17,200 to 18,300 levels in coming days. However, with practically just three trading days in the week ahead, optimists predict there are chances of a technical pullback in the next few sessions. It is interesting to observe that since May 2020, time wise index has not corrected for more than 2-3 consecutive weeks. In current scenario, index has already corrected over past two weeks. Thursday will just have a symbolic one-hour Muhurat Trading session while Friday will be a trading holiday on account of Diwali.

Nearly all the sectors ended in negative, except the PSU Bank and Health Care which were resilient. The Metal and Private Banks were the underperformers. The Metal stocks declined as the commodity prices continued to come down on weak demand outlook especially from China due to the slowdown in the economy. The private banks on the other side declined on weak results and lower asset quality. Results till date show that consumer goods companies have witnessed unprecedented inflation in several key raw material. Coming week will start with the automobile companies releasing their October sales data. Industry observers expect the shortage of semiconductors, and rising commodity prices to impact sales and margins. Barring couple of stocks, the sector has been underperformer for last several months. Maruti Suzuki, Tata Motors, Mahindra&Mahindra, Escorts, Bajaj Auto, TVS Motor, Hero Motocorp and Ashok Leyland are expected to be in focus. IDFC First Bank reported a near 50 per cent jump in its standalone net profit in the second quarter of this fiscal year, driven by growth in core operating income and lower net credit losses. Punters predict target price of Rs65 in next few weeks. Stock futures looking good are Ambuja Cements, Canara Bank, Cholamandalam Finance, DLF, Escorts, Grasim, Torrent Pharma, UPL and Vedanta. Stock futures looking weak are Amaraja, Balkrishna Inds, Godrej Consumer, Laurus Labs, Muthoot Finance, NMDC and Zee Entertainment.

Stock Picks

Asahi India Glass Limited

Asahi India Glass Limited (AIS) is an integrated glass solutions company. The company is present across the entire glass value chain, from manufacturing of float glass to processing of glass, fabrication and installation. Product portfolio includes Clear, Tinted and Frosted glass; Coated (Energy efficient, Solar control and Heat-reflective glass); Décor (Back-painted, Mirror and Tinted mirror glass); Processed (Laminated, Tempered and Value-added laminated glass); and Fire-resistant, Smart, Fabric laminated, Mesh laminated and Bullet resistant glass It is an

eminent brand preferred by retail and institutional customers in the domestic market as well as overseas. The company's business is spread across 3 Strategic Business Units (SBUs): Automotive, Architectural and Consumer. At 74 per cent market share, AIS continues to be the undisputed leader of the Indian passenger vehicle segment. The company manufactures windscreens, side windows, rear windows, glass sunroofs and other assembled and value -added products for major automotive manufactures in India. AIS is the one of the leading producers and

suppliers of architectural glass and offers a wide range of highly specialised value-added glass products. It provides an array of solutions – across annealed glass, coated glass, decorative glass, processed glass and other value -added glass – intended for exterior and interior use in modern architecture, protecting people and allowing people to 'See More'.

In Consumer Glass, the company provides an expansive range of fenestration products in uPVC and aluminium substrates for residential and commercial use.

AIS Glasxperts leads the way in providing full-service innovative solutions in living glass, meeting expectations around contemporary, eco-sensitive and high-quality branded glass products, fittings and systems. AIS Windshield Experts is India's largest automotive glass repair and replacement service brand. Prospects of immense growth potential in the Indian market, growth of automobile exports from India, increasing trend of use of value added glazing products in automobiles, pick-up in consumer businesses, strategic government reforms like stricter quality standards for all glass products and curb of spurious imports and implementation of new vehicular emissions norms, generating demand for new technology products spell good times for the company in next few quarters. Buy for medium term target of Rs750.

Triveni Turbine limited

Triveni Turbine limited (TTL) is a dominant Industrial Steam Turbine manufacturer with a global footprint spanning over 70 countries. The company is the market leader in India with a dominant 60 per cent market share and is the largest manufacturer of industrial steam turbines in 5 to 30 MW range globally. It also offers comprehensive aftermarket services covering the entire lifecycle of turbines. TTL operates in higher capacity range upto 100 MW turbines. The company offers robust back-pressure and condensing steam turbines that work across a wide range of pressure and flow applications. TTL find applications in a wide range of industries such

as sugar, steel, pulp & paper, textiles, chemical, palm oil, food processing, etc. The turbines are used in multiple applications like co-generation, combined heat & power generation, waste to energy, captive power generation and independent power generation.

GE Triveni Limited (GETL), Triveni's joint venture company with DI Netherlands BV, affiliates of GE, is engaged in the design, supply and service of advanced technology steam turbine generator sets, with generating capacity in the range of 30.1-100 MW. Q2 results clearly indicate that growth is 'back' and the company is likely to report good results in coming quarters also. Use declines to buy for medium term target of Rs375.