Assembly Results In Haryana, J&K To Set The Tone For Mkts

The sudden U-turn in FII strategy has been mainly triggered by the outperformance of Chinese stocks. However, the duration of this FII selling trend will depend on the sustained momentum in the Chinese markets

Spooked by escalating tensions between Israel and Iran, raising concerns about a broader Middle East conflict, the persistent selling by foreign institutional investors (FIIs), the implementation of regulatory changes in the F&O segment by Sebi and fears of sharp surge in international crude oil prices; the domestic stock market witnessed its biggest weekly fall since June 2022. BSE Sensex declined 3,883.4 points or 4.53 percent to finish at 81,688.45 points, while NSE Nifty fell 1,164.35 points or 4.44 percent to end at 25,014.60. Modestly better were broader markets with the BSE Mid-cap Index shedding 3.2 per cent and the BSE Small-cap index falling 2 per cent. All the sectoral indices ended in the red. FIIs sold equities worth Rs40,511.50 crore. However, DIIs bought equities worth Rs33,074.39 crore. A ‘Buy China, Sell India’ trade is getting played out in emerging markets. The sudden U-turn in FII strategy has been mainly triggered by the outperformance of Chinese stocks. However, the duration of this FII selling trend will depend on the sustained momentum in the Chinese markets. The Indian rupee extended the weekly losses as it ended 27 paise lower against the US dollar at 83.97 on October 4 against its September 27 closing of 83.70. India’s foreign exchange reserves jumped by $12.6 billion to cross $700 billion for the first time. India is only the fourth economy in the world to cross $700 billion in reserves after China, Japan, and Switzerland. The international crude prices have risen in recent days, although there has not been a sharp spike so far. The situation may change if Israel attacks oil installations in Iran. The RBI will announce the review of the policy on October 9. RBI faces a delicate balancing act. In responding to softer goods and services inflation, it will be important for monetary policy not to inadvertently accentuate asset price inflation, financial exuberance and the associated financial stability risks that come with it. Expect modest impact of Assembly Polls outcome of Haryana and J&K. The exit polls have predicted a comfortable majority for Congress in Haryana and a hung Assembly in J&K, with NC-Congress alliance emerging as the single largest player. The predictions, if they hold true, spell worry for BJP which was looking to regain its momentum following a subpar performance in the general election.

Don’t despair amid the inevitable setbacks that all investors face, especially during a crisis in the market. If the reasoning behind the investment was sound, stick with it, and it should eventually turn around.

F&O/ SECTOR WATCH

Geopolitical tensions and the recent changes by Sebi to limit index weekly contracts per exchange and increase lot sizes and aggressive selling by FIIs have certainly shifted market dynamics in the derivative segment. Sharp swings in the stock futures have heightened nervousness among the market players. Both the Nifty and Bank Nifty experienced corrections of over four per cent on a weekly basis. Sentiment-based selling was seen as investors reacted to regulatory changes. In the options market, highest Call Open Interest in the Nifty was seen at 25,400 and 25,200 strikes, while for Put side highest Open Interest was observed at the 25,000 and 24,500 strikes. For the Bank Nifty, highest Call Open Interest is at 52,500 and 52,000 strikes whereas for Put highest Open Interest is at the 50,500 and 51,000 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 11.91 per cent, while Put options concluded at 12.59 per cent. The India VIX, a key market volatility indicator, closed the week at 13.17 per cent. The Put-Call Ratio Open Interest (PCR OI) stood at 1.03 for the week. The momentum indicators and oscillators also suggest a weakness. With the Nifty slipping below its 20 and 50-day EMA and also below the 50 per cent Fibonacci retracement level of its prior upward rally (23,893-26,277); chartists suggest it would be wise to remain patient until clearer technical signals of a potential reversal appear.

Technically, the Nifty has next support at 24,800 points, while on higher side 25,200-25,400 zone would act as a key resistance zone for the index. It’s also crucial to set stop-losses to protect against significant downside risks, as this can help minimize losses in a highly volatile market. Stop-losses act as a safeguard, allowing investors to manage risk and prevent emotional decisions during sharp market swings. Stock futures looking good are Exide Inds, Granules, Laurus Labs, Lal Pathlabs, MCX, Petronet LNG and Tata Steel. Stock futures looking weak are Bharat Forge, Bata India, Bajaj Auto, Dabur, Mannapuram Finance, HDFC AMC and Jubilant Foods.

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

STOCK PICKS

ADF Foods Limited

ADF Foods Limited is engaged in the business of Meal Accompaniments, and Prepared food in frozen or canned form and is a market leader in the prepared ethnic food segment. The company’s product portfolio includes ready-to-eat food, meal accompaniments like pickles and chutneys, sauces, condiment pastes, cooking sauces and spices. Its portfolio of brands includes Ashoka, Truly Indian, Camel, Aeroplane, ADF Soul, Nate’s, PJ’s Organics, and Khansaama. Its Meal Accompaniment products include dipping sauces, such as twisty tamarind, tango mango, spicy schezwan, and chatpata achari. Its Chutneys in olive oil products include coriander chutney, mint chutney, pani puri concentrate, sandwich chutney, and tamarind chutney. It also provides Pickles in Olive Oil, Traditional Pickles, and Mango Chutneys. The company’s Frozen products include Frozen samosas, Frozen Kathi rolls, Frozen dosa wraps, Frozen snacks and Ponk. Its ready to eat products include Ready to eat-Normal, Ready to eat-Vegan, and Sarson ka saag. The company products are best suited to serve a wide range of geographies. With a strong distribution network spread across 55 countries, the company possesses a global customer base with a product for everyone. More than 95 per cent of the company’s revenues are derived from exports to North America, Europe, Asia Pacific and GCC markets. The company’s processed food business generated revenue of Rs414.12 crore in FY 2023-24. ADF Foods has production plants in Nasik and Nadiad with an overall capacity of 28,000 MTPA. In addition to the processed food business, the company has ‘agency distribution’ agreements with two key Principals i.e. Unilever and Ekaterra. These agency businesses have assisted the company in launching the distribution of Indian tea, soups and other food products in the North America and the United Kingdom. The Indian government had approved the company under Category-III of the PLI scheme for food processing industries. The economic incentive is anticipated to facilitate global branding and marketing (50% of marketing expenditure or 3% of sales, whichever is less, up to a maximum incentive of Rs61.35 crore during the scheme’s tenure from FY 2022-23 to FY 2026-27). Buy on declines for medium term target of Rs500.