Consolidation at current level more likely

Key Factors

• CPI inflation on Dec 12
• WPI inflation on Dec 14
• Bank loan & deposit growth, forex reserves and BoP data to influence mkts

Buoyed by favourable State elections results, better-than-expected economic growth for Q2FY24, increase in full year GDP growth estimates by RBI, while maintaining status quo on policy rates, stable international crude oil prices and positive global cues; the domestic equity markets had a spectacular run during the week ended with NSE Nifty logging gains for sixth consecutive week and Bank Nifty also closing higher for the third straight week. The benchmark indices as well as Bank Nifty ended at fresh record closing highs. The Nifty closed at 20,969 points, up 702 points or 3.46 percent, the biggest weekly gain since July 2022, while BSE Sensex rallied 2,344 points or 3.47 percent to 69,826 points. The broader markets also recorded gains with the Nifty Mid-cap and Small-cap indices rising 2.35 percent and 1.16 percent respectively. FIIs continued their purchases with nearly Rs10,900 crore worth of shares in the current month so far.

DIIs also provided support with buying of more than Rs5,700 crore worth of shares in the cash market segment. Observers expect the FII flows to continue given the increasing possibility of continuation in economic policies after BJP winning three key States elections, strong economic growth, falling oil prices and declining US 10-year treasury yields. True to expectations, the RBI held interest rates for the fifth consecutive time in its monetary policy stance review meeting. However, it signalled that rates will remain elevated to ensure consumer inflation retreats toward the central bank’s legally mandated target. It also bumped up the economic growth forecast for FY24 on robust demand. The RBI maintained its full year inflation forecast at 5.4 percent for FY24, citing food and weather related risks, while raising full year growth forecast.

Coming week will be laced by macroeconomic data like the CPI inflation on December 12, WPI inflation on December 14 and the bank loan & deposit growth, foreign exchange reserves and balance of trade data. After the consistent run up in past six weeks, the market is expected to take a breather and consolidate at current levels. Mild correction is not ruled out with major focus on the US Fed meet outcome and the Powell commentary.

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

Following the bullish undertone in the cash segment, derivative segment witnessed robust volumes amidst hectic short covering by bears. Both Nifty and Bank Nifty indices managed to close at their record highs with sharp gains of more than 3.5% & 5.45% respectively. The maximum weekly Call Open Interest was seen at 21,000 strike, followed by 21,500 and 22,000 strikes; while the maximum Put Open Interest was at 20,900 strike, followed by 20,000 strike and 20,800 strike. Bank Nifty futures advanced 5.4 per cent last week to close at 47,500 points. Highest Call Open Interest is at 47,500 and the Put Open Interest is at 47,000 points.

F&O data indicates that the Bank Nifty is not as bullish as Nifty. Implied Volatility for Nifty’s Call options settled at 10.37 per cent, while Put options concluded at 11.25 per cent. The India VIX, a key indicator of market volatility, concluded the week at 12.67 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.54 for the week. Overall options data indicates that 21,000 is the crucial level to watch. Volume spike and decisive closing above the same can take the Nifty towards 21,500.

Immediate support is at 20,800 and crucial support at 20,500. Protecting profits at current levels is of paramount importance. While fresh purchases have to be made highly selectively, emphasis should also be placed on protecting profits at current and higher levels by placing trailing stops. Banking and financial services, energy, infrastructure, technology, metal, oil & gas, and auto stocks supported the market, while FMCG and pharma stocks were under pressure.

The defensive pockets like FMCG, IT, PSE may continue to find traction over the coming days. Stock futures looking good are Coromandel, HDFC Bank, Infosys, ICICI Bank, PVR Inox, CUB, Samvardhana Motherson, IRCTC and TCS. Stock futures looking weak are Bharti Airtel, Escorts, Divi Labs, Piramal Enterprises, Page Inds and M&M Finance.

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

Amines & Plasticizers Ltd

Amines & Plasticizers Ltd is engaged in the manufacturing of organic chemicals, amines, gas treating solvents and general trading. The company manufactures over 60 different varieties of organic chemicals, amines, solvents and fertilizers. The main products manufactured by the company are Methyl Diethanolamine (MDEA) and N Methyl Morpholine Oxide (NMMO), which are used in petrochemicals and oil refineries, gas plants and textiles. Its product by type includes Alkyl Alkanol Amines, Alkyl Alkanol Amines, Alkanolamines, Morpholine and Substituted Morpholines, Specialty EO/PO Products and EO/PO derivatives /surfactants.

Its product by industry includes paints, coatings, printing inks, polyurethanes, metal working fluids, corrosion inhibitors, agro chemicals and photographic chemicals, among others. In the field of plasticizers, it manufactures a range of products, which include Phthalates, Sebacates, Trimellitates and Acetates, among others.

The company’s products are also used in the Textile and manufacturing of Electronic chips. The company has ventured into other activities like manufacture of Amine Reclamation Units. These Amine Reclamation Units are used for revamping the amines by removing the heat stable salts formed in the amine during use giving the amine a longer life for reuse on the refinery. The company’s wholly owned subsidiary – Amines and Plasticizers FZ-LLC in Ras Al Khaimah, Free Trade Zone, UAE has commenced its operations and reported a profit of for the first time since its inception. Buy on declines for target price of Rs325 in medium term.