Divergent cues signal high volatility in mkts

The single biggest factor driving stock-specific movements will be the Q4 earnings season which picks up pace this week with March quarter numbers of RIL, Tata Consumer, Axis Bank, Bajaj Finance, ICICI Bank and Nestle. When the market opens on Monday, it will also react to Wipro and HDFC Bank’s Q4 numbers announced on Saturday

Spooked by the flare-up in geo-political tension in the Middle East, hawkish US Fed comments, and aggressive FII selling; heightened volatility grippedthe markets and dampened the sentiment. The Nifty fell 372 points for theweek to close at 22,147, and the Sensex was down 1,157 points at 73,088.

In the broader market, the Nifty Midcap 100 fell 2.7 percent and Smallcap100 declined 1.4 percent. FIIs net sold Rs11,867 crore worth of equityshares in the cash segment, taking total monthly outflow to Rs22,229 crore in April, while DIIs have net bought Rs12,233 crore and their monthly net buying was Rs21,269. This showed that DIIs continued to compensate the FII outflow.

Crude oil prices have seen a significant rise in the last few daysamid simmering tensions in West Asia. Apart from geopolitical tensions, healthy economic growth of the US and signs of economic recovery in China have also boosted crude oil prices. If crude oil prices rise and sustain above the $90 per barrel mark, they can negatively impact the overall market sentiment.

Markets are likely to see high volatility in a broader range on the back of divergent cues. On the negative side, flare-up in geo-political tension in the Middle East, hawkish US Fed comments, and FIIs selling are making investors restless. On the positive side - expectations of healthy earnings from index heavy weights and buying emerging at lower levels are showing strength in the market. It is pertinent to observe that the Nasdaq and S&P 500 have both declined in each of the past three weeks as astronger-than-expected US economy buoys inflation and uncertainty over rate cuts by the Federal Reserve. Nasdaq posted worst weekly performance since 2022 during the week ended.

Changing expectations are hammering the speculative artificial-intelligence-oriented tech stocks that propelled a market rally in recent months. The so-called Magnificent 7 stocks lost a collective $950 billion in market capitalization this week.

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

FUTURES & OPTIONS / SECTOR WATCH

Surprised by the sudden spike of geopolitical tensions in West Asia, both Nifty and Bank Nifty extended their corrections from their record highs last week. Nifty ended with a loss of over 1.5 per cent, while BankNifty dropped by more than 2 per cent. Nifty options for the upcoming April 25 expiry showed the highest call open interest at the 22,500 strike and the maximum Put open interest is placed at the 22,000 strike. For Bank Nifty, the highest call open interest was at the 48,000 strike, while the highest put open interest was observed at the 47,000 strike.

Implied volatility (IV) for Nifty’s call options settled at 12.38 per cent and put options concluded at 13.03 per cent.The India VIX, a crucial market volatility indicator, ended the week at 13.04 per cent. The Put-Call Ratio Open Interest (PCR OI) stood at 0.79 for the week indicating more put writing compare than call. Overall, the 22,000 is expected to be key level to watch in the upcoming F&O settlement week.

Nifty is expected to trade within a range of 22,400 to 21,700. The single biggest factor driving stock-specific movements would be the Q4 earnings season which picks up pace this week with March quarter numbers of RIL, Tata Consumer, Axis Bank, Bajaj Finance, ICICI Bank and Nestle. When the market opens on Monday, it will also react to Wipro and HDFC Bank’s Q4 numbers announced on Saturday. It is interesting to observe that after its big bet on Adani companies paid back spectacularly, America’s GQG Partners, an investment boutique which manages global and emerging market equities for institutions, advisors, and individuals worldwide, is betting on another beleaguered company Vodafone Idea. The government, which is the biggest shareholder, currently holds around 32 per cent stake in Vi, which is likely to come down to 24 per cent after the FPO. Vi is now a too-big-to-fail enterprise due to its nearly 20-crore subscriber base.

Finance Secretary TVSomanathan statement that preserving competition with multiple operatorsin the market is a major policy goal of the government has allayed fears of a25 per cent probability of a two-player market, A market with three private telecomcompanies is optimal for India.

Stock futures looking good- Bharti Airtel, Escorts, Petronet LNG, PVR Inox, Trent and Motherson. Stock futures looking weak are Astral, Coforge, IGL, TVS Motors and Page Inds.

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

Uniparts India Limited

Uniparts India Limited is a manufacturer of engineered systems and solutions. The company is one of the leading suppliers of systems and components for the off-highway market in the agriculture and construction, forestry and mining (CFM) and aftermarket sectors with the presence across over 25 countries. The company is a manufacturer of 3-point linkage systems for agricultural machinery globally. Product portfolio offered to the agriculture segment includes 3-point linkage system, assemblies, precision machined parts (PMP), power take-off (PTO) components, forgings as well as hydraulic cylinder solutions. The company is a supplier for precision machined parts (PMP) and hydraulic cylinder solutions to the mobile equipment market and in particular to theconstruction market.

Uniparts is present both in the OEM and aftermarket segments in the off-highway industry with strong global operating model and wide customer base comprising of over 125 customers from across the globe. Balance sheet continues to be net debt free, with group net cash position at approximately Rs107 crore at the end of December 2023. capex for the quarter has been approximately Rs6 crore. Use declines to buy for medium term target of Rs850.