Domestic factors in focus for mkt direction

Under the shadow of the US Debt ceiling concerns, predictions of monsoon arrival, favourable macroeconomic data and global cues in a week of consolidation, benchmark indices-- NSE Nifty at 18,534 and BSE Sensex at 62,547- closed on a flat note. Nifty gained 0.19 percent from previous week's close, Sensex added only 0.07 percent. However, major action was seen in the Midcap space with the Nifty Midcap-100 scaling a record high of 34,006.55. The index gained 1.6 percent during the week. Spurred by MSCI rebalance, FIIs were aggressive buyers for the whole of May investing Rs43,838 crore. It is pertinent to observe that in May, India attracted the largest investment among all emerging markets, and FPIs were sellers in China.

After the announcement of Q4 GDP surprising on the upside at 6.1 percent against an estimate of 5 percent; barring any negatives in next six months market players expect the Nifty to hit 20,000 by December-end and the Nifty Bank scale the coveted 50,000 mark. The Goods & Services Tax (GST) revenue collected in the month of May 2023 rose 12 per cent on an annual basis to Rs1.57 lakh crore. Monthly GST revenues more than Rs1.4 lakh crore for 14 months in a row, with Rs 1.5 lakh crore crossed for the 5th time since inception of GST, indicate the resilience and robustness in the economy.

In terms of volume, Maharashtra, Gujarat, Karnataka along with Tamil Nadu clocked the maximum collection, as these states have a large corporate base and attract most of the investments that come into India. India's stock market capitalisation beat that of France to reclaim its spot as the world’s fifth largest stock market. On the back of a lower inflation data in April and a higher-than-expected gross domestic product (GDP) growth rate in the January-March quarter, observers expect the Reserve Bank of India (RBI) is likely to continue with its current stand in the coming MPC meeting on June 6.

Over the weekend, major US stock indexes rose sharply on the back of a jobs report that beat expectations, signalling that hiring remains robust even as other data suggests inflation continues to slow. It added momentum to a market already bouncing from Washington’s 11th-hour deal to avert a government default. Spill over effect on Indian markets during the early part of coming week is not ruled out. Near term direction of the market will be dictated by RBI MPC meeting outcome, progress of monsoon and global factors.

Listening Post: You're Not as Good an Investor as You Think You Are

Are those who can't remember the crash condemned to repeat it? Markets have been rising and investors returning to stocks, thanks to FIIs, a rash of takeover deals, the glimmers of economic recovery—and an epidemic of amnesia. Many investors have been behaving as if the bloodbath at the start of Covid pandemic, when most of the global stock markets lost at least 50 per cent, had never happened. More worrisome, investors are forgetting the agonizingly real fear they felt during the financial crisis. That could lead some to take more risk than they should and incur losses they can't withstand. So it is vital to evaluate whether you suffer from investing amnesia and, if you are, to counteract it before it is too late. There is not any doubt that individual investors have been getting more aggressive. Leading discount brokerages Zerodha, Upstox and Growwsay trading volumes are up 24 per cent in 12 months. People are revising their memory of the financial crisis, as if they were looking into a rear-view mirror made of rose-coloured glass.

Financial planners report that clients are increasingly saying 2008 and 2020 were no big deal. Many have put the losses out of their memory and are eager to increase their return by adding more stocks.

“It just feels better for a lot of people” to forget their losses. You might think memory works like an engraving plate onto which events are carved in stone and preserved for decades, until they fade with age. In reality, psychologists have shown, memory works more like an Etch A Sketch, on which events are traced but then often altered or erased entirely. People are prone to “spontaneous distortions of memory that make us feel better about ourselves.”

Studies have shown, for example, that people remember voting regularly in national or state elections even when they haven't cast a ballot in at least six years and that 71 per cent of students who earned D grades in high school later recall getting higher marks. One thing that might make some investors feel better about themselves is remembering that their losses were smaller or their gains were bigger than they actually were. That's exactly the kind of polishing of the past that seems to be going on in many investors' minds right now. Memory whitewashes mistakes, too.

Because memory is so malleable, investors should keep an investment diary, creating a record of their buying and selling decisions and the reasons behind them. You can mitigate the flaws of memory by writing events down as they happen. You shouldn't trust your recollections of how you felt in 2008 and 2020. Instead, ask your spouse or a close friend how afraid you were, and look at your old account statements to see whether you sold at the bottom. The best guide to how you will act in the next market downturn is how you did act in the last one. The great financial analyst Benjamin Graham wrote in his book “The Intelligent Investor,” that “the investor's chief problem—and even his worst enemy—is likely to be himself.” If you can't remember the pain you felt in the past when you lost money, you will have no one to blame but yourself if you end up feeling the same anguish all over again.

Quote of the week: “With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future.”

— Carlos Slim Helu

It's far too easy for investors to lose perspective. Whenever something big goes wrong, a lot of people panic and sell their investments. Looking at history, the markets recovered from the Pandemic Covid, the 2008 financial crisis, the dotcom crash, and even the Great Depression, so they'll probably get through whatever comes next as well.

F&O

Amidst heightened volatility in the week ended, markets finished the week almost near an unchanged line, as NSE Nifty closed above 18,500 levels, whereas Bank Nifty closed around 44,000. Options data indicates maximum Call open interest at 19,500 strike, followed by 18,600 and 18,500 strikes. Call writing was visible at 18,600 strike and 18,800 strikes. On the Put side, the maximum open interest was seen at 18,500 strike, followed by 18,600 and 18,000 strikes. In Bank Nifty, highest call and put open interest concentration is at 44,000.The implied volatility (IV) of calls closed at 9.99 per cent, while that for put options closed at 10.59 per cent. The Nifty VIX for the week closed at 11.60 per cent. The PCR OI for the week closed at 1.38. Technically, both the Nifty and Bank Nifty are struggling to give a fresh move above their key resistance levels. Nifty needs to make decisive move beyond the 18,600-18,700 band to touch lifetime highs.

Going by the rollover data, traders have cut short positions in the Nifty and the Bank Nifty looks set to outperform. Among sectors, Auto, Banking and Financials, Capital Goods, FMCG and Realty are likely to outperform. Mid Cap IT stocks are also likely to outperform Large Caps. Keep focus on stock specific action for upcoming week. Cement companies witnessed speculative support from investors through FY23 amid hopes of a rebound. After capex announcements in the FY24 Budget, there was further interest due to expectations that government expenditure would boost earnings, besides a generic macro-recovery. Cement earnings were under pressure in FY22 and FY23 due to high raw material and fuel costs; muted demand prevented them passing on the higher cost. Fuel prices are now moderating, which may reflect in earnings of cement companies going forward. Buy Ultratech, Ramco and Dalmia Bharat. A leading foreign broking house Jefferies has come out with a detailed report on Adani Group. Post Hindenburg fallout, looks like the worst is over for the group. Punters can use declines to build trading positions in Adani counters. Stock futures looking good are Apollo Hospitals, Granules, Info Edge, Jubilant Food, Laurus Labs, M&M and SBI Cards. Stock futures looking weak are Coal India, Kotak Bank, CUB, Container Corp, PVR Inox, Voltas and Zee Tele.

-The author is a senior maket

analyst and former vice- chairman, Andhra Pradesh State

Planning Board