Besides policy-related announcements, the Street also wants to know who would be the new FM and contours of the full-fledged Union Budget that will be tabled in next few weeks

On the back of caution ahead of general elections outcome, F&O settlement considerations, recent swoon in technology stocks in US, FII selling and uncertain global cues; the domestic stock markets corrected modestly during the week ended. Both the benchmark indices fell almost two per cent each to close at 22,531 and 73,961 points. FIIs sold nearly $424 million in equity segment. It is important to see how FIIs position themselves after the election results. S&P Global Ratings during the week revised outlook for the Indian economy to positive from stable and has affirmed the overall rating at BBB- citing robust growth and improved quality of government expenditure. GST collections for May 2024 came in at Rs1.73 lakh crore, up 10 per cent year-on-year. The growth in mop-up was driven by an increase in domestic transactions (up 15.3%) and slowing of imports (down 4.3%).

The GST mop-up for April had hit a record high of Rs2.1 lakh crore. A decline in collections on a month-on-month basis could be due to year-end tax payments in May and potentially stagnant auto sales. The combination of summer heatwaves and lower auto sales might lead to flat or lower GST collections in June 2024 compared to Aprils peak. The exit poll estimates that predict a huge win for the ruling BJP-led NDA coalition may trigger an ‘explosion’ in the markets on Monday and observers believe that stocks and indices will register strong gains on Monday even as the continuity of the current government is already factored in. Technically and fundamentally the market is poised for a rally. Large-caps in financials, capital goods, automobiles, and telecom are likely to lead the present swing.

In the US markets, the era of low interest rates had investors piling into expensive growth stocks during down markets. Lately, though, they have been seeking safety in shares that trade at much lower multiples of future earnings than technology stocks, such as utilities and energy. In the near term, while the single biggest trigger for the stock market, undoubtedly, this week would be the outcome of the Lok Sabha election results on June 4, investors would be eyeing other key triggers like monthly auto sales numbers, RBI Policy meeting on June 5-7, FII flows, inflation data and global cues. Once the results are out on June 4, investors would be looking for cues from the winning alliance regarding the immediate priorities of the new government.

Besides policy-related announcements, the Street also wants to know who would be the new FM and contours of the full-fledged Union Budget that will be tabled in next few weeks.

Follow market trends and history. Don’t speculate that this particular time will be any different. For example, a major key to investing in a specific stock is its performance over five years.

F&O / SECTOR WATCH

After reaching record highs, Acrophobia (fear of heights) triggered selling in the benchmark indices and the Nifty corrected by more than 1.5 per cent from its record highs, while the Bank Nifty closed on a flat note. Rollovers in Nifty futures improved to 71 per cent compared to last month’s 65 per cent, in line with the last 3-month average of 72 per cent. On other hand, the market-wide rollovers stood at 90 per cent compared to last month’s market wide of 92 per cent. Rollovers in indices were aggressive from Indian market players whereas FIIs rolled over shorts.

Analysing option data, the highest Call writing in Nifty was observed at the 23,000 and 22,500 strikes. For Bank Nifty, the highest Call Open Interest was seen at the 50,000 and 49,000 strikes. The rollover rate for Bank Nifty in the June series has declined compared to the previous series, falling from 74.41 per cent to 67.66 per cent. Conversely, Nifty’s rollover rate has increased to 71.76 per cent, surpassing the previous month’s rate. This indicates sluggish moves in Bank Nifty for present. Implied Volatility (IV) for Nifty’s Call options settled at 22.37 per cent, while Put options concluded at 23.54 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.25 for the week. The India VIX, a key indicator of market volatility, concluded the week at 24.18 per cent. Going ahead, the India VIX is likely to continue its northward journey up to 26-29 levels till it is trading above the level of 21 mark. However, after the general election outcome, we may witness a sharp correction in the volatility index. Over the past week, PSU banks emerged as the top performer last week, whereas the IT, energy along with oil & gas sectors lagged behind. On the back of outcome of Lok Sabha Elections, expect heightened volatility in the upcoming week. Stock futures looking good are Adani Ports, Bharat Forge, BHEL, Gail, HPCL, Cummins India and RIL. Stock futures looking weak are ABFRL, Berger Paints, Lall Pathlabs, Marico, Nestle and Persistent.

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

STOCK PICKS

EPL Ltd

EPL Ltd (formerly called Essel Propack Ltd) is the world’s largest specialty packaging company, with 21 state-of-the-art manufacturing facilities spanning across 11 countries (Brazil, China, Colombia, Egypt, Germany, India, Mexico, Philippines, Poland, and the United States) and 5 continents. EPL is an EcoVadis Gold rated company.

The company is engaged in the manufacturing of plastic packaging material in the form of multilayer collapsible tubes and laminates used primarily for packaging consumer products in the beauty and cosmetics, health and pharmaceuticals, food, home and oral care categories. The company’s product segments include laminates, laminated tubes, extruded tubes, caps and closures, and dispensing systems. The company produces specialty laminates in its facilities in China and India.

The company also produces tamper-evident closures for the protection of products. The company is a preferred partner to the world’s biggest brands in Beauty & Cosmetics, Food, Oral Care, Pharma & Healthcare and Home Care. It is estimated that every third tube produced in the oral category globally is an EPL tube.

It can be recalled that after Blackstone had acquired a 75 per cent stake in Essel Propack, it sold a 23 per cent stake to Axis Mutual Fund, Franklin Templeton Mutual Fund and DSP Mutual Fund, Morgan Stanley, Neuberger Berman and Nomura on an average price of Rs256.5. Market sources indicate that remaining 51.53 per cent stake is going to be sold at Rs320-330 in near future. Stay invested and add on declines for target price of Rs350 in next few months.