Expect Sharp Stock-Specific Moves This Week

HDFC Bank, Paytm, Zomato, IDBI Bank, IOB, Tata Technologies, BPCL, HUL, HUDCO, Adani Green Energy, Dr Reddy’s Labs, DLF, and Indigo will announce their quarterly earnings this week

India’s resilient economic growth and robust forex reserves could limit excessive declines. In the coming fortnight, a good Union Budget can be a game-changer if it delivers bold reforms addressing structural challenges, spurring growth, and encouraging investments

Amidst heightened volatility triggered by renewed selling in IT and Bank stocks, rising crude oil prices, weak rupee against dollar and subdued expectations over the Union Budget; the domestic stock markets weakened during the week ended. BSE Sensex declined 759.58 points or 0.98 percent to finish at 76,619.33, while NSE Nifty shed 228.3 points or 0.97 percent to end at 23,203.20. Among broader indices BSE Mid-cap and BSE Small-cap indices shed one per cent each. FIIs sold equities worth Rs25,218.60 crore during the week, while DIIs bought equities worth Rs25,151.27 crore. Till date in the current month, FIIs offloaded equities worth Rs46,576.06 crore and DIIs purchased equities worth Rs49,367.14 crore. It is pertinent to observe that over the last 10 years, FIIs have been net sellers six times in January with the highest selling in 2022 at Rs33,303 crore. Optimism about the US economy, driven by rate cuts, AI-led US stocks, and Trump’s win, have fuelled buzz around American Exceptionalism and capital shifts from emerging markets to the US. Any reversal of the FII flows will happen only after the market signals peaking of the dollar and US bond yields followed by their decline.

The dollar index, which is currently hovering around 109 against a basket of six top currencies, has appreciated by nearly six per cent over the past three months. On the back of massive outflows of foreign funds and falling domestic equity markets denting investors’ sentiment, the rupee ended the week at 86.60 against the US dollar. The Indian rupee’s trajectory against the USD depends on several factors, including oil prices, the trade deficit, and global interest rate trends. India’s resilient economic growth and robust forex reserves could limit excessive declines. In the coming fortnight, a good Union Budget can be a game-changer if it delivers bold reforms addressing structural challenges, spurring growth, and encouraging investments.

A well-balanced Budget aligned with India’s growth vision could significantly boost market sentiment and long-term growth prospects. In the coming MPC meeting of the RBI, the likelihood of an Repo rate cut depends on inflation trends, domestic growth indicators, and global monetary policy. If inflation remains within the central bank’s comfort zone and growth requires further support, a rate cut could be considered.

During the week ahead, Donald Trump will take over as the 47th President of the United States, and global markets could remain volatile throughout the week. Many leading companies like HDFC Bank, One 97 Communications (Paytm), Zomato, IDBI Bank, Indian Overseas Bank (IOB), Tata Technologies, Bharat Petroleum Corporation, Hindustan Unilever (HUL), Housing & Urban Development Corporation (HUDCO), Adani Green Energy, Dr Reddy’s Laboratories, DLF, and Indigo will announce their quarterly earnings this week. Expect sharp stock-specific moves during the course of the week.

Be prepared to invest in a down market and to get out in a soaring market, as per the philosophy of Warren Buffett.

F&O/ SECTOR WATCH

On the back of heightened volatility in the derivatives segment, both the Nifty and the Bank Nifty marked a seven-month low (23,047 for Nifty and 47,898 for Bank Nifty) during the early part of the week. Mild recovery helped the indices recoup some losses helping Nifty and Bank Nifty to close at 23,203 and 48,541. Among sectorial indices, major gainers were PSU Bank, Metals and Commodities, whereas IT, Consumer Durables, and Realty were the top losers for the week. In the options market, prominent Call open interest for Nifty was seen at the 24,000 and 23,500 strikes, while the notable Put Open Interest was at the 22,700 strike. For Bank Nifty, the prominent Call open interest was seen at the 49,000 strikes, whereas notable Put Open Interest at the 48,000 strike. Implied Volatility (IV) for Nifty’s Call options settled at 15.16 per cent, while Put options conclude at 15.97 per cent. The India VIX, a key market volatility indicator, closed the week at 15.47 per cent. The Put-Call Ratio Open Interest (PCR OI) for the week was 1.01. Decent 3QFY25 earnings of large cap stocks were unable to improve the market sentiment amid rising crude oil prices (+5%) and continued depreciation of INR (-0.6%) in the past week. The short-term trend of Nifty remains weak amidst range movement. Nifty’s support is around 22,800, with resistance near 23,500.

A decisive upside move above 23400 can give confidence to the market participants over near term direction of markets till the Union Budget. Stocks looking good APL Apollo, Biocon, GMR Airports, Indus Towers, ICICIGI, Jubilant Food, LTTS, Mannapuram Finance andNHPC. Stocks looking weakBPCL, CESC, Infosys, Lodha, Persistent, Shriram Finance and Ultratech.

STOCK PICKS

Gujarat Apollo Industries Ltd Gujarat Apollo Industries Ltd is engaged in manufacturing of different types of mining and road construction and maintenance machineries. The company operates through business of manufacturing and sale of construction and mining machineries, and spare parts segment. It provides state of the art and technically savvy crushing and screening solutions serving industries like quarries, mining, construction, and recycling. The company formed a joint venture with PFH BV, a prominent Belgium-based manufacturer of agricultural and construction equipment; and aims to leverage combined expertise and resources to develop and market innovative solutions in the agricultural machinery sector.

The joint venture resulted in the establishment of PFH Agri Equipment India Private Limited (PAEPL), a 50:50 partnership between GAIL and PFH BV. The government’s emphasis on infrastructure development and mining initiatives has created a robust demand for crushing, screening, and mineral processing equipment. This market is poised for significant growth in the coming years. The company’s primary focus is on the mining equipment and manufacturing sector, making our growth directly linked to the expansion of these industries.

The company’s products include Jaw Crusher, HP Cone Crusher, GP Cone Crusher, Horizontal Shaft Impact Crusher, Vertical Shaft Impact Crusher, Vibrating Screen, Mobile Crushing Plant, Crushing and Screening plant, Bucket Crusher, and Coal Sampling Unit. Its vibrating screen consists of two spherical roller bearings in each housing with bore sizes up to 140 mm. Company’s wholly-owned subsidiary, AEML Investments Ltd, is dedicated to manufacturing components for agricultural equipment and farm machinery. Buy on declines for medium term target of Rs750.