FIIs hold the key in ongoing Market rally

Ignoring the selling pressure in IT stocks after lower-than-expected TCS’ Q4 earnings with cautious outlook and uncertainty in the BFSI segment; buoyed by consistent buying from FIIs, better macroeconomic data indicating further pause in interest rates by RBI and positive global cues, the domestic stock markets logged gains for a third successive week. BSE Sensex jumped 598 points to 60,431 points and NSE Nifty rose 229 points to 17,828. Renewed interest from retail investors was evident in the broader markets. Outperforming the benchmark indices, the Nifty Midcap 100 and Smallcap100 indices gained 1.75 percent and 1.5 percent respectively.

Forty four smallcaps have given double digit returns during the week ended. FIIs extended the buying in the third consecutive week with purchases worth Rs3,355.16 crore during the week ended. FII buying has been one of the reasons for the rally in equity markets. FIIs have been net buyers in all sessions this month, to the tune of nearly R5,000 crore, the highest buying since November 2022. Experts expect the rally to continue if the inflow continues in the coming sessions. The Indian rupee has appreciated for the fourth consecutive week to settle at 81.81 against the US dollar. March inflation based on the Wholesale Price Index (WPI) will be out on Monday. RBI will release the minutes of the Monetary Policy Committee’s meeting. It is pertinent to understand that for the first time since May 2022, the RBI paused rate hikes and left the repo rate unchanged. Near-term direction of the market will be dictated by macroeconomic data, Q4 results, international crude oil prices and global cues. With the continuous nine days winning streak, the support level is now 17,500 – 17,600 level; whereas 200-SMA around 17,500 is likely to act as a sacrosanct level. The next major resistance is seen at the psychological level of 18,000. The markets will react to the results of two heavyweight’s viz. Infosys and HDFC Bank in early trades on Monday. The coming week will be busy for market players as several companies, including Reliance Industries (RIL), HCL Tech, ICICI Bank and others will release quarterly numbers.Adopt buy on dips strategy say old timers.

Listening Post: For investors, that ‘gut feeling’ can be more powerful than they realize. Here’s how to listen to your gut without being ruled by it. If only financial markets came with traffic signals: indisputable indicators of when it is safe to keep going, when you need to slow down, when you must stop. Imagine how much easier investing would be if you could rely on such green, yellow or red lights. Unfortunately, these unambiguous signals don’t exist. Investors fill much of the absence with anecdotes and gut feelings, which can be more powerful than you realize. Such soft indicators can help you make hard decisions, but only if you rely on them in the right ways. Consider the anecdotal feel of today’s markets. Bitcoin’s price rose above $30,000 this week. There are always two opposing narratives over the conditions prevailing in market. Depending on which feels more compelling, your gut may be telling you to be cravenly bearish or gung-ho bullish. And you wouldn’t be alone in heeding your gut feelings. Gut feelings don’t arise only from your gastrointestinal tract. Evolution finely tuned our bodies to potential changes in risk and reward, preparing our ancestors for fight or flight in the presence of prey or predators. In today’s world, the same mechanisms make our hearts race, palms sweat and muscles tense up when we expect our portfolios to take a sharp rise or fall. Recent research has shown that signals from the stomach activate regions of the brain that monitor arousal and motivate people to orient their attention. Such gut feelings—which scientists call interoception—can shape our decisions even when we believe we are relying on data and logic.These intuitions are most reliable when they arise in stable environments where you get prompt, accurate and unambiguous feedback. In financial markets, it’s hard to educate your intuitions as professional athletes and other skilled performers do in stable environments. But your gut feelings will still feel powerful—precisely because the information you’re getting is in such flux. That’s especially true in current times, when most financial assets are overvalued by traditional measures and when nightmare and nirvana scenarios are both plausible.The solution is to adopt rules and procedures that enable you to listen to your gut without being ruled by it.Don’t just heave a hunk of money at (say) bitcoin or gold or some stock because it’s “going to the moon.” Write down how likely, in a percentage range, you think it is to reach your target price by a certain date. List, in as much factual detail as you can, three reasons why. (If all you’re going on is a hunch, then write something like “I have a gut feeling” three times.) Finally, use your estimate of the probability you are right to determine how much you invest.When the target date arrives, check the outcome against your original forecast and reasoning and see if what you wrote down at the start can teach you anything about how to make your next investment. Did the asset end up near your predicted price roughly when you expected? How much of your rationale was right? If all you went on was intuition, did it turn out to be reliable?A gut check just might keep your gut from hijacking your brain.

Quote of the week:"Given a 10% chance of a 100 times payoff, you should take that bet every time."

— Jeff Bezos

Most people dismiss many of the best and most profitable investment ideas simply because they probably won't work. These investors never stop to consider how much they could make if unlikely outcomes actually occur. Jeff Bezos took those bets and became the richest person in the world.

F&O / SECTOR WATCH

Mirroring the buoyancy in cash market, despite intermittent holiday’s derivatives segment witnessed brisk trading activity. In the Option segment, Call Open Interest was seen at 18,000 level. On the contrary, Put writers hold maximum Open Interest at 17,800 strike. The Implied Volatility (IV) of Calls closed at 11.05 per cent, while that for Put option, it closed at 12.03 per cent. The Nifty VIX for the week closed at 12.27 per cent. PCR of OI for the week closed at 1.29 higher than the previous week, this indicates more Put writing than Calls. Broader trading range for the Nifty is now 17,400-18,200 levels say traders. However, Bank Nifty outperformed over the week and ended with gains of more than 2.50 per cent. Bank Nifty has its next immediate hurdle at 42500-42700 zone, while on downside, 41500-41000 zone is likely to act as a major support for the index. True to predictions, the recent US banking crisis has resulted in estimate cuts by analysts and increased caution among investors for Indian IT companies that rely heavily on revenue from the BFSI sector, particularly from the US and Europe. TCS and Infosys reported Q4FY23 earnings that missed street expectations. Despite a 14.8 percent year-on-year (YoY) rise in consolidated net profit at Rs11,392 crore and a 16.9 percent growth in revenue to Rs59,162 crore, TCS missed estimates, with quarterly growth at 1.6 percent for revenue and 5.0 percent for net profit. Operating profit for the Infosys came in at Rs7,877 crore, whereas, operating margin contracted 0.5 percent yearly as well as sequentially to 21 percent. Stay underweight on IT sector for present say market observers. Over the weekend, HDFC Bank reported better than expected results. Net interest income (NII), or the difference between interest earned and interest expended, grew by 23.7 percent to Rs23,351 crore from Rs18,872 crore for the quarter ended March 31, 2023. The commentary from the management on the merger is positive. The stock would react positively over medium term say players in the counter. A total of 50 companies will release their earnings scorecard for the coming week including prominent ones like HCL Technologies, and ICICI Bank. Stock futures looking good are Aurobindo Pharma, ICICI Bank, L&T, Eicher Motors, Exide Inds, Syngene, SBI Cards and Zydus Wellness. Stock futures looking weak are Birla Soft, Indus Towers, LTTS, PVR, Persistent and TechMahindra.