Global cues to weigh on mkts amid sluggish Q2 results

Spooked by multiple global factors like geo-political tensions in the Middle East, firm crude oil prices and the rising US bond yields and domestic factors like weak earnings from IT majors were some of the major factors that weighed on the market sentiment during the last week. The markets napped two-week winning streak and fell over one per cent during the week ended February 23. NSE Nifty closed down 208 points to 19,542 points, while BSE Sensex was down 885 points to 65,397 points. Among the broader indices the Small-cap Index ended on a flat note, while the Mid-cap Index fell one per cent. FIIs have continued their selling spree across the board in sectors like financials, power, FMCG and IT with a sell figure of Rs13,411.72 crore during the week ended. It is not surprising because when the safest asset class in the world, the US bond, yields are around five percent, it is rational for FIIs to take out some money. It is important to note that the FII selling is not large. This means, when the tide turns, capital outflows will be reversed. On the back of conflict in Middle East, supply-side price pressures in crucial sectors such as oil will require more concerted policy response. Upside risks, which may not be short term, would be a factor in monetary policy actions. In near term, the market will take further cues from F&O settlement, the Israel-Palestine conflict, Q2 earnings and global cues like UK services PMI, US Manufacturing and Services PMI, initial jobless claims, crude oil inventories, etc.

Investors will remain focused on the earnings season, which saw a soft start, as it would help in gauging the underlying growth trends for companies.Axis Bank, Tech Mahindra, ACC, Asian Paints, Bajaj Finserv, Cipla, Dr Reddy’s Laboratories, Maruti Suzuki, SBI Cards, Indus Towers, Jubilant Food, Canara Bank, and Colgate Palmolive are some of the major companies announcing earnings in the next week. Ignoring the uncertainty in broader markets, IPO segment continues to sizzle with new offerings. New IPO openings include Blue Jet Healthcare with an issue size of Rs840 crore on the mainboard. SME IPO openings include that of On Door Concepts, Paragon Fine and Specialty Chemicals, Shanthala FMCG Products and Maitreya Medicare.Companies that will be listed in the coming week include IRM Energy on the main board and Arvind and Company Shipping Agencies and WomanCart (October 27) on the SME platform. The stock market will be closed on 24thTuesday for Dussehra.

Listening Post: The Secret to Braving a Wild Market

For most of the past decade, investing has required almost no courage at all. That may well be changing. While positioning portfolio remember seven cardinal virtues: curiosity, skepticism, discipline, independence, humility, patience and above all courage. It would be absurd and offensive to suggest that investing ever requires the kind of courage Ukrainians are displaying as they fight to the death to defend their homeland or what Israelis are doing to counter Hamas. But for most of the past decade or more, investing has required almost no courage at all, and that may well be changing. Inflation is consistently at the highest levels in decades, and some analysts think oil prices could hit $200 a barrel. A global strategist put the odds of a civilization-ending global nuclear war in the next year at an uncomfortably high 10 per cent. Conflicts like Russia’s invasion of Ukraine and Israel-Hamas conflict have historically sent stock prices lower and boosted the value of certain commodities. That shows two things. First, glaringly obvious big fears, like the risk of nuclear war, can blind investors to insidious, but more likely dangers, like the ravages of inflation. Second, investors need not only the courage to act, but the courage not to act—the courage to resist.

By the early 1980s, countless investors had given up on stocks, while many others had been hoodwinked by brokers into buying limited partnerships and other alternative investments that wiped out their wealth. If it feels brave to you to rush out and buy energy stocks, you’re kidding yourself; that would have been courageous in April 2020, when oil prices hit their all-time low. Now, at higher oil prices it’s a consensus trade. Courage isn’t doing the easy thing; it’s doing the hard thing.Making a courageous investment gives you that awful feeling you get in the pit of the stomach when you’re afraid you’re throwing good money after bad. You can be pretty sure you’re manifesting courage as an investor when you listen to what your gut tells you—and then do the opposite.

Quote of the week: We don’t prognosticate macroeconomic factors, we’re looking at our companies from a bottom-up perspective on their long-run prospects of returning — Mellody Hobson

It’s very difficult to predict when the next recession or stock market crash will come, so many of the best investors don’t even try. Instead, look for good companies with the strength to make it through the occasional challenging economic environment.

F&O/ SECTOR WATCH

Ahead of the settlement week, mirroring the weakness in the underlying cash market, the derivatives segment too witnessed unwinding of positions. On the monthly Options front, the maximum Call Open Interest was visible in 20,000 strike, followed by 19,800 & 19,600 strikes. The maximum Put Open Interest was at 19,000 strike, followed by 19,500 & 19,400 strikes. The level of 19,500 is a key support level for Nifty. A break below 19,500 can lead to initiation of fresh shorts, which can take the Index until 19,400 level. The hurdle on the higher side will be 19,600-19,800 area. A breakout on either side has the potential to provide further directional momentum to the index. For the Bank Nifty, the highest Call Open Interest was concentrated at strikes 44,500 and 45,000, while the highest Put Open Interest was at strike 43,000. In terms of Implied Volatility (IV), Call options for Nifty settled at 10.10 per cent, whereas Put options concluded at 11.21 per cent. The Nifty VIX, a key indicator of market volatility, ended the week at 10.90 per cent. The Put-Call Ratio of Open Interest stood at 0.88 for the week. Bank stocks could be in the limelight as some major private banks like Kotak Mahindra, YES Bank, IDBI Bank, ICICI Bank, and RBL Bank declared their Q2 results over the weekend.

In a momentous initiative, the Indian textile industry, in collaboration with industry bodies, is set to host Bharat Tex 2024, heralded as the world’s largest textiles event. This mega exhibition is scheduled to take place during February 26-29, 2024, in New Delhi. Bharat Tex 2024 represents India’s 5F vision, encompassing Farm to Fibre to Factory to Fashion to Foreign. It emphasizes the nation’s readiness to take on global competition in the textile sector, creating products not only for India, but the entire world.Watch out for price action in the dull textile stocks in next few months. Stay invested in fundamentally strong branded stocks with low debt.

Stock futures looking good are Apollo Tyres, Bajaj Auto, Colgate Palmolive, ICICI Lombard, Hero Motocorp, Kotak Bank and Ultratech. Stock futures looking weak areAstral, Aarti Inds, Crompton, MGL, Laurus Labs and Syngene.

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

Styrenix Performance Materials Limited

Styrenix Performance Materials Limited (formerly known as INEOS Styrolution India Ltd) is the number one producer of Absolac (ABS) and Absolan (SAN) in India. ABS is a plastic resin produced from acrylonitrile, butadiene and styrene, used for manufacturing home appliances, automobiles, consumer durables and machinery. Absolan (SAN) is a polymerized plastic resin produced from styrene and acrylonitrile, and mainly used for products such as lighting, stationery, novelties, refrigerators and cosmetic packing. With 45 years of pioneering experience, Styrenix Performance Materials Limited has been the most preferred supplier to its customers. Both ABS and Polystyrene have been witnessing an increased demand in the domestic market and given the scope for adding new customers, new product applications and expanding theproduct portfolio, the expansion of production capacities would help in the business growth for the company.

The company provides styrenic applications for many everyday products across a broad range of industries, including automotive, electronics, household, construction, healthcare, packaging and toys/sports/leisure. The growth of industries such as automotive, electronics, and packaging will contribute to the increase in demand for ABS and Polystyrene. Government initiatives promoting manufacturing and infrastructure development can boost the demandfor these materials. The government’s policy to improve logistics infrastructure, incentives to facilitate industrial production and measures to improve farmers’ income will support the country’s efforts to grow at a faster pace. The company is planning to increase the annual capacity for ABS to 210 KT and Polystyrene to 150 KT in a phased manner over a period of next 48 months in case of ABS and 36 months in case of Polystyrene. Buy on declines for medium-term target of Rs2,000.