Investors awaiting major triggers

With 6 phases of polling over now, the election-triggered jitters appear to be calming for present. One more phase of polling will be done on Saturday (June 1) and then the outcome will follow on June 4. Rumours on the street that the BJP is not doing well as it’s anticipated or that the BJP will better the tally of 2019 will keep triggering volatile swings in market till June 4

Buoyed by the transfer of Rs2.12 lakh crore dividend by RBI to government, renewed buying in index counters, modest short covering by FIIs, calmness in election blues and supportive global cues; the domestic stock markets ended the truncated week with bullish undertone. Nifty rose 455.1 points or 2.02 percent to close at 22,957.10 after hitting new high of 23,026.40, while BSE Sensex added 1,404.45 points or 1.90 percent to finish at 75,410.39, after touching fresh high of 75,636.5. Broader markets underperformed with only modest gain of one per cent in BSE Mid-cap Index and the BSE Small-cap index ended on flat note. The transfer of Rs2.12 lakh crore dividend by RBI to government did wonders to Indian markets as rupee, bonds and equity rose bringing about an expected boost before the election results on June 4. Observers view this as a positive development which could potentially improve ratings for India.

In this week, the Indian rupee gained against the US dollar. The domestic currency rose 24 paise to end at 83.09 on May 24 against its May 17 closing 83.33. The performance of DIIs and FIIs will have an impact on the way movement happens in the domestic stock markets. International crude oil prices continued to be range bound with downward bias. Oil prices remain critical for markets with their impact on inflation and on the rate trajectory of global central banks including India’s. With six phases of polling over now, the election-triggered jitters appear to be calming for present. One more phase of polling will be done on Saturday (June 1) and then the outcome will follow on June 4. Rumours on the street that the BJP is not doing well as it’s anticipated or that the BJP will better the tally of 2019 will keep triggering volatile swings in market till June 4. With earnings season nearing its end, focus of majority market players is on the outcome of general elections.

That is another testament to the fact that investing without an education and research will ultimately lead to regrettable investment decisions. Research is much more than just listening to popular opinion.

F&O/ SECTOR WATCH

Mirroring the buying pattern in large-caps in cash market, the derivatives segment witnessed a brisk trading in index counters. NSE Nifty index touched a record high and closed with a weekly gain of over two per cent, while Bank Nifty rose by more than 1.5 per cent. In the options segment, Nifty options showed the highest Call Open Interest at the 23,500 and 23,000 strikes, while the highest Put Open Interest was observed at the 23,000 and 22,500 strikes. The psychological level of 23,000 will play a crucial role as both Call and Put writers are active at this level. For the Bank Nifty, the highest Call Open Interest was observed at the 50,000 and 49,000 strikes, while on the Put side, the highest Open Interest was at the 48,000 and 48,500 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 19.09 per cent, while Put options concluded at 20.03 per cent. The India VIX, a key market volatility indicator, closed the week at 21.38 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.30 for the week. The resistance for Nifty June futures is at 23,250 points. If Nifty fails to breach 23,250 and reverses lower, then it can fall back to 22,800. Immediate resistance for Bank Nifty is at 49,300. Crossover of this resistance may take Bank Nifty to 50,300- 50,500.

Failure to break above 50,500 can drag the index down to 49,300-49,000. Support for Bank Nifty is in the broad range of 48,300-47,900 region. Complete action in the markets is centered on outcome of one event General Elections. It is entirely possible, if not probable, that the ruling party doesn’t do as well as it’s unexpectedly positive performance in the State elections held in November. Still, even if the BJP wins by only the number of seats in the last general election held in 2019, that is quite enough for markets to sustain at current levels and focus shifting to Union Budget.

Stock futures looking good are ACC, Axis Bank, Britannia, Coromandel, JSW Steel, Laurus Labs, HUL and Ultratech. Stock futures looking weak Aarti Inds, Astral, Berger Paints, Lupin, India Mart and Syngene.

NCL Industries Ltd

NCL Industries Ltd is engaged in the business of manufacturing and selling cement, ready mix concrete (RMC), cement bonded particle boards (CBPB), doors, and operates two small hydro power (SHP) projects. The company’s segments include Cement, Boards, RMC, Energy and Doors. Its Nagarjuna Cement is available in various grades of Ordinary Portland Cement (Grades 53 and 43) and Pozzolana Portland Cement. In addition, a special cement (IRS Grade 53 S) is manufactured for supply to Indian Railways for making concrete sleepers. Nagarjuna RMC is its RMC brand. The companyis the only manufacturer of Cement Bonded Particle Boards (CBPB) in the country, marketed under the brand name Bison Panel. Bison Panels are normally used for construction of prefab structures and have been extensively used in the infrastructure and housing sectors. Several new and innovative applications are being found for the Bison Boards, like false ceilings, kitchen platforms, fixed furniture etc; enhancing the demand potential. The company also has a fully owned distillery Tern Distilleries. The company has acquired Vishwamber Cements Limited and made it a wholly-owned subsidiary of NCL Industries Ltd (NCLIL). Stake in the group company NCL Buildtek will be divested in next few months. Divestment of equity to unlock value is equal to nearly half of present market cap of NCL Inds. With BV of Rs179 and good visibility of earnings, buy for medium term target of Rs350.

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