Investors awaiting major triggers

Markets look to domestic cues as NDA govt setting in and US Fed’s decision on rate cut

Overcoming wild swings, the domestic stock market had an incredibly eventful week as they reacted to the exit polls and the actual general election results. The market posted its strongest week of 2024. The benchmark indices recorded a three percent gain since last Friday, rising as much as 10 per cent from Tuesday low, the day when election-related jitters had spooked investors.

For the week, BSE Sensex touched an all-time high of 76,795 points, and NSE Nifty came within striking distance of its record peak of 23,338 points. The anticipation of stability within the coalition government at the centre, coupled with the RBI’s upward revision of its growth forecast for FY25 to 7.2 percent turned the sentiment positive. Despite Indian benchmark indices ending with strong gains this week, FPIs have remained unenthusiastic in June so far, off-loading Indian equities worth Rs14,794 crore. It is pertinent to observe that in 2024 year-to-date, FPIs have off-loaded stocks worth Rs38,158 crore.

After the huge volatility witnessed in the market in response to the election results (both exit polls and actual results), the market is slowly stabilising. An important point to consider is the high valuations of Indian stocks, particularly in the broader market. The RBI Monetary Policy Committee (MPC) decided to keep the benchmark Repo rate unchanged at 6.5 per cent for the eight consecutive time by a 4:2 majority. It also decided to continue with its stance of ‘withdrawal of accommodation’.

RBI raised its GDP growth forecast for FY25 to 7.2 per cent from seven per cent earlier. The central bank retained FY25 inflation forecast at 4.5 per cent. The inflation is expected to inch down further to 4.8 percent from April’s 4.83. Wholesale price index (WPI) numbers is expected to have gone up sharply in May to 4 per cent from April’s 1.26 per cent largely be because of fuel inflation. The Index of Industrial Production (IIP) data is expected to slow down to 3.9 percent in May from 4.9 percent in April.

While it is unlikely the US Fed will cut the rate when it meets this week on June 11 & 12, the Street will be looking at its commentary on inflation and economy post the rate cut by the European Central Bank (ECB). After the allocation of ministerial portfolio’s takes place over the next few days, markets may shift their focus to spread of monsoon, expectations over Q1 earnings, macro-economic numbers like GDP growth, monthly GST collection and FII flows. Speculation over contours of Union Budget may trigger some sharp moves in the markets in coming 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

Mirroring the heightened volatility in the cash market, the derivatives segment witnessed a huge surge in volumes on alternate bouts of buying and selling. On a weekly basis, Nifty outperformed, closing with a gain of over three per cent, while Bank Nifty rose by more than 1.5 per cent. In the options segment, the highest Call Open Interest was seen at the 23,500 strike and the highest Put Open Interest at the 23,000 strike.

For Bank Nifty, the highest Call Open Interest was at the 50,000 strike, while the 49,000 strike saw the highest Put Open Interest. Implied Volatility (IV) for Nifty’s Call options settled at 15.56 per cent, while Put options concluded at 16.73 per cent. The India VIX, a key market volatility indicator, closed the week at 16.80 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.04 for the week. In the near-term, Nifty movements are expected to hover within the boundaries of 22,600 to 23,400-22,800-23,000 will act as short-term support, while the 23,400-23,500 will act as the hurdle for further upside.

As for Bank Nifty, the key support levels are positioned at 49,000 and 48,500, with significant resistance lying within the 50,200 to 50,600 zone. Currently the Bank Nifty appears to be consolidating around 50,200 zone serving as an immediate resistance and 49,200 as a nearby support level. Expect the bullish momentum to continue in upcoming sessions as well and traders should use dips to create fresh longs as far Nifty hold above 22,800 level. Stock futures looking good are Axis Bank, Bharti Airtel, Dr Lal Pathlabs, Laurus Labs, LTF, M&M, Oberoi Realty, Ultratech and Zydus Lifesciences. Stock futures looking weak are BPCL, HPCL, IDFC First, PI Inds, Page Inds, SBI Life and Tata Chemicals.

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

HPL Electric & Power Ltd

HPL Electric & Power Ltd is a multiproduct electric equipment manufacturer. The company’s product portfolio covers a wide range of low-voltage electric products including metering solutions, switchgears, lighting products, wires and cables, solar solutions, and modular switches. The company operates through two segments: Metering and Systems, and the Consumer & Industrial Segment.

The company has its presence across five key verticals: Metering Solutions, Switchgears, light emitting diodes (LED) Lighting, Wires and Cables, Solar Solutions and Modular Switches. Its Metering vertical offers smart meter, net meter, prepaid meter, Tri vector meter and others. Its Switchgear vertical includes Industrial Applications, which include air circuit breaker (ACB), moulded case circuit breaker (MCCB), and phase selector. The company’s manufacturing units are located at Gurugram, Kundli, Gharaunda and Sonepat in Haryana and Jabli in Himachal Pradesh. Buy for medium term target of Rs750.