Investors awaiting major triggers ahead of Budget

In the medium term, all eyes will be on the Union Budget proposals, which will dictate the market. Political uncertainty after the US Presidential Debate may keep US markets subdued in near term

Indian markets extended gains in the week ended June 28 with benchmark indices hitting life-time highs primarily led by sharp buying from FIIs, steady progress of monsoon, RBI Governor confidence about 7.2 per cent growth in the current financial year and potential rate cuts in the near future by US Fed. BSE Sensex gained 1,822.83 points or 2.36 per cent to finish at 79,032.73, while NSE Nifty added 509.5 points or 2.16 per cent to end at 24,010.60 points. The Sensex and the Nifty touched record high of 79,671.58 points and 24,174 points, respectively during the week ended. It is pertinent to observe that in the month of June 2024, both the benchmark indices surged 6.5 percent each.

While the action was concentrated in large-caps, the broader market was in consolidation mode. BSE Mid-cap Index rose 0.4 per cent and the BSE Small-cap index gained 0.4 per cent. In terms of the market value, Reliance Industries (RIL) added the most, followed by Tata Consultancy Services (TCS), ICICI Bank and UltraTech Cement. On the other hand, Tata Steel, Maruti Suzuki India and IndusInd Bank lost the most of their market-cap. FIIs extended their buying in this week, as they bought equities worth of Rs4622.19 crore, while DIIs bought equities worth Rs7,186.13 crore. Observers point that FIIs have purchased Indian stocks worth about Rs26,565 crore in June - before the Union Budget and India’s inclusion in JP Morgan’s bond index. India’s inclusion in the JP Morgan Bond Index is also positive as it will end up reducing the cost of borrowing for the government and reduce the cost of capital for India Inc. It appears that FIIs have realised that selling in the most performing market would be a wrong strategy.

The Indian rupee gained against the US dollar as it ended higher by 16 paise at 83.38 on June 28 against its June 21 closing 83.54. Market participants will be keeping an eye on the trajectory of the monsoons, Q1 results season, first flush of IT majors’ earnings and pre-Budget expectations. In the medium term, all eyes will be on the Union Budget proposals which will dictate the market. Political uncertainty after the US Presidential Debate may keep US markets subdued in near term.

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F&O / SECTOR WATCH

Maintaining the momentum in cash market, in the derivatives segment, the Nifty futures (July) rallied 2.2 per cent to close at 24,132. Bank Nifty futures closed at 52,530 with 1.5 per cent gain. The cumulative Open Interest (OI) increased to 156 lakh contracts. A price rise accompanied by increase in OI indicates long build-up. In the option segment, the highest Call writing was seen at the 24,500 and 24,200 strikes, while put writers were most active at the 24,000 and 23,800 strikes. The positioning of traders in weekly and monthly option contracts give a contrasting signal.

The PCR of the weekly options is at 0.6, whereas the same of monthly options is at 1.3. So, the bias for this week is bearish, whereas that for the broader trend is positive. For Bank Nifty, the highest Call Open Interest was seen at the 53,000 and 53,500 strikes, whereas on the Put side, it was concentrated at the 52,000 and 51,500 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 13.09 per cent, while Put options concluded at 14.01 per cent. The India VIX, a key indicator of market volatility, concluded the week at 14.15 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.49 for the week indicating more Call writing more than Put. The rollover rate for Bank Nifty in the July series has increased from 67.66 per cent to 70.68 per cent compared to the previous series. Similarly, Nifty’s rollover rate has risen to 76.25 per cent, exceeding both the previous month’s rate and its three-month average of 68.88 per cent.

This indicates Nifty’s outperformance compared to Bank Nifty. Technically both the indices look good on charts as well and traders are advised to use any dips for creating fresh longs. The immediate support for Nifty stands at 23,800 to 23,700 zone. Energy, Oil &Gas and Infrastructure sectors outperformed last week, whereas the Realty and Media sectors lagged. In the coming week, Auto stocks will be in focus as companies release their monthly sales numbers. Industry observers expect June automobile wholesale volumes across segments are likely to be subdued. Stock futures looking good Apollo Tyres, Biocon, Crompton Greaves Electricals, Dr Reddy Labs, Indraprastha Gas, MGL and Wipro.Stock futures looking weakare Eicher Motors, Hindustan Copper, Metropolis, M&M, Maruti, NMDC, Sun TV and Ultratech.

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

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