Investors chary of volatility, uncertainty

On the back of lack of major news on both domestic and global front, markets were in consolidation mode during the week ended September 9, 2021. Stocks remained close to record highs, but investor concerns about a volatile market in near term are clearly evident. The BSE Sensex climbed 175.12 points to close at 58,305.07 points, and the NSE Nifty rose 45.65 points to 17,369.25 points.

Outperformance in broader markets continued with the BSE Midcap and Smallcap indices rising more than a percent each. FIIs have net sold Rs1,113.88 crore worth of shares against more than Rs6,800 crore of net buying in the previous week. On the contrary, domestic institutional investors turned net buyers during the week, to the tune of Rs1,115.55 crore worth of shares against net selling of Rs1,421.12 crore in previous week. Cabinet has approved certain changes in the ₹10,683 crore performance linked incentive (PLI) scheme for man-made fibres.

The PLI has been expanded to include more products. In order to make disinvestment deals of ailing state-owned firms more attractive for strategic investors, the government on allowed erstwhile public sector companies to carry forward losses to be set off against future profits. It is pertinent to recall that as part of the privatisation strategy, the government aims to complete the strategic sale of Bharat Petroleum Corporation Ltd (BPCL), Shipping Corp, Container Corporation, Neelachal Ispat Nigam Ltd, Pawan Hans and Air India, among others, by March 2022.

In the week ahead market momentum will be dictated by inflation data. Consumer Price Index (CPI) inflation, one of the key points in the list of RBI before taking interest rate decision, is expected to be steady at around 5.6 percent for the month of August. Wholesale Price Index in July 2021 eased to 11.16 per cent YoY as it finally fell below 12 per cent after seeing a record high in May. Near term direction of the market will be dictated by the macroeconomic data, crude oil prices, rupee movement and global cues. Coming week will witness the listing of shares of Ami Organics and Vijaya Diagnostic Center.

Heard on the Street: How to Keep Your Cool When Markets Are Sizzling. When everyone around you seems to be getting rich quick, it's hard to control your fear of missing out. But buying assets just because they're hot is a good way to get burned. Buy low, sell high. Is any investing advice more universal—or more universally ignored? That market axiom was made for times like these, when stocks are hovering near all-time highs, digital currencies are heading to the moon and commodity prices are surging. Yet, when markets seem to be breaking records every day, your emotions naturally prompt you to buy high, not to sell. Even the world's greatest investors find selling harder than buying. Many of them have admitted that 'greatest mistakes' were selling at the wrong time. That's largely because of the unbearable feeling of FOMO (fear of missing out).

Sell a winner too soon, and you have to watch from the sidelines as it continues to soar. The most you could have lost from keeping it is 100 per cent, but the gains you can miss out on by selling too soon are unlimited. It hurts not to buy an asset that goes on to become a huge winner. But it stings far worse to sell one. That's an active decision, easier to imagine undoing.

That focuses your attention on the mistake, making you feel you should have made a different decision and filling you with regret. Never are those feelings more intense than when markets are setting records and everyone around you seems to be getting rich quick. And the less certain you feel about what an asset is worth, the more hesitant you will be about selling.

Imagine that a company was cheap at price A and overvalued at price C. Then you would know what to do: Buy at price A and sell at price C. If only it were that simple.

"The hard part of investing," is that most stocks, most of the time, hang around what "price B," anywhere between cheap and overvalued. In that ambiguous range of price B, "it becomes tough to tell" whether or not to sell. The range of price B varies inversely with how much you know about the company or its industry. If you know a lot, price B is a narrow zone; if you know only a little, then it is wide and fuzzy.

The higher the market goes, the more you will see and hear about stocks that are far more expensive. Even if yours is already overpriced, thinking about others can make it seem moderate by comparison—pushing it back into that grey area of price B. New research suggests that selling isn't just hard to think about; most of the time, many investors might not think about it at all.

When it comes to investing, know that extra holdings keep getting barnacled onto a portfolio during every bull market, no matter how hard anybody try to simplify. The question that should be always asked is not "What should I buy?" but rather, "What should I buy or sell?" Better yet,

instead of asking how you can improve your portfolio, ask how you can streamline it. Yes, missing out on future gains could be painful. Missing out on future losses won't be. In the long run, adding or keeping hot assets only because they are hot, not because you think they are undervalued, is the surest way to get burned.

Quote of the week: It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong

-George Soros

Too many investors become obsessed with being right, even when the gains are small. Winning big and cutting your losses when you're wrong are more important than being right.

F&O / SECTOR WATCH

Derivatives segment continued to witness large stock-specific moves. Most of the 'sizzling' stocks are either new entrants or those coming to F&O segment. On option front, the maximum Put Open Interest (OI) was seen at 17,300 strike followed by 17,000 & 16,800 strikes, while maximum Call Open Interest was seen at 17,400 followed by 17,500 & 17,600 strikes. Call writing was seen at 17,400 strike with Call unwinding at 18,000 and 17,500 strikes, while Put writing was seen at 17,300 & 17,000 strikes with Put unwinding at 17200, 16500 &17100 strikes. Looking at the options base, the Nifty has the highest Open Interest concentration at ATM 17,400 Call strike. A move above this level is crucial for a fresh uptrend. On downside, 17,100 will remain as important support in the current consolidation. Implied Volatility (IV) of Calls closed at 11.43 per cent, while that for Put option, it closed at 12.12 per cent.

The Nifty VIX for the week closed at 13.94 per cent. PCR of OI for the week closed at 1.56. For Bank Nifty, 37000 level would act as a strong hurdle, above which follow up buying may propel it towards 37750 level. Ahead of run up to the mega LIC IPO, on news flow PSU stocks may outperform from here on. ONGC and Gail are looking interesting amid bullish momentum in

global natural gas prices. Metal stocks may also catch up momentum as global markets are benign whereas metal prices are seeing a rise due to cool off in the dollar index.

With Aluminium prices at decadal high Hindalco and Nalco may continue to outperform. AMC business is cyclical. In a bear market, earnings come under pressure, in a bull market, you get a lift of a rising tide. While growth is structural, the profitability could be cyclical. In the present bull market, listed AMCs are still at reasonable valuations. Buy HDFC AMC and Nippon Life. Realty stocks look pretty good for medium term. Companies having very good balance sheets without any baggage and less debt will be the choice of funds. Buy on declines DLF and Oberoi

Realty. Stock futures looking good are Coromandel, HDFC AMC, PFC, Pidilite, Metropolis, Syngene and Zee Entertainment. Stock futures looking weak are Granules, Gujarat Gas, InduSind Bank, TVS Motors and SBI Life.

STOCK PICKS

Mirza International Limited

Mirza International Limited is engaged in the business of manufacturing leather and leather footwear, and dealing in apparels. The company is amongst India's leading leather footwear manufacturers and exporters: and also the preferred supplier of leather footwear to leading international brands and one of the largest suppliers of finished leather to overseas markets. The company also manufactures and sells processed leather through its in-house tannery unit. The company operates through two segments: Tannery Division and Shoe Division. The Tannery Division is engaged in the manufacturing of finished leather from Raw Hides, Wet Blue and Crust. The Shoe Division is engaged in manufacturing finished leather shoes. Its export products include tanned leather, white label footwear and branded footwear. Its brands include Red Tape, Oaktrak, Bond Street, Mode and Yezdi. Under the brand Red Tape also includes footwear; apparels, including shirts, jackets, denims, tees, pants/shorts, and accessories, such as belts, socks and wallets. Oaktrak includes both formal and urban styles serving mobile executives and businessmen. The company exports its products to Germany, United Kingdom, United States and France, among others. In the United Kingdom, Red Tape branded products are sold through more than 1,000 chain stores and multi-brand outlets. The company has six integrated manufacturing units, one Tannery equipped with state-of-the-art effluent treatment plant, 2 In-house design studios and two advanced warehouses to serve E-commerce channels in Noida and Bangalore, with an area of 70,000 sft and 30,000 sft respectively. Has capacity of 54 million pairs of footwear per annum. Due to pandemic capacity utilisation for FY 2020-21 was 38.91 per cent and is expected to grow to at least 65 per cent in FY 2021-22.

Why we are recommending

1. New products launched under REDTAPE brands like sliders, handkerchiefs, undergarments, etc. The company has achieved turnover of Rs342.58 crore in garment segment, which shows its increasing customer confidence for future growth as well.

2. Company's sport brand REDTAPE athleisure is rapidly finding its place in the feet of young and sporty Indians.

3. International business division has been strengthening each year and contributes 31.77 per cent to total revenue.

4. Promoters have been doing market purchases of equity in the last few weeks. Last big purchase was around Rs57. Indication of confidence in the growth of company.

5. News reports suggest big surge of export orders after heavy flooding of several units in Vietnam.

Buy between Rs59-61 for medium term target of Rs90 (in 6 to 9 months) and long term target of Rs125 (in 12 to 16 months). Risk / Reward ratio is 1:7.