Investors look to macro cues

Reacting to the US Fed outcome, RBI MPC meeting, macroeconomic data and other global cues; the stock markets witnessed lacklustre muted trading during the week ended. BSE Sensex fell 159 points to 60,683, and the Nifty gained 2.5 points at 17,856 points. Broader markets performed better and as many as 61 small-cap stocks gave double-digit returns. Nifty Mid-cap and Small-cap indices posted over two percent and one percent gains. Modest buying was seen in technology, infra, pharma, and select banking and financial services stocks. Sporadic selling was seen in auto, energy, FMCG, metal, and oil & gas stocks. FIIs have net sold more than Rs5,000 crore worth shares in February so far, but DIIs have compensated the same by buying over Rs6,000 crore worth shares in the same period. Savvy market veterans say China re-opening does not pose a threat as much and India is definitely well-placed among money-drawing markets like the US, China and Europe. India observers say thatafter a 40-50 percent move in the index in China, if somebody is selling India to buy China, it is laughable. Despite several assurances by the Adani Group and regulators, investor confidence is yet to come back and bring about a relief rally for the stocks. Over the weekend, Moody’s Investors Service announced its decision to cut the outlook on 4 of Adani Group companies, including Adani Green Energy, to ‘negative’ from ‘stable’. The crucial consumer inflation data, both in the US and India, will be released next week. India will release the numbers on Monday, and the US on Tuesday. After easing to a 12-month low in December, India’s consumer price index-based inflation has likely inched up in January.

CPI is seen touching a 3-month high of six per cent, but this is mainly due to a low base of last year. Gross direct tax collections grew 24 per cent to Rs15.67 lakh crore so far till date upto February 10. After adjusting for refunds, the net direct tax collection stood at Rs12.98 lakh crore, a growth of 18.40 per cent. The net collections are about 79 per cent of Revised Estimates (RE) of direct tax collection for current fiscal. Market observers feel that the markets have certainly weathered the Adani storm, and have digested most of the pain.

Near term direction of the markets will be dictated by macroeconomic data, final leg of Q3 results, international crude oil prices, dollar-rupee movement and global cues. Only some solid trigger can lead to breakout move from present range say traders. Companies releasing their Q3 report cards in coming week are Adani Enterprises, Nestle, Nykaa, SAIL, ONGC, Siemens, Grasim, Apollo Hospitals, Bharat Forge, Eicher Motors, IRFC, PFC, NMDC, Biocon and Zee Entertainment.

Listening Post: ChatGPT Clones are preparing to take over world. Google, Baidu and Alibaba are jumping on the advanced-Chabot bandwagon. The technology could be a big deal in USA and China—but that comes with its own dangers. This column isn’t written by ChatGPT. At least not yet. But the conversational artificial-intelligence tool seems to be taking over the world—and that now includes the stock market. Investors should be careful not to get ahead of themselves. AI is a different political ballgame in China than e-commerce or online finance, but the country has just emerged from a multiyear crackdown on internet-platform companies—in part, because they became too powerful and ubiquitous. At the very least, such a potentially transformative new technology seems likely to quickly become a subject of significant regulatory concern. The launch of ChatGPT by Microsoft-backed OpenAI a few months ago has sparked a race among US online-search and software giants. Last week Microsoft said it would incorporate the AI tool into its Bing search engine and Edge web browser. Search market leader Google says it will launch its own version of an AI chatbot called Bard. Chinese companies are jumping on the bandwagon too. It may not be long before an Indian company will also come out with a chatbot. China’s search giant Baidu is unveiling its own conversational AI tool called Ernie Bot after completing internal testing in March.

Alibaba, China’s e-commerce leader is also testing its own ChatGPT-style tool. Shares of companies announcing news in this segment are creating waves on the bourses. It is easy to see how chatbots could be integrated into tech giants’ businesses. Bots may, for example, improve the search interface for Microsoft or Google or Baidu’s users. The ability of ChatGPT to draft convincingly human essays could enhance productivity tools. Tech giants with their enormous troves of data and AI research are well-placed to capitalize on the new technology. Regulation could be another issue globally, given strict data-security laws in different countries. The governments will probably initially be supportive because dominance in AI is such a high policy priority. Widespread use of the tool by the public will still be scrutinized. Its use may be restricted in settings like education. And if advanced chatbot technology starts bumping up against some of economy’s sore spots—for example, online financial fraud or politics—one can imagine a swift and sure regulatory response. But it is still too early to tell how much revenue such chatbots will really bring into corporate coffers. For one, competition will be intense: It’s already clear that many major internet-platform companies could end up as contenders. AI-powered chatbots could help improve existing services, but may not create new, stand-alone revenue streams. And integrating chatbots into existing platforms may incur significant costs. When asked to write a short sentence on investing in the latest fads, ChatGPT said it “can be risky and they may not have a solid track record and can quickly lose popularity.” Investors would be wise, in this case, to take it at its word.

Quote of the week: A good trader has to have three things: a chronic inability to accept things at face value, to feel continuously unsettled, and to have humility.

….Michael Steinhardt

F&O / SECTOR WATCH

During the week ended, alternate bouts of buying and selling in Adani Group companies kept traders on tenterhooks in the derivatives segment. Nifty and Bank Nifty closed flat with stock-specific movements dominating the trading pattern. Buying interest was seen in IT and Large Midcap stocks. Metal stocks witnessed strong selling pressure. Maximum Call Open Interest was seen at 18,000 strike, followed by 18,500 and 18,200 strikes, with Call writing at 17,800 strike, then 18,000 & 18,200 strikes. On the Put side, there was Maximum Open Interest at 17,800 strike followed by 17,000 and 17,500 strikes, with writing at 17,800 strike, then 17,400 and 17,300 strikes. Implied Volatility (IV) of Calls closed at 11.72 per cent, while that for Put options closed at 12.52 per cent. The Nifty VIX for the week closed at 13.04 per cent. PCR of OI for the week closed at 1.16 lower from previous week. With FIIs’ short exposure in index Futures still at 82 percent, a short-covering rally can’t be ruled out say market players. Expect benchmark indices to remain in range with emphasis on stock-specific moves. MSCI index has reduced weightage to some Indian stocks, which could trigger an outflow of funds to the extent ofHCL Technologies (-$97 million), Jindal Steel & Power (-$19 million), Shriram Finance (-$14 million), ACC (-$12 million), but the heaviest outflow among all is likely to be witnessed in Adani Transmission (-$145 million), Adani Total Gas (-$110 million) and Adani Enterprises (-$161 million). Stock futures looking good areCummins, Lupin, Intellect Design, Infosys, Tata Motors and PEL. Stock futures looking weak Escorts, LIC Hsg, HAL, Marico and NALCO.