Investors look to macro data for triggers

Buoyed by the strong progress of the South-West monsoon, narrowing current account deficit (CAD) in Q4FY23, HDFC-HDFC Bank merger update, robust FII inflows and positive global data; the benchmark indices finished at a record closing highs during the last week. BSE Sensex rallied 1,739 points or 2.8 per cent to 64,719, and the Nifty jumped 524 points or 2.8 per cent to 19,189 during the week, taking monthly gains to around 3.5 percent. Nifty Mid-cap and Small-cap indices gained 2.7 percent and two percent during the week ended, taking June month rally to 6 per cent and 6.6 per cent respectively. Sustained flows from FIIs for the fourth straight month and of more than Rs27,000 crore in June, triggered by steadily improving domestic macro indicators, have helped markets to reach record highs.

After the failed strategy of Sell India, Buy China, amid the re-opening of the Chinese economy after Covid in the first two months of 2023; FPIs have reversed their strategy to ‘Buy India, Sell China’, since the prospects of China deteriorated and that of India improved. GST collections for the month of June rose 12 percent year-on-year to over Rs1.61 lakh crore. The revenues had touched a record high of Rs1.87 lakh crore in April. July 3 (Monday) will be the first day when the Nifty offshore derivatives will start trading on the NSE International Exchange under the new name GIFT Nifty, following its transition from Singapore Exchange. The entire Open Interest in SGX Nifty of around $7 billion will shift to Gift Nifty. The daily volumes are around $1.5-2.0 billion. The mega merger of HDFC Bank and Housing Development Finance Corporation has taken effect and July 13 is the record date to decide the eligible shareholders for allotment of shares in the merger.

Market will continue to see action in the IPO market in the coming week too, as two IPOs- one each in the mainboard and SME segments - will be opening for subscription next week. Kolkata-based jewellery retailer Senco Gold will open on July 4, with a price band of Rs301-317 per share and the closing date will be July 6. In the SME segment, Alphalogic Industries, a subsidiary of BSE listed software development company Alphalogic Techsys, will launch Rs12.88-crore IPO on July 3 and the bidding will remain open till July 6, with an issue price of Rs96 per share. Meanwhile, frozen buffalo meat exporter HMA Agro Industries will debut on the BSE & NSE on July 4, while in the SME segment, the listing of Veefin Solutions is on July 5, and Essen Speciality Films, Greenchef Appliances, and Magson Retail and Distribution is on July 6. Near-term trend will be dictated by the monsoon progress, Q1 results, macroeconomic data, US Fed minutes and other global cues. Ahead of Q1 results, adopt stock specific strategy advise old timers.

Listening Post: Lessons from the Bull Market

How to avoid errors that cost many investors dearly during the stock-market rebound? Do you remember how you felt about the stock market in March, 2020? Evidence suggests many investors have blocked out those fearful times. Three years after the Nifty and the Sensex hit their lowest point during the Covid pandemic, investors are pouring money into stocks. A little complacency is understandable. If you took a Rip Van Winkle nap starting in March 2020 and woke up this weekend, you might conclude nothing bad had happened. The Nifty and the Sensex has shot up to record levels and hit another all-time peak on Friday. If you stuck with stocks throughout, your reward would be huge: An investor who wagered Rs100,000 on the index on March 30, 2020, would have Rs258,127 including dividends, as of last Friday.

In choosing which experts to listen to, pick ones who seem aware of the uncertainty of their predictions and are willing to change their minds.

Remember What Losing Felt Like

The first principle is that you must not fool yourself—and you are the easiest person to fool. Many investors appear to be kidding themselves. Financial advisers report that some clients appear to be forgetting the intense fear they felt five years ago.With indices at historic highs, many are asking why their personal accounts were up less than 20 per cent. In March 2020, the pain of further losses on stocks was too great for some investors to bear; now, it is the pain of not holding more stocks that bothers them.

“Memory has done a kind of 180-degree turn for some people,” Some investors are asking, “why haven’t we been more aggressive?” even though they were the ones who insisted on making their portfolios more conservative in the wake of the last crisis. What they should be asking is this: Am I fooling myself into remembering my losses as less painful than they were? Am I itching to take risks that my own history should warn me I will end up regretting? Am I counting on willpower alone to enable me to stay invested and to rebalance through another crash? For the answers, dig up your old account statements to see whether you held fast in March 2020.

Ask your spouse or a close friend how anxious or afraid you were during the crisis. Then ask yourself whether you want to repeat that experience. If your records show that you bought or stayed put during the last crisis, then you can probably weather the next one—and should stay put now. But if you sold then, you almost certainly will sell again if the markets take another steep fall. In that case, you should consider using the recent market gains as a gift that enables you to take some risk off the table before it can hurt you again.

Limit Your Risk-Taking

Owning some stock is a good thing for many investors. Over long periods, stocks tend to outperform other asset classes by a few percentage points annually, giving a powerful boost to portfolios. Investors who dumped their stocks have missed out on that benefit over the past few years. Instead of periodically bailing on stocks, investors would be better off keeping a smaller amount in stocks and sticking with that allocation in good times and bad. Alternatively, investors can pare back their stock allocation if they’re willing to step up their savings rate to compensate. You don’t have to rely so much on the market to get you where you want, but if you want to rely less, you have to be willing to increase those savings.

Be Wary of Labels

Investors who hear the phrase bull market might decide it is time to get in on the rally. On the other hand, investors who hear the current bull market in stocks has been running for three or five years might worry it will soon end. In either case, investors would do better to tune out the chatter. The definition of a bull market is arbitrary, and the term tells investors little about what will happen next. Market watchers call it a bull market when stocks rise 20 per cent off a low point, and a bear market when they fall 20 per cent from a peak. But investors who use slightly lower thresholds would see a more volatile picture of how stocks have behaved in recent years. There is no such thing as an average bull market. Investors would be better off focusing on whether stocks are valued more highly than in the past. By that standard, stocks warrant more caution today than three years ago. Terms like bull market and bear market are eye-catching labels—not forecasts.

Question Performance Figures

It is one of the most oft-repeated adages in investing: Past performance doesn’t guarantee future results. In fact, it can be a poor guide to past results, too.

Quote of the week: If we only look to confirm our beliefs, we will never discover if we’re wrong. Be self-critical and unlearn your best-loved ideas. Search for evidence that disconfirms ideas and assumptions. Consider alternative outcomes, viewpoints and answers--Peter Bevelin

F&O/ SECTOR WATCH

Mirroring the strong bullish undertone, the settlement week witnessed good rollovers @77 per cent (well above the three month average of 70%). With an eye on Q1 results, it is pertinent to observe that index futures positions have declined indicating preference for stock-specific approach. Sectors that can outperform in the July series with focus on stocks with long rollovers are - Auto, Banking, Finance, Capital Goods, FMCG, Realty and Pharma.

IT sector also showed promising performance ahead of the result season, witnessing a rebound in stocks such as TCS, Infosys, and others.

Maximum Call Open Interest is at 19,500 strike, indicating that Nifty may be having another 300 points rally in the coming future, followed by 19,200 and 19,400 strikes. On the Put side, the maximum OI was at 19,000 strike, which can be immediate support for the Nifty-50, followed by 19,100 & 18,900 strikes. The Implied Volatility (IV) of Calls closed at 9.96 per cent, while for Put options, it closed at 10.22 per cent.

In Bank Nifty, the Call and Put OI concentration is at 44,500, which points towards further consolidation in the index. For upcoming week expect markets to remain buoyant and any dip should be used to create fresh longs.

Stock futures looking good are Ashok Leyland, Axis Bank, Bharat Forge, BEL, IPCA Labs, RIL and Sun Pharma. Stock futures looking weak are Adani Enterprises, Adani Ports, Gujarat Gas, NMDC, Petronet and PVR Inox.