Investors Looking To Maha Poll Outcome, Macro Data

High US bond yields and a strengthening dollar post-election have impacted emerging markets like India, and FII activity remains a key factor influencing Indian equities in the near term

Spooked by muted Q2 results season accompanied by several downgrades, persistent FII selling and uneasiness over Assembly elections outcome; the equity market closed on a very weak note during the week ended. The downturn in the market continued as India’s retail inflation surged to a 14-month high in October, dampening expectations of an interest rate cut in the upcoming RBI policy meeting in December. BSE Sensex declined 1,906.01 points or 2.39 percent to close at 77,580.31, while NSE Nifty shed 615.5 points or 2.5 percent to finish at 23,532.70. Broader markets underperformed with the BSE Mid-cap Index shedding nearly four per cent and the BSE Small-cap index declining 4.6 per cent. On the sectoral front, Nifty Metal and PSU Bank indices shed more than five per cent each, Nifty FMCG and Healthcare indices fell more than four per cent each, Nifty Auto and Oil & Gas indices slipped nearly four per cent each. However, Nifty Information Technology index added nearly one per cent.

According to the data, FPIs recorded a net outflow of Rs22,420 crore so far this month. This has come after a net withdrawal of Rs94,017 crore in October, which was the worst monthly outflow. Adding to the concern, FPIs have also turned cautious on Indian debt markets, with outflows reaching Rs4,717 crore in the first fortnight of November. The relentless FPI selling since October has been triggered by the cumulative impact of three factors: one, the high valuations in India; two, concerns regarding the earnings downgrade; and three, the Trump trade.

It’s been a ‘Buy US, Sell India + other EMs’ trade due to the Presidential election event in the US say observers. During the week, the Indian rupee ended 3 paise lower at 84.40 per dollar on November 14 against the November 8 closing of 84.37. High US bond yields and a strengthening dollar post-election have impacted emerging markets like India, and FII activity remains a key factor influencing Indian equities in the near term.

After a muted September quarter results season, investor focus during the week ahead will be on Maharashtra Assembly Elections outcome, incoming economic data and developments on the global economy front. As Maharashtra is both an economic powerhouse and a major political battleground, the election outcome could influence policy decisions and investor sentiment, particularly in sectors that are directly impacted by government actions. The G20 summit will begin on Monday. The summit gains prominence as the US sees leadership change and global trade faces risks from rising trade barriers. The Indian stock market will remain closed on Wednesday, November 20, in observance of the Maharashtra Assembly elections.

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

Tracking the sustained weakness in the cash market, derivatives segment witnessed renewed short selling by bears. In the options market, the highest Call Open Interest for Nifty was seen at the 24,000 and 23,600 strikes, while the notable Put Open Interest was at the 23,500 and 23,000 strikes. For Bank Nifty, the prominent Call Open Interest was seen at the 51,000 and 50,500 strikes, whereas notable Put Open Interest at the 50,000 and 49,500 strikes.

Implied Volatility (IV) for Nifty’s Call options settled at 13.42 per cent, while Put options conclude at 14.08 per cent. The India VIX, a key market volatility indicator, closed the week at 15.44 per cent. The Put-Call Ratio of Open Interest (PCR OI) for the week was 0.92. On the weekly chart, the index has failed to close above its preceding week’s high for seven consecutive weeks, remaining below the 20-week EMA (Exponential Moving Average). Attempts to rebound have been thwarted by persistent selling at higher levels, reflecting mounting bearish pressure. From a technical perspective, Nifty is currently trading at a crucial level of 23,500, where the 200-day Exponential Moving Average (EMA) is positioned.

This level will be key level in the upcoming sessions. A move above the 200 EMA could trigger a bounce towards 24,000. Immediate resistance is expected at 23,800 and 24,000, while support is placed at 23,200. Stock futures looking good are Coromandel, Eicher Motors, Indian Hotels, Persistent Systems, Power Grid and Ramco Cements. Stock futures looking weak are Asian Paints, BPCL, Deepak Nitrate, Dalmia Bharat, NTPC and Marico.

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

STOCK PICKS

Akums Drugs and Pharmaceuticals Ltd

Akums Drugs and Pharmaceuticals Ltd’s one of the largest and fastest-growing vertically integrated pharmaceutical companies in the country. The company is India’s largest contract manufacturer of generic medicines. The manufacturing facilities are equipped to produce all forms of dosages—tablets, hard and soft gelatine capsules, powder in sachets, liquid syrups and suspensions, injections, eye and ear drops, ointments, creams, gels, lotions, Ayurveda and herbal preparations, and nutraceutical and cosmetic preparations.

Akums produces over 12 per cent of the country’s total domestically consumed medicines for more than 1,000 clients that comprise not just leading Indian pharmaceutical companies, but also some of the biggest multinational corporations. Along with its core service offering—Contract Research and Manufacturing Services (CRAMS)— Akums also offers a comprehensive suite of services from the development of formulations to their market launch. Akums established its export subsidiary, Unosource Pharma, in 2014.

The company’s product portfolio for emerging markets includes generic and branded formulations. Akums has registered more than 1,250 products in around 53 countries, and the company exports to nations across Africa, South and Southeast Asia, Eastern Europe, the Caribbean and Latin America. With Akums recently receiving the EU GMP (good manufacturing practice) accreditation for its injectable and oral dosage form facilities, the company will soon venture into European markets. Accumulate at current levels for target price of Rs1,000 in medium term.