Market hovering at record highs in uncharted territory

When the market opens on Monday, it will react to the Q4 earnings of Kotak Mahindra Bank, DMart and IDBI Bank. Major companies that would announce their numbers in the coming week are DRL, Cipla, Tata Motors, Asian Paints, BPCL, SBI, Hero Moto and L&T

After marching to new highs for the better part of the week, the market took a sharp turn lower amid selling pressure in key index heavyweights on Friday to close on a flat note during the week ended. BSE Sensex gained 147 points to end at 73,878 points, while NSE Nifty finished at 22,475 points, closing 56 points higher. In the two days of trading in May, FPIs have invested Rs1,156 crore in equity and sold Rs1,726 crore in debt. Rumours of impending changes in capital gains both short-term and long-term have been scotched by FM. The market is at record highs in uncharted territory. Factors like the ongoing Lok Sabha elections, uncertain economic and rate outlook in the US, FII selling, and anxiety around corporate earnings are bound to stoke turbulence in the market say old timers. At historic highs, there is always some nervousness and people watching over their shoulders to see who is rushing through the door. They want to book profits at the earliest sign of trouble.

Expect a degree of consolidation in the market due to expensive valuations and any election-led jitters. When the market opens on Monday, it will react to the Q4 earnings of Kotak Mahindra Bank, DMart and IDBI Bank. Major companies that would announce their numbers in the coming week are DRL, Cipla, Tata Motors, Asian Paints, BPCL, SBI, Hero Moto and L&T. Renewed hopes for a second rate cut in 2024 emerged following a weaker US labour report, giving markets some reason to celebrate during the week ended. Oil prices may remain under pressure as Hamas reportedly studies a proposal for a temporary cease-fire with Israel and plans to send a delegation to Egypt to continue negotiations. Moving forward, the ongoing results season will be detrimental for investors to align their portfolios. The market will also remain vigilant about the election related news and global cues.

Street Talk: Rumours of promoters inflating profits (through profit entry) and in nexus with Gujarati-Marwari brokers driving their stock prices to unrealistic levels are gaining ground. With the domestic equity market is flush with funds from retail as well as other domestic investors, the combined market capitalisation (mcap) of all listed stocks on the BSE has zoomed above a record high level of Rs400 lakh crore. While both Sensex and Nifty are near all-time peaks, the boom is more pronounced in small-caps and SME stocks, which are giving multi-bagger returns in a matter of few days. Froth is building up in small-caps and mid-caps and there are signs of price manipulation in the equity market.

Witha booming stock market, all the malpractices of Harshad Mehta/Ketan Parekh era are back primarily in Kolkata says a industrialist. He urged Sebi and the Finance Ministry to intervene and investigate the matter to prevent small investors from suffering significant losses. It would be wise to recall earlier scams like those from Harshad Mehta and Ketan Parekh times which left a lasting impact on equity investors and regulatory authorities like the Securities Exchange Board of India (Sebi). Stay cautious and avoid ‘cats and dogs’.

You are an investor, not someone who can predict the future. Base your decisions on real facts and analysis rather than risky, speculative forecasts.

F&O / SECTOR WATCH

The week ended witnessed wild swings on some trading days, triggering nervousness among market players in the derivative segment. While the Nifty has stayed flat, the volatility has shown a huge spike. This is evident from the India VIX spiking by a massive 33.80 per cent to 14.62. In contrast, Bank Nifty outperformed Nifty, wrapping up the week with a 1.5 per cent gain. In the options segment, the highest Call Open Interest in Nifty options is at the 22,800 and 23,000 strikes, while the highest Put Open Interest was noted at the 22,000 and 22,500 strikes. For Bank Nifty, the highest Call Open Interest was at the 49,500 strike, while the highest Put Open Interest was observed at the 48,500 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 11.76 per cent and Put options concluded at 12.57 per cent.

The India VIX, a crucial market volatility indicator, ended the week at 13.45 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.39 for the week. Currently, both indices have developed a negative divergence pattern, with the rising India VIX suggesting a limited upside potential. In the near term, Nifty is anticipated to trade within the range of 22,700 to 22,200. Profit booking was seen in IT and media stocks, while PSU and Financial Services stocks emerged as major gainers. The markets are likely to adopt some defensive bias going forward. Expect some defensive pockets like Pharma and FMCG to do well over the coming days.

Some technical rebounds in the recently corrected counters can be expected. However, it is strongly recommended to use these technical rebounds to exit from weaker counters. Avoid large positions in F&O and fresh purchase should be done extremely carefully and only in the stocks that are developing or bettering their relative strength against the broader markets. A cautious approach is advised for the coming week. Stock futures looking good are Ashok Leyland, Apollo Tyres, Coal India, Federal Bank, PNB, Sun TV and REC. Stock futures looking weak Apollo Hospitals, Coforge, LTIM, Ramco Cements and Tata Consumer.

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

Biocon Ltd

Biocon Ltd is biopharmaceutical company, which focuses on treating diabetes, cancer and autoimmune diseases. Biocon operates four distinct business segments: a. Generics b. Novel Biologics c. Biosimilars (Under Biocon Biologics Limited) d. Research Services (Under Syngene International Limited). Generics Business comprises of a growing portfolio of Active Pharmaceutical Ingredients (APIs) as well as finished dosages.

The company was the first Indian company to be approved by the US Food and Drug Administration (US FDA) to manufacture the API and is presently one of the largest manufacturers of statin and immune suppressant APIs in the world.API business comprises of a balanced portfolio of 50+ APIs spread across Cardiovascular, Anti-Diabetics, Immuno suppressants, Oncology, Peptides, Neurology and a few speciality and niche molecules.Its products include Tacrolimus, Rosuvastatin, Simvastatin, Atorvastatin, Pravastatin, Fingolimod and others.Novels Biologics business continues to address unmet patient needs with a focus on oncology and immunology.

The lead molecule, Itolizumab, is the world’s first novel humanized anti-CD6 monoclonal antibody.Biocon Biologics Limited (BBL) is the biosimilars arm of Biocon Limited. It is a unique, fully integrated global biosimilars player.BBL was the largest contributor to the company’s revenues in FY23 and is its fastest growing business segment. Syngene International Ltd (Syngene) is a research, development, and manufacturing services company that provides an integrated range of scientific services from the earliest stages of discovery research to commercial manufacturing.

Over the years, the company has developed and commercialized novel biologics, biosimilars, and complex small molecule active pharmaceutical ingredients (APIs) in India and several key global markets, as well as Generic Formulations in the United States, Europe and key emerging markets. It has over five facilities across Bangalore, Hyderabad and Visakhapatnam in India. Its API manufacturing facilities leverage complex technology platforms that range from microbial fermentation, chromatographic purification, chemical synthesis, peptide synthesis and HPAPIs. Biocon has underperformed on the stock market for last couple of years. But recent developments make the stock good buy at current levels for medium term target of Rs500.