Markets hovering in strong cross-currents of global, domestic factors

Under the shadow of ongoing general elections 2024 in phased manner, US inflation concerns, geopolitical tensions and selling by Foreign Institutional Investors (FIIs); the heightened volatility continued to impact the domestic markets during the week ended April 26. BSE Sensex gained 641.83 points or 0.87 percent to end at 73,730.16 points, while Nifty finished at 22,420 points, rising 273 points or 1.23 per cent. The broader indices outperformed the benchmark indices with BSE Small-cap and Mid-cap surging four per cent each. Nifty Midcap 100 index gained four per cent to touch fresh all-time high of 50,684.50 points. FIIs sold equities worth Rs14,703.72 crore, while DIIs bought equities worth Rs20,796.16 crore. However, for the month till date, FIIs sold equities worth Rs36,933.21 crore and DIIs purchased equities worth Rs42,065.12 crore. During the week, the market remained volatile with positive bias amid mixed cues including geopolitical de-escalation, falling crude oil prices, mixed 4QFY24 earnings, weaker-than-forecasted GDP growth, higher inflation and rising US bond yield.

Global traders feel that an expanding conflict between Iran and Israel would disrupt global crude supplies, pushing up commodity prices and energy stocks. However, the war fears that jolted oil markets recently have been easing off. Next week, many traders will look to a US Fed meeting which could provide hints about the potential for rate cuts this year. Futures markets are pricing in a 19 per cent chance the central bank will hold rates steady for the rest of the year. Investors say the market’s crosscurrents, a strong economy, but higher-for-longer interest rates, mean additional volatility could be on the way. Coming week would see results from a clutch of Adani Group companies, Dabur India, Britannia Industries, Titan, Tata Technologies, Avenue Supermarts, Kotak Mahindra Bank, Tata Chemicals, Trent and UltraTech Cement.

The markets will also react to earnings declared by ICICI Bank, Yes Bank, RBL Bank, IDFC First Bank and others over the weekend. In the holiday truncated week, monthly auto sales numbers and low voter turnout in the second phase is also likely to play on the market sentiments.

Equity markets will be shut for trading on May 1, Wednesday on account of Maharashtra Day.

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

On the back of Q4 results from major corporates, the settlement week witnessed robust volumes in the derivatives segment. Expectedly, rollovers in Nifty futures declined at 65 per cent, well below last 3-month average of 76 per cent. On other hand, market wide rollovers stood at 92 per cent (last month’s market wide 93%).The rollover rate for Bank Nifty shows a decline compared to the previous series, dropping from 87.21 per cent to 74.41 per cent. Nifty and Bank Nifty are currently consolidating near their record highs, with both indices registering weekly gains of over one per cent. In Nifty, the highest Call writing is seen at the 22,500 and 22,600 strikes. Conversely, Put writers displayed activity, particularly at the 22,500 and 22,000 strikes. In Bank Nifty, the highest Call Open Interest was observed at the 48,500 and 49,000 strikes, while on the Put side, it was concentrated at the 48,000 and 47,000 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 11.60 per cent, while Put options concluded at 12.29 per cent. The India VIX, a key indicator of market volatility, concluded the week at 10.73 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.37 for the week. This suggests that the market is in a state of anticipation, with traders hesitant to carry positions into the current month (May Series). Consequently, we anticipate sluggish movements in both indices until a trigger emerges. The market’s trend will be determined by how positions are formed throughout the month. In the upcoming week, Nifty may test upside resistance at 22,600 points, whereas on downside support is placed at 22,200. Sustained breakout above 48,600 level could trigger a move towards 50,000 in Bank Nifty. Immediate support sits at 47,800, with a crucial support level at 47,200.

Sectors to watch in May series are Banks, Capital Goods, Chemicals, Infrastructure, Metals and Power.

Stock futures looking good are Adani Ports, ACC, Container Corporation, GNFC, MGL, Mannapuram, MFSL and SBI. Stock futures looking weak are Bharti Airtel, Exide Inds, IPCA, Metropolis, Persistent, Shree Cements and SBI Life.

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

Bannari Amman Spinning Mills Ltd’s

Bannari Amman Spinning Mills Ltd’s principal line of business is manufacturing and marketing of Cotton Yarn, Woven and Knitted fabrics, Home Textiles, Knitted Garments and Processing of fabrics. The company has two spinning units with an installed capacity of 1,45,440 spindles, weaving and home textiles units with an installed capacity of 153 looms, processing unit with an installed capacity to process 5,400 tonnes of fabric per annum, knitting unit with installed capacity to produce 7,200 tonnes of knitted fabric per annum, garment units and 27 Windmills with an installed capacity of 23.40 MW green power which is entirely used for captive consumption making the company a very low cost producer of textiles.

The impact of continuously increasing trend of cotton prices resulted in yarn & fabric prices increased frequently, which affected the garment value chain significantly and created uncertainty in the market in FY 2021-22 and first quarter of FY 2022-23. Geo political tensions caused by Russia-Ukraine war had adverse effect on the textile industry as exports came down drastically. The prices of cotton have come down by more than 30 per cent from its peak levels in last three quarters and the demand scenario has improved significantly as export orders have started flowing from developed economies. The prospects have further improved with robust domestic demand. The Spinning unit’s production capacity has been increased from about 90 tonnes of cotton yarn per day to about 105 tonnes of cotton yarn per day.

Moreover, the company plans to introduce new product mixes for quality sensitive consumers. Home textiles is one of the focus areas for the company. The main products of home textiles are bleached fabric and made-up like bed linen products meant mainly for exports. The company has installed machines to start Terry Towels production apart from existing products. A portion of fabric produced is transferred to Home Textile division for manufacture of value-added products. Overall, the prospects for the current year are very bright on improvement in demand scenario as well as prices at this point of time. Excellent turnaround performance indicated in next couple of quarters. Going by the prospects of good FY 2024-25 and with Book Value of Rs64, the stock is good buy for medium term target of Rs150.