Markets looking to US Fed for next level triggers

Despite the mixed sentiments in the secondary market, the primary market continues to be robust. In the upcoming week, 4 companies are gearing up to launch their IPOs including 2 in the main board segment

Major Cues

♦ Nifty Midcap-100, Smallcap-100 indices edged higher

♦ Geopolitical unrest in Middle East remains concern

♦ Higher oil prices, Re volatility dampening sentiment

Buoyed by optimism over a potential rate cut by the US Federal Reserve next month, stability in Japanese Yen and lower CPI & WPI inflation data; the domestic stock markets closed on a strong note during the week ended. BSE Sensex rose 1,331 points, or 1.7 per cent, to 80,436 points, while NSE Nifty gained 397 points, or 1.7 per cent to 24,541 points. Nifty Midcap-100 index was up 0.84 per cent and Smallcap-100 index gained 0.14 per cent. FIIs have net sold Rs8,616 crore in the week gone by, taking the total current month’s outflow to Rs28,977 crore. However, DIIs bought Rs10,560 crore for the week and Rs34,060 crore for August month. Continuous selling from FIIs may restrict the pace of the rally. Rupee settled flat at 83.95 against the dollar, just one paisa lower than its previous close. Expect the rupee to trade with a slight negative bias on geopolitical tension in the Middle East between Israel and Iran. Oil prices, which remain critical for markets with their impact on inflation and on the rate trajectory of global central banks including India’s are locked in a range for last few weeks. Higher crude oil prices do not augur well for the equity markets, fuelling inflation fears. Despite the mixed sentiments in the secondary market, the primary market continues to be robust. In the upcoming week, four companies are gearing up to launch their IPOs including two in the main board segment.

Listing gains in Ola Electric has rekindled the speculative fervour in IPO listings. During the week ended, the US stocks capped off their best week of the year in a head-spinning turnaround that defied recent concerns about rising recession risks. Buoyed by a surprising streak of encouraging economic reports, the S&P-500 gained 3.9 per cent, the Dow Jones Industrial Average climbed 2.9 per cent, and the Nasdaq Composite advanced 5.3 per cent. It was the biggest weekly gain for each major index since last November. This sentiment was driven by better-than-expected US inflation data, retail sales figures, and jobless claims. All eyes next week will now be on US Fed meeting minutes and speech by the US Fed Chair Jerome Powell at the three-day Jackson Hole Economic Symposium in the coming week.

Quote of the week:

Courage taught me no matter how bad a crisis gets. Any sound investment will eventually pay off — Carlos Slim Helu

Don’t despair amid the inevitable setbacks that all investors face, especially during a crisis in the market. If the reasoning behind the investment was sound, stick with it, and it should eventually turn around.

F&O/ SECTOR WATCH

Last week was a roller-coaster for markets, driven by a complex interplay of economic indicators and geopolitical factors. Remarkable recovery over the weekend triggered brisk trading including short covering in the derivatives segment. NSE Nifty closed above the psychological level of 24,500 points. The Bank Nifty ended the week flat. Among the sectors in limelight, the IT sector was the top performer. FMCG and Realty sectors continued to attract buying at lower levels. Conversely, profit booking was seen in PSU banks, Media, and financial services stocks. In the options market, Nifty options indicate significant Call open interest at the 25,000 and 24,900 strikes, while the substantial Put Open Interest was observed at the 24,500 and 24,400 strikes. In the Bank Nifty, significant Call Open Interest stood at the 50,500 strike, while the highest Put Open Interest was seen at the 50,000 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 14.20 per cent, while for Put options at 15.03 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) stood at 1.19 for the week. The Nifty’s strong support zone is between 24,200 and 24,000. Expect strong resistance around 24,800 to 24,900 points. Traders are advised to adopt a buy on dip strategy, provided the support level holds.

Stock futures looking good include HCL Tech, ICICIGI, ICICI Bank, LTTS, MCX, Naukri and Torrent Pharma. Stock futures looking weak are Astral, Godrej Consumer, InduSind Bank, MFSL, Maruti Suzuki, Sun TV, GNFC and PEL.

STOCK PICKS

CMS Info Systems Ltd

CMS Info Systems Ltd provides logistics and technology solutions to banks, financial institutions, organized retail, and e-commerce companies with a presence across cash logistics, managed services, and technology solutions. The company has three operating segments. The cash management services segment provides automated teller machine (ATM) cash management services, retail cash management services, cash in transit services for banks, and other related services. It’s the market leader in ATM cash management: maintaining cash at ATMs and ensuring they run at all times. The managed services segment includes banking automation product deployment, brown label ATMs and managed services for banks, software solutions including multi-vendor software and automation solutions and remote monitoring technology solutions. The card segment engages in trading in card and card personalization services. Its subsidiaries include Securitrans India Private Limited, CMS Securitas Limited, CMS Marshall Limited, Hemabh Technology Private Limited, among others. Recent PSU bank mergers and tighter regulations have resulted in consolidation in the cash management industry. CMS is aiming to exploit this opportunity, expand into new cash-related businesses, and use acquisitions to augment its capabilities. Apart from being market leader in niches like #1 in ATM software solutions, #1 in cash logistics and #1 in AIoT remote monitoring; CMS trades at 24 times its earnings, lower than the 28 per cent annual earnings per share growth it reported in the last three years, making an entry into the stock still attractive. Buy on declines for medium-term target of Rs1,000.