Mkts looking to US Fed meeting

Primary Mkt On The Go

• Primary market will also see a lot of action this week
• 6 IPOs hitting the street
• 10 companies scheduled for listings
• FIIs and DIIs remain active

Unnerved by the consistent selling by FIIs (reportedly due to Sebi’s new disclosure norms), Middle East geo-political concerns, none too enthusiastic Q3 results and jitters ahead of Union Budget; during the holiday-shortened week gone by, BSE Sensex and Nifty declined one percent each to end at 70,700 points and 21,352 points, respectively. FIIs sold equities worth Rs12,194.38 crore, while DIIs provided some support with purchases of Rs9,701.96 crore. It is pertinent to observe that in January so far, the FIIs sold equities worth Rs35,778.08 crore, and DIIs purchased equities worth Rs19,976.66 crore. Many observers may have blamed the fall over the past few sessions on FPIs selling down stakes to comply with the Securities and Exchange Board of India’s (Sebi) new disclosure norms, but savvy market players say the big falls over the past few sessions were triggered by stock-specific negative news and overvaluation. However, since the tug of war between the FIIs and DIIs continues, volatility will remain high in the near-term. Finance Minister is expected to intensify measures to stimulate consumption and support the rural economy, while maintaining control over inflation in her upcoming presentation of the sixth consecutive budget on February 1.

One way to boost consumption is to put more money in the hands of people, and one of the possible ways of doing it is by reducing the tax burden through tinkering with tax slabs or increasing the standard deduction. As the government endeavours to decrease the fiscal deficit to 4.5 percent by FY26, analysts predict that the BJP government will emphasize infrastructure spending in line with the goal of reducing the fiscal deficit from the FY24 target of 5.9 percent of GDP.

Many believe that the government’s belief in the possibility of re-election is likely to prevent them from implementing populist measures in the Interim Budget, enabling a sustained emphasis on investments in infrastructure. The next US Fed (FOMC) meeting will be held on January 30-31. During the most recent FOMC meeting held on December 12-13, 2023, interest rates were kept unchanged at 5.25-5.50 percent. The Fed, however, did signal at least three rate cuts could be on the cards for 2024 as inflationary pressures come down. Investors expect the US Fed will opt to maintain key interest rates at current levels. The Street will be keenly watching for Fed chair Jerome Powell’s commentary as recent US GDP numbers exceeded estimates.

IPO Corner: The primary market will also see a lot of action with six IPOs hitting the street and 10 companies scheduled for listings. New Delhi-based company BLS e-Services, a technology-enabled digital service provider, will open its maiden public issue on January 30, with a price band of Rs129-135 per share. The induction heating and melting products manufacturer will float its public issue on January 29 at a price band of Rs100-108 per share. Epack Durable, the original design manufacturer of room air conditioners, will list its equity shares on the bourses on January 30 after raising Rs640 crore through IPO. Nova AgriTech, which makes soil health, plant nutrition and crop protection products, will be the second listing from the mainboard segment in the coming week, on January 31. Epack Durable IPO shares were available at around five per cent premium over the issue price of Rs230 per share in the grey market, while Nova AgriTech shares traded at more than 50 percent premium over the IPO price of Rs41 per share.

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

Sharp stock-specific corrections with significant volume action were seen during the week ended in the derivatives segment. The Nifty (21,353) and Bank Nifty (44,866) dropped by one per cent and 2.6 per cent respectively. Tracking the options chain, the nearest supports are at 21,300 and 21,000 and the nearest resistances are at 21,400 & 21,500 points. Highest OI in Calls was seen at 21,400 and 21,500 strikes. Highest OI in Puts was seen at 21,300 and 21,000. Until Nifty futures remain below 21,700, the broader inclination will be bearish. Ahead of Union Budget, either go short on Nifty futures or buy at ¬the money (ATM) monthly put options or can consider Put spreads to keep the risk lower suggest punters. According to options chain in the Bank Nifty, 45000 is a strong barrier. Major support is at 44,000 points. As long as Bank Nifty futures lie below 46,000, bears will be in control. Overall option data shows that the Put Call Ratio of weekly expiry stands at 0.80.

A ratio less than 1 means traders have written a greater number of Call options versus Put options. Earnings will continue to be on the top of investors’ radar and will decide their course of action in the market. ITC, Bajaj Finance, Vodafone Idea, NTPC, BPCL, L&T, Bajaj Finserv, Dr Reddy’s Laboratories, Sun Pharmaceutical, Maruti Suzuki India, Titan, Adani Enterprises, Adani Ports & SEZ, Tata Motors, InterGlobe Aviation, UPL, Jubilant FoodWorks, GAIL India and Indian Hotels are the F&O stocks scheduled to detail their quarterly earnings in coming week. On the back of auto sales numbers for January, stocks from the sector will be in limelight. Stock futures looking good are Adani Ports, ABFRL, BHEL, L&T Finance, Motherson, SAIL and Titan Inds. Stock futures looking weak are AU Bank, Coromandel, Jubilant Food, Tech Mahindra Laurus Labs and Voltas.

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

Subros Ltd

Subros Ltd is manufacturer of thermal products for automotive applications. The company manufactures compressors, condensers, heat exchangers and all connecting elements required to complete air conditioning (AC) loop and caters to all segments, such as passenger vehicles, buses, trucks, refrigeration transport and railways. Its car AC and engine cooling parts products include blower, evaporator, cooling module, and hoses and tubes. Its railway AC products include roof mounted driver cab AC for diesel automotive, driver cab AC electric automotive and EMU cab AC.

The company’s transport refrigeration system products include reefer SL 1400, reefer SL 3500, evaporator unit SL 3500, reefer SL 500 and compressor. It has a range of residential air conditioners, such as window AC and split AC system (inverter and fixed speed range) and supplies these products as original equipment manufacturer (OEM)/original design manufacturer (ODM) to various brands in the market. Subros Ltd started as a joint venture public limited company with 36.79 per cent ownership by the Indian promoters and 20 per cent ownership by Denso Corporation, Japan & 11.96 per cent ownership by Suzuki Motor Corporation, Japan.

The company has grown from a capacity of 15,000 AC units in 1985 comprising of largely an assembly operation, into the largest and only integrated manufacturing unit in India for auto air conditioning systems. Subros has manufacturing plants at Noida, Manesar, Pune, Chennai, Nalagarh and Karsanpura with an annual capacity of 1.5 Million AC Kits per annum beside a well-equipped R&D Center and Tool Room at Noida. Buy on declines for medium term target of Rs1,000.