Mkts To Remain Positive Despite Inflation Woes

Expect heightened volatility in some of the recently listed stocks that will see lock-in expiry. These include Shree Tirupati Balajee Agro, Swiggy, Acme Solar Holdings, Bajaj Housing Finance, Niva Bupa Health

Buoyed by renewed buying from FIIs, positive global markets, weak international crude oil prices and dovish RBI Policy in line with expectations; markets rallied for third consecutive week to post biggest weekly gains in six months.

The Sensex rallied 2.39 per cent or 1,906 points to close at 81,709, and the Nifty jumped 2.27 per cent or 547 points to 24,678. Performance of broader markets was better than benchmarks with the Nifty Midcap 100 Index rising 4.1 per cent and Smallcap 100 index surging 4.5 per cent. The hope for pick-up in the government capex in the remaining part of FY25 and likely moderation in inflation in Q4FY25 with positive outlook for February policy meeting also lifted sentiment. After long hibernation, there was positive turnaround in FII flow on the weekly basis for the first time since the mid of September, which reflected in the broad-based market rally.

FIIs net bought Rs 11,934 crore in the cash segment in December against Rs 1.6 lakh crore of net selling in October-November. On the contrary, DIIs net bought Rs 1,792 crore worth shares in December against Rs 1.51 lakh crore of net buying in previous two months. Overall, they have been net buyers on the monthly basis since August 2023. The Indian rupee continued to hit new low against the US dollar and consistently fell for the fifth consecutive week amid lower growth forecast and higher inflation estimates, ending at 84.65 on December 6 after hitting all-time low of 84.77.

Tarriff threats by Donald Trump also weighed on the currency, though rally in equity markets and lower oil prices provided good support at lower levels. Incremental capital inflows into India from the FCNR measures announced in RBI Policy may help the INR marginally in the short term, but they are unlikely to be substantial enough to change the overall trajectory for USD/INR to move higher.

Experts see the currency to see volatility this week. From here on, the focus will be on the CPI inflation, which is the key factor for the RBI to decide over the rate cut cycle that is likely to kick off either in February or April policy meeting. Apart from inflation, the industrial and manufacturing production numbers for October will also be announced on December 12. Globally, all eyes will be on the inflation data for November from the United States, especially ahead the US Fed policy meeting scheduled on December 17-18 wherein the central bank is likely to announce 25 bps cut in fed funds rate in addition to 75 bps cut already reported in the previous two meetings.

According to economists, inflation is likely to be around 2.6 per cent number reported in October. The focus will also be on the interest rate decision by the European Central Bank due on December 12. Considering the improved sentiment, in the week ahead the market is expected to remain positive despite likely intermittent consolidation, with focus on US and India’s inflation numbers, ECB interest rate decision and the bunch of IPOs scheduled for subscription.

Plenty of action awaits investors in the primary markets this week, as the high-profile IPOs of Vishal Mega Mart, One Mobikwik, and seven other issues open for subscription. Expect heightened volatility in some of the recently listed stocks that will see lock-in expiry. These include Shree Tirupati Balajee Agro, Sagility India, Kronox Lab Sciences, Kroxx, Swiggy, Acme Solar Holdings, Bajaj Housing Finance, Niva Bupa Health, Tolins Tyres, and PN Gadgil Jewellers.

This is testament to the fact that investing without education and research will ultimately lead to regrettable investment decisions. Research is much more than just listening to popular opinion.

FUTURES & OPTIONS / SECTOR WATCH

Tracking the renewed buying from FIIs, derivative segment witnessed brisk trading and markets saw fresh round of buying last week in both Nifty and Bank Nifty. Both ended the week on a positive note with gains of more than 2 per cent each.

According to the weekly options data, the maximum Call open interest was seen at the 26,000 strike, followed by the 25,500 and 25,000 strikes, with maximum Call writing at the 25,000 strike, followed by the 25,500 and 24,700 strikes. On the Put side, the 24,000 strike holds the maximum open interest, followed by the 24,500 and 24,200 strikes, with maximum writing at the 24,200 strike, and then the 24,700 and 24,000 strikes. The Implied volatility (IV) on Nifty call options was 13.37 per cent and on put options was 14.09 per cent. India VIX ended the week at 14.53 per cent. The Put-Call Open Interest Ratio (PCR OI) for the week was 1.28. Chartists say that the Nifty is holding well above its key psychological level of 24500 as index has witnessed a fresh breakout above the Inverted Head & shoulder pattern on daily time frame.

The immediate support for Nifty is placed at 24500 levels while on higher side, a decisive move above 24800 levels could trigger fresh round of buying which can take Nifty towards 25000 levels as well. Overall options data indicates that the Nifty will trade in the broad range of 24,200-25,200, while the immediate range is likely to be 24,500-25,000. Sectors like Auto, Metal, Reality along with Financial services were in limelight last week; while subdued movement was observed in pharma & FMCG counters. It is important that instead of chasing all-up moves, the prudent thing to do would be to mindfully protect gains and stay invested in the stocks showing improvement in their relative strength. A cautious approach is advised for the coming week. Stock futures looking good are GMR Infra, HFCL, NHPC, REC, Tata Steel, Tata Motors and Zydus Life. Stock futures looking weak are Berger Paints, Kalyan Jewellers, InduSind Bank, HDFC Life, Nykaa and Tata Chemicals.

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

STOCK PICKS

Time Technoplast Ltd

Time Technoplast Ltd (Time Tech) is a multinational conglomerate with operations in Bahrain, Egypt, Indonesia, India, Malaysia, UAE, Taiwan, Thailand, Vietnam, Saudi Arabia & USA is a leading manufacturer of polymer products. The company’s portfolio consists of technically driven innovative products catering to growing industry segments like industrial packaging solutions, lifestyle products, automotive components, healthcare products, infrastructure / construction related products, material handling solutions & composite cylinders.

Manufacturing polymer drums / barrels, jerry cans and pails for varied packaging requirements for over 900 institutional customers, the company is the largest manufacturer of industrial packaging in Asia and MENA Region. With increasing strategic tie-ups with MNCs across different countries due to significant presence in the Asia and MENA Region, the company is market leader in 8 out of 11 countries in industrial packaging. The company is 3rd largest manufacturer in the value added products like intermediate bulk containers and has 2nd largest capacity worldwide in composite cylinders. The company has developed air tanks for vehicle air brake system and diesel exhaust fluid (DEF) dispenser tanks that are designed to ward off the harmful impact of corrosion for commercial vehicles.

It has also launched CNG Type IV composite cylinder and composite leaf springs composite propeller and drive shafts for automotive segment. Supply of newly launched new generation multilayer PE pipes for power / communication cable duct with silicon in-lining continues is giving overwhelming business. The pipes/ducts have substantial business potential especially in smart cities. The company is world class player in several of its products. Buy for price target of Rs750 in next twelve months.