Overall Sentiment May Remain Positive Amid Likely Consolidation

New transaction charges announced by NSE and BSE recently will come into effect from Oct 1 (Tue). While NSE came out with a new fee structure for cash and derivatives segments, BSE announced changes for Sensex and Bankex options contracts of the equity derivatives segment

Quote of the week

I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful — Warren Buffett

Buoyed by China’s recent additional stimulus measures and short-term policy interest rates cut, sliding international crude oil prices in the international market, renewed foreign fund inflows and positive cues from US markets; Indian market extended gains for a third consecutive week. For the week, BSE Sensex added 1,027.54 points or 1.22 percent to end at 85,571.85 points, while NSE Nifty rose 388.05 points or 1.50 percent to end at 26,179 points. On September 27, the Sensex and Nifty touched fresh highs of 85,978.25 and 26,277.35, respectively. The BSE Small-cap index ended flat and the BSE Midcap index added 0.7 percent. FIIs sold equities worth Rs3,932.80 crore, however, DIIs bought equities worth Rs15,961.71 crore. It is pertinent to observe that for the month till now, FIIs bought equity worth Rs22,403.72 crore and DIIs bought equities worth Rs24,211.50 crore.

Some observers feel that some of the FIIs may be inclined to Eastern Asian peers given the stimulus and attractive valuations like China. US rate cut, a record peak in gold prices, Chinese economic stimulus, and escalating tensions in the Middle East have bolstered the appeal of silver. Prices at the benchmark London spot market breached a 12-year high of $32.50 an ounce, while in the domestic futures market, it is well above Rs93,500 per kg. Gold and silver have a strong positive correlation. Both are considered precious metals and are often influenced by similar market factors. Silver prices are influenced by both investment and industrial demand, but its industrial use can create additional volatility in prices. Stronger industrial growth typically translates to higher demand for silver, as more than half of global silver consumption is used for industrial purposes. New transaction charges announced by NSE and BSE recently will come into effect from October 1 (Tuesday). While NSE came out with a new fee structure for cash and derivatives segments, BSE announced changes for Sensex and Bankex options contracts of the equity derivatives segment. In the near term, the overall sentiment may remain positive amid likely consolidation. Track Q2 earnings data, manufacturing & services PMI numbers, monthly auto sales, US jobs data, and Federal Reserve Chair Jerome Powell speech in the coming truncated week. The market will be shut on October 2 for Gandhi Jayanti.

Be prepared to invest in a down market and to get out in a soaring market, as per the philosophy of Warren Buffett.

F&O/ SECTOR WATCH

Settlement week witnessed robust trading in the derivatives segment. Rollovers in Nifty futures were higher at 79 per cen (last month 77%), above 3-month average of 75 per cent, in value terms at Rs45,068 crore versus Rs35,530 cr. In contrast, the Bank Nifty’s October rollover rate stands at 66.88 per cent, slightly below both last months and the three-month average of 71.45 per cent. On other hand, market wide rollovers stood at 89 per cent (last month’s market wide 90%) in value terms Rs42,3669 cr, which flat than last month Rs38,1449 cr. In the options segment, on the Call side, the maximum Open Interest was observed at the 27,000 strikes, followed by the 26,000 and 26,600 strikes, with maximum writing at the 27,000 and then the 26,800 and 26,400 strikes. On the Put side, the 26,000 strike holds the maximum Open Interest, followed by the 25,000 and 25,500 strikes, with maximum writing at the 26,400 strikes, and then the 26,300 and 25,500 strikes. For the Bank Nifty, the highest Call OI was at the 54,000 strikes, while for Put OI concentrated at the 53,500 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 10.93 per cent, while Put options concluded at 11.43 per cent. The India VIX, a key indicator of market volatility, concluded the week at 12 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.24 for the week. For the upcoming sessions, sentiment remains positive as long as the Nifty stays above the psychological level of 26,000 points. The strong rollover in Nifty suggests good momentum in the near term, provided there are no fresh market triggers. The weekly options data suggested that 26,000 is likely to be immediate support for the Nifty, followed by 25,500 being the key support, whereas, on the higher side, 26,400-26,600 is the area to watch. Focus in the coming week will be on the auto sales data for the September month from original equipment manufacturers. Auto stocks like Maruti Suzuki India, Tata Motors, Ashok Leyland, Hero MotoCorp, Eicher Motors, TVS Motor, Bajaj Auto, Mahindra & Mahindra, Escorts, etc., will be in limelight. Industry observers expect soft data from all segments. Stock futures looking good are ABFRL, BPCL, Berger Paints, HPCL, L&T Finance, and NALCO. Stock futures looking weak are Birla Soft, Granules, Godrej Consumer, LTTS, PI Inds and Syngene.

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

STOCK PICKS

Dhanuka Agritech Ltd

Dhanuka Agritech Ltd (DAL) is a leading agrochemical company in India. The company’s strength lies in manufacturing formulations. The product portfolio is largely distributed across the Insecticides, Herbicides, Fungicides, Bio-pesticides, and Bio-stimulants segments. Insecticides contribute a significant portion of the overall revenues and the company aims to ramp up its presence in the fast-growing Herbicides segment. The introduction of novel chemistries and extensive product development has been the key focus of the organization, distinguishing Dhanuka from the rest of the industry. Dhanuka has world-class NABL-accredited laboratories. Dhanuka has international collaboration with 10 leading global agrochemical companies from Japan, US, and Europe, which helps us to introduce the latest technology in India. DAL’s pan India distribution network consists of around 6,500 distributors and dealers and 80,000 retailers, enabling it to have a presence across 10 million farmers’ touchpoints. The company’s latest innovative sales process guides the farmers effectively on crop solutions through channel partners and a dedicated team. It also ensures a smooth reach of products to farmers with readily available stock on demand as per the latest market scenario. This new-age sales process is managing issues like inventory cost, blockage of funds and uncertain demand and supply. It also offers automatic order processing and complete availability of the products in real-time. The company has a healthy Net worth of Rs1,255.88 crore as at March 31, 2024. Buy on declines for target price of Rs2,500 in medium term