Q1 earnings holding market

Weak global cues and consistent selling by FIIs kept market under pressure for the second consecutive week. US Federal Reserve's Dovish policy helped market recoup some losses in the latter half of the week. The BSE Sensex fell 388.96 points (-0.73 percent) to close at 52,586.84 poins, while the NSE Nifty was down 93.05 points (-0.58 percent) to end at 15,763 levels.

Broader markets outperformed benchmarks, with BSE Midcap and Smallcap indices gaining 0.29 percent and 1.36 percent respectively. FIIs continued to be net sellers in Indian equities for the fourth consecutive month in July, offloading Rs 23,193.39 crore, the highest since March

2020. However, DIIs continued to support the market with net buying of Rs 18,393.92 crore in July, the highest monthly buying since March 2020. On the back of the strength in US and other developed markets, it is pertinent to observe that emerging markets have been witnessing sharp selling from FIIs for last few weeks. Monetary Policy Committee (MPC) of RBI will be meeting during the course of next week. Observers expect the RBI to hold interest rates, but the commentary on economic growth and inflation trajectory along with measures for most-affected sectors (if any) will be keenly watched out for. US Fed left their stance on monetary policy

unchanged at the conclusion of a two-day policy meeting. The Fed said in a statement that the economy has made progress toward its employment and inflation goals, and that the central bank would continue to assess its stimulus programs in the coming months.

With the 'Pegasus' issue disrupting the Parliament proceedings, no major Bills were introduced. Near-term direction of the markets will be dictated by RBI Policy meeting, developments in Parliament, macroeconomic data, international crude oil prices and Q1 earnings numbers. Corporate earnings have generally been strong, easing concerns that the stock market is overvalued. Clutch of PSU banks like State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB), Bank of India (BoI) and Indian Overseas Bank (IOB) will unveil their Q1 numbers.

Prominent corporates like HDFC, Bharti Airtel, Titan, Dabur, HPCL, M&M, Nalco, Cipla, GAIL India, Adani Ports, Hindalco, and Divi Labs will also announce their numbers in the coming week.

Heard on the Street: Investor behaviour has been the focus of many studies and numerous theories attempt to explain the regret or overreaction that buyers and sellers often experience when it comes to money. The reality is that the investor's psyche can overpower rational thinking during times of stress, whether that stress is a result of euphoria or panic. Taking a rational and realistic approach to investing—during what seems like a short time frame for capitalizing on euphoria or fearful market developments—is essential. The non-professional investor is typically putting hard-earned cash in investments for the sake of receiving a return.

Still, they see their investments lose value due to market developments at times. The losses can cause stress and second-guessing. That is, many investors have a relatively low risk tolerance when it comes to investing because losing money is painful. But risk can be viewed as a guidepost for investing and investor behaviour. Investors who enter into investments with

a base level understanding of the risks involved can mitigate a great deal of the emotion associated with investing. In other words, challenges due to emotional investing can crop up when investors see unidentified or higher stake risks than they had originally ascertained. Emotional investing is often an exercise in bad market timing. Following the media can be a good way to detect when bull or bear markets are evolving because the daily stock market reports feed off the activity occurring through the day, which can at times create a buzz for investors. However, media reports can also be outdated, short-lived, or even non-sensical and based on rumours. At the end of the day, individual investors are accountable for their own trade

decisions and therefore must be cautious when seeking to time market opportunities based on the latest headlines. Using rational and realistic thinking to understand when an investment may be in a development cycle is the key to evaluating interesting opportunities and resisting bad investing ideas. Reacting to the latest breaking news is probably a sign that decisions are being driven by emotion rather than rational thinking.

Quote of the week: With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future. — Carlos Slim Helu

It's far too easy for investors to lose perspective. Whenever something big goes wrong, a lot of people panic and sell their investments. Looking at history, the markets recovered from the 2008 financial crisis, the dotcom crash, and even the Great Depression, so they'll probably get through whatever comes next as well.

F&O / SECTOR WATCH

True to predictions, the settlement week witnessed heightened volatility with intraday Nifty moves of over 200 points in some sessions. However, it can be seen that the July series has been one of the most boring series with the Nifty trapped in a slender range of 500 points. Rollover in the Nifty and the Bank Nifty stands at 82.75% and 81.20% respectively, well above 3-month average of 76%. Market wide rollovers stood at 91% (last month's market wide 92%). With the new series only one session old, option data is scattered at various far strikes. Maximum Put open interest was seen at 15700 followed by 15800 &15500 strikes, while Maximum Call open interest was seen at 15900 followed by 15800 & 16000 strikes. The highest option base remains at ATM 15800 strike for both Call and Put strikes for the coming weekly expiry. The Implied Volatility (IV) of Calls closed at 11.81 per cent, while that for Put options closed at 12.62 per cent. The Nifty VIX for the week closed at 12.95 per cent and is expected to remain volatile. PCR of OI for the week closed at 1.27. Chartists expect that breach of ongoing trading range of 15,600-15,900 on a closing basis should trigger fresh directional move for another 300 points. Bank Nifty has major support at its 100 days exponential moving average on daily charts which is placed around 34000 levels. On higher side, index can face strong hurdle at 35300-35400 zone.

Traders are advised to stay light in the indices and focus on individual themes which have been doing good of late. Adopt stock specific approach. Though stock futures positions have increased clearly is required. Themes that can outperform the Nifty in the Aug series are financials, cement, speciality chemical, metals, realty and IT. On the eve of RBI Policy meeting, banks may witness heightened action. Keep an eye on PSU banks say industry watchers. Banking sector holds the key for any directional move going ahead. The uncertainties brought in by the pandemic helped spur the demand for life insurance players. The first year premiums for the industry spiked 6.9 per cent (Y-o-Y) in June quarter. ICICI Prudential has logged the fastest growth followed by HDFC Life and SBI Life. Stay overweight on the sector. Relaxation of localised lockdowns in most parts of the country may see automobile companies report better sequential as well as year-on-year sales volumes for July. Track commentary on supply chain issues on account of a shortage of semiconductors. Maruti Suzuki, TVS Motor, Tata Motors, Eicher Motors, Bajaj Auto, Ashok Leyland, M&M and Escorts will be in focus.

Stock futures looking good are Bharti Airtel, Hindalco, L&T, GMR Infra, NMDC and UPL. Stock futures looking weak are Bajaj Finserv, HUL, Kotak Bank, Maruti and Metropolis.