Range-bound trading more likely this week

Disappointed by the ‘status quo’ attitude on interest rates by the US Fed and RBI, renewed aggressive selling by FIIs, higher bond yields in the US and lack of specific triggers; Indian equity markets ended lower during the week ended. Nifty shed 71.3 points or 0.32 per cent to finish at 21,782.5 points, while BSE Sensex fell 490.14 or 0.67 per cent to end at 71,595.49 points.

However, despite the moderate selloff in broader markets, Nifty Midcap closed 0.85 per cent higher for the week. FIIs sold equities worth of Rs5,871.45 crore in the week gone by, while DIIs have provided support by buying equities worth Rs5,325.76 crore. Observers feel that the main trigger for FII selling is rising bond yields in the US. It is interesting to observe that FPIs were buyers in IT and telecom, which explains the resilience of the leading players in these segments. It is pertinent to understand that FIIs continued their bullish stance on the country’s debt markets with a net infusion of over Rs15,000 crore so far this month, on the back of inclusion of Indian government bonds in the JP Morgan Index along with relatively stable economy.

This followed a net investment of Rs19,836 crore in January, making it the highest monthly inflow in more than six years. This was the highest inflow since June 2017, when they infused Rs25,685 crore. India’s net direct tax collection stood at Rs15.60 lakh crore as of February 10, reaching approximately 80 per cent of the revised target set for the entire financial year. In US markets, technology stocks drove the S&P-500 past another milestone and to a fresh record closing above 5,000 points for the first time. The rally reflects unexpected strength in the economy that has investors believing that as long as the expansion continues, they can ride riskier assets to gains even if interest rates remain high.

Near-term direction of the Indian market will be dictated by the release of US, UK, and Indian inflation data, geo political cues on Red Sea crises, international crude oil prices, FII fund flows and other global cues. Ahead of announcement of election calendar for General Elections by ECI, markets are expected to remain range bound with stock-specific moves in next few weeks.

In the last leg of Q3 FY24 results in the coming week, major companies announcing results are Mahindra & Mahindra, BHEL, IRCTC, Eicher Motors, Hindustan Aeronautics, Mazagaon Dock Shipbuilders, and Phoenix Mills.

Market Musings: Professional fund managers labour under handicaps that individual investors don’t face. Make sure you manage your portfolio differently than they do. Investing is one of the few areas of life in which amateurs can—and should—outperform professionals.The individual investors who have spent the past few years trying to beat the pros at their own game by chasing hot stocks have it all wrong. Instead, you should play a different game entirely. On average, only 46 per cent of funds outperformed the total market over monthly horizons; 39 per cent beat the market over 12-month periods; 34 per cent over decade-long horizons; and a mere 24 per cent for their full history. That cost of being human, is almost as high as the drag from annual fees. In the long run, however, nearly all the market’s return comes from a remarkably small number of stocks—giant winners that rise in value by 10,000 per cent or more over the course of decades. Investors and financial historians calls such companies superstocks.

Research shows that less than half of all stocks even generate positive returns over their publicly traded lifetimes, and that only 4.3 per cent of stocks created all the net gains in the Indian market between 1950 and 2016. That means searching for the next superstocks is like hunting for a few needles in an immense field of haystacks. And professional investors, by design, can’t search the whole field and all the haystacks. If fund managers could stick to only their best ideas, they might do better. But owning just a handful of stocks could create tax and regulatory headaches—and would expose the managers to massive withdrawals (and loss of fees) if returns faltered. So most portfolio managers own too many stocks to focus on their best ideas, but not enough to maximize the odds of finding a giant winner. Individual investors, by contrast, can capture every needle in all the haystacks with a total-market index fund. Then you can add the potential for outperformance by trying to pick the next superstocks yourself.

Unfortunately, many individual investors diversify by adding big, household-name companies too similar to what they already own, or by following the crowd into whatever’s red-hot. Instead, search for superstocks among smaller, unfamiliar firms that have a proven ability to raise prices without losing business. Limit yourself to a handful of possibilities, don’t put more than a total of five per cent of your money in them and never add new money even if they go up. That way you can make a lot if you land a big winner, but you can’t lose much on the losers. If you do find what you think is a likely super stock, you, unlike a professional, can hold for as long as it takes to reap a giant gain. The word professional comes from the Latin for declare publicly. Professional investors no longer have insurmountable advantages over individual investors. They only profess that they do. In the long run, you can’t beat the pros by trading faster or by joining a meme-stock mob. The way to outperform isn’t by blending into the herd, but by standing apart from it.

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

Amidst high volatility, the derivatives segment witnessed brisk volumes during the week ended. On the sectoral front, PSU Banks, healthcare & pharma and oil & gas sectors were in limelight. Private bank stocks continued to drag the market. As per the weekly options data, the maximum Call Open Interest was seen at 22,000 strike, followed by the 23,000 and 22,700 strikes. On the Put front, the 21,500 strike owned the maximum Open Interest, followed by 21,000 and 20,500 strikes. India VIX, the fear index, remained on the higher side for fifth consecutive week indicating the possibility of higher volatility in the coming days. The VIX jumped 5.1 percent to 15.45, from 14.7 levels on the week-on-week basis.

Overall options data indicates that 22,000 is key resistance for the Nifty on the higher side, with key support at 21,500. The financial markets witnessed a week of fluctuations, influenced by changing expectations regarding the Federal Reserve’s actions, concerning economic indicators from China, and escalating geo-political tensions in the Middle East.The expectation of cooling inflation, coupled with geopolitical risk premiums, may provide support for gold prices in the coming week. Additionally, with Chinese markets closed for the Lunar New Year holiday, movements in metals are expected to remain subdued during this period.

Stock futures looking good are ACC, Adani Ports, Grasim, Granules, NTPC, SBI and Zee. Stock futures looking weak areApollo Tyres, Delta Corp, MRF, SAIL, Petronet and ONGC.

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

Bikaji Foods International Ltd

Bikaji Foods International Ltd (Bikaji) is India’s leading fast-moving consumer goods (FMCG) brand with a prominent brand in India that specialises in ethnic snacks and has established a global presence. The company is one of the fastest-growing players in India’s organised snacks market. In addition to domestic success, the company is one of the top exporters of snacks, sweets, frozen food, and savouries to over 25 countries worldwide. The company’s reach extends across North America, Asia Pacific, the Middle East, the European Union, Africa, and the United Kingdom. The company has diverse product range of over 300 different items, including namkeen, sweets, western snacks, chips, and cookies, which provide it with a robust presence in the Indian snacks industry.

Bhujia is the best-selling product, followed closely by other categories such as namkeen, sweets, papad and other snacks. The company’s product offering is classified into six major segments: bhujia, namkeen, packaged sweets, papad, western snacks, and other snacks, the majority of which are gift packs (assortment), frozen food, mathri range, and cookies. The company has established market leadership in its core states of Rajasthan, Assam, and Bihar, with a significant market presence. With operations in 26 states and three union territories as of June 30, 2023, it has gradually increased its presence throughout India. Bikaji has invested heavily in strengthening the brand recall and consumer goodwill of its brand Bikaji.

It has engaged Amitabh Bachchan, a well-known celebrity in India, as its brand ambassador. The company has recently launched Bikaji Café and BikajiFunkeen brands to promote its western snack segment. Bikaji is a well-established brand, the second fastest growing company with a CAGR of 21.3 per cent from FY19 to FY23 in the Indian organized snacks market. The company has registered healthy revenue growth CAGR of 20.2 per cent over FY18-FY23 and a growth of 9.7 per cent in EBITDA over the same period while maintaining healthy profitability. The company has continued to report healthy cash flow from operations, with strong liquidity and credit metrics supported by strengthening its distribution network and launching new products. Its strong operational and financial performance will help to capitalize on significant growth opportunities in the Indian snacks industry in India. Buy at current levels for target price of Rs800 in medium term.