Roller-coaster trading likely

Amid mixed global cues and rising concerns over Delta variant of Covid, the last week witnessed heightened volatility. Recouping most of the losses of the early part of the week, the BSE Sensex ended 0.30 percent lower at 52,975.80 points, while the NSE Nifty was down 0.42 percent to close at 15,856 level.

BSE Midcap index ended lower by 0.47 percent, while BSE Smallcap index ended flat in the week ended. FIIs continued to be net sellers restricting the upside of market. However, DIIs continued supporting the market through consistent buying. FIIs total monthly selling till date in July is Rs 12,368.18 crore, while DIIs have net bought Rs 10,187.60 crore in the month of July.

Monsoon Parliament session has started on a stormy note, but indications are that some key bills like Electricity (Amendment) Bill-2021 will be passed in the coming week. There are clear indications of an economic revival and that the country is on track to achieve $400 billion of goods exports this financial year besides attracting high foreign direct investment (FDI) in FY22. In a historic week for the Indian equity market India's first unicorn Zomato garnered Rs1 Lakh crore market capitalisation on the listing day itself. When conventional valuation wisdom is not enough to truly value a loss-making, but high-growth company like Zomato, it's time to look at it from a different perspective. As Zomato controls a considerable market share in India's food delivery market, it will be safe to value the company's growth in line with the whole industry's growth. Watch out for Unicorn IPOs in coming days. Brace yourself for exciting roller coaster action till the 'nasha' comes down. The near-term direction of the market will be dictated by US Fed meet, F&O settlement, Q1 earnings, progress of monsoon, crude oil prices and macroeconomic data. With US economic numbers indicating uneven recovery, US Fed has maintained a dovish stance and played down inflation risks. Markets do not expect any negative surprises from the Fed meet.

Heard on the Street: Rising concerns over Delta variant of Covid are beginning to cast their shadow on global economy. Parts of the global economy are expected to surge over the coming months and start to catch up with the US and China, though the Delta variant of Covid-19 looms as a potential headwind. Amid continued supply constraints, a shortage of available workers and the spread of the new Delta variant, surveys of businesses across the globe recorded the strongest increase in activity for more than two decades. However, the pace of global economic recovery continues to depend on the course of the pandemic. The Delta variant poses a major risk to the outlook because not only have rising case numbers led to a slide in business optimism to the lowest since February, further Covid waves around the world could lead to further global supply- chain delays. India is set to rebound strongly from its second-quarter calendar year contraction; and world economic growth is set to have its strongest three-month period this year. Output in the manufacturing sector—which accounts for a smaller share of overall activity—continued to accelerate.

Some moderation of service-sector growth in particular was always on the cards after the initial reopening of the economy. The reopening of large parts of the economy is supporting a vigorous bounce back in the services sector. But the Delta variant of the coronavirus could dampen this recovery in services, especially in tourism and hospitality. The global supply problems that accompanied a rapid surge in demand earlier this year have yet to be resolved. Continued price increases for labour, raw materials and the varied pace of infections and vaccination programs, coupled with the ebb and flow of government restrictions, means that the recovery has and will likely continue to proceed at different paces in different parts of the world.

Quote of the week: Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas

— Paul Samuelson

If you think investing is gambling, you're doing it wrong. The work involved requires planning and patience. However, the gains you see over time are indeed exciting.

The pace of global economic recovery continues to depend on the course of the pandemic. The Delta variant poses a major risk to the outlook because not only have rising case numbers led to a slide in business optimism to the lowest since February, further Covid waves around the world could lead to further global supply- chain delays

Ahead of settlement week, on the back of global cues derivatives segment witnessed heightened volatility. Sharp stock and sector-specific moves amplified the volatility. On option front, maximum Put Open Interest was seen at 15,000 followed by 15,800 and 15,500 strikes, while maximum Call Open Interest was seen at 16,000 followed by 15,900 and 15,800 strikes. Call writing was seen at 16,000 then 15,900 and 16,100 strikes, while Put writing was seen at 15,800 then 15,000 and 15,900 strikes. The options activity is concentrated at ATM strikes of 15,800 for both Call and Put. A move below 15,750 should trigger downside towards 15,500. However, on higher side, the retesting of last week's high itself may trigger short covering momentum, which may take the Nifty towards 16,200 level. The Implied Volatility (IV) of Calls closed at 11.09 per cent, while that for Put options closed at 12.01 per cent. The Nifty VIX for the week closed at 11.89 per cent. PCR of OI for the week closed at 1.00. Sectorally, IT, FMCG, Realty outshone while Financials and Auto underperformed. Market will first react to the earnings of Reliance Industries, ICICI Bank and ITC, which were announced over the weekend.

RIL reported a consolidated net profit of Rs 12,273 crore for the three months ended June 30, 2021 (Q1FY22). This is a fall of 7.2 per cent from Rs 13,233 crore posted in the same period last year (Q1FY21). Stock price is expected to be range bound in near term. After caution and mild disappointment from HDFC Bank, ICICI Bank reported net profit rise of 78 per cent year-on-year to Rs 4,616 crore for the quarter ended June 30, 2021 (Q1FY22) on improvement in interest margins and lower provisioning.

Its net profit was Rs 2,599 crore in the same quarter last year (Q1FY21). Stay invested for further gains. ITC results showcase the strong rebound across operating segments despite operational constraints in the wake of the second wave. Standalone earnings before interest, tax, depreciation and amortisation (EBITDA) shot up 50.8 percent to Rs 3,992.16 crore compared to year-ago quarter. Surprising sharp move towards new high indicated. On the back of strong results and a good demand outlook, the cement companies witnessed good buying interest. Buy on declines Ultratech, ACC and Ambuja Cement. Traders should continue to focus on stock specific moves. Results to watch out for in the coming week would be Axis Bank, Kotak Mahindra Bank, Larsen & Toubro, DLF, SBI Life Insurance Company, Tata Motors, Dr Reddy's Labs, InduSind Bank, Maruti Suzuki India, Nestle India, Tech Mahindra, Britannia Industries, Indian Oil Corporation, Sun Pharmaceutical Industries, and UPL. Stock futures looking good are Ambuja Cement, Aarti Inds, Berger Paints, ITC, Power Finance Corp, Ultratech Cement and Wipro. Stock futures looking weak are Cholamandalam Finance, RBL, Tata Motors, M&M and Shriram Transport Finance.