Upward trajectory may continue on positive global cues

Good final leg of Q3FY24 earnings, falling inflation, and buying in most of the key sectors (banks, technology, oil & gas, energy, auto), and consistent DII support were some of the primary driving factors for Indian market during the week ended. Observers feel that this may be the beginning of a pre-election rally, especially after pre-poll surveys by a couple of agencies. International crude oil prices are stabilising at higher levels as geopolitical tensions in the Middle East offset a forecast by the IEA that warned of slowing demand

Ignoring uncertainty over the timing of the beginning of the rate cut cycle, FII sales and recession news in some large economies; the domestic stock market smartly recouped its previous week’s losses and climbed more than one percent during the week ended. BSE Sensex rallied 1.16 percent to 72,427 points, and the Nifty jumped 1.19 per cent to 22,041 points. The broader markets underperformed benchmark indices with the Nifty Smallcap index falling half a percent and the Nifty Midcap index gaining just half a percent. FIIs were net sellers during the last week due to a spike in US bond yields after higher-than-expected CPI inflation. FIIs have net sold Rs6,238 crore worth of shares in the cash segment, taking the total current month’s outflow to Rs13,920 crore, whereas DIIs bought Rs8,732 crore worth of shares during the week, taking the total to Rs17,400 crore for the current month. In the near term, the bond yields will mainly get directional cues from global factors such as the movement in US yields and oil prices.

Good final leg of Q3FY24 earnings, falling inflation, and buying in most of the key sectors (Banks, Technology, Oil & Gas, Energy, Auto), and consistent DII support were some of the primary driving factors for Indian market during the week ended. Observers feel that this may be the beginning of a pre-election rally, especially after pre-poll surveys by a couple of agencies. International crude oil prices are stabilising at higher levels as geopolitical tensions in the Middle East offset a forecast by the IEA that warned of slowing demand. Oil prices are critical to Indian macros and also inflation and impact overall sentiments in the markets. Japan has unexpectedly slipped into a recession after shrinking for a second quarter due to sluggish domestic demand. This comes after the United Kingdom (UK) also dipped into a recession at the end of last year. However, it is interesting to observe that Japan’s Nikkei 225 index rose 0.9 per cent to its highest close since the start of 1990.

Near term direction of the market will be dictated by key takeaways from minutes of FOMC and MPC policies, US bond yields action, and global cues. Markets in mainland China were closed all week for the Lunar New Year holidays. US markets will be closed on Monday on the occasion of President’s Day. The primary market will remain active in the coming week too, with Juniper Hotels opening its Rs1,800-crore IPO for subscription on February 21 followed by GPT Healthcare IPO on February 22, while Vibhor Steel Tubes is set to debut on the bourses on February 20 after the IPO closing with a massive 299 times subscription, in the mainboard segment.

Quote of the week: “An investment in knowledge pays the best interest.” — Benjamin Franklin

When it comes to investing, nothing will pay off more than educating yourself. Do the necessary research and analysis before making any investment decisions.

FUTURES & OPTIONS / SECTOR WATCH

Heightened volatility was seen in the derivative segment. Stock futures continued to witness sharp two way price swings. On the weekly options data front, the maximum Call open interest was seen at 23,000 strikes, followed by 22,600, 22,800, and 22,100 strikes. On the Put side, the 21,000 strikes owned the maximum open interest, followed by the 22,000 and 21,700 strikes. India VIX failed to sustain above the 16.5 zone again and closed the week down by 1.46 percent at 15.22 levels, giving comfort to bulls. Overall options data indicates that the 22,000 is expected to be crucial inflexion point for further direction in the Nifty in the coming weeks. Expect strong resistance between 22,100 and 22,300. Auto stocks continued to witness buying on every decline and form higher top & higher bottom charts. Two wheeler industry is back in focus. Industry sources expect the segment to grow in double digits on revenue in the coming year at the least. Use declines to buy Bajaj Auto and Hero Motocorp. Business and valuation tailwinds to help in outperformance of some pharma stocks like Lupin, Cipla and Torrent Pharma. Watch out for developments on valuation and sale of Novartis India. This event may trigger rerating in some counters. Stock futures looking good are ACC, Bajaj Auto, Granules, Federal Bank, Maruti and Wipro. Stock futures looking weak are BHEL, Gujarat Gas, IGL, Powergrid, REC, UBL and Zee.

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

Alkem Laboratories

Alkem Laboratories is a well-established Indian generic pharmaceutical company that has gained a reputation as one of the largest players in the industry. It has maintained a top 10 position among domestic pharmaceutical companies for the past 20 years, operating across the value chain from product development to manufacturing and sales.

The company has 20 advanced manufacturing facilities globally, with 18 of these in India and two in the United States. The company also has five state-of-the-art R&D centers staffed by over 500 scientists, having filed over 175 ANDAs with the US FDA and over 1,100 product registrations in various international markets. Alkem has significant investments in biotechnology through its subsidiary, Enzene Biosciences.Enzene’s focus lies in developing and producing biosimilars, novel biologics, synthetic peptides and phytopharmaceuticals. In India, Alkem is a dominant player in acute therapy areas such as Anti-infective, Gastro-intestinal, Pain management, and Vitamins/ Minerals/Nutrients. Its product portfolio also includes megabrands such as Clavam, Pan, Pan-D, and Taxim-O, all of which rank among the top 50 pharmaceutical brands in India.

The company has been expanding its presence in chronic therapy areas such as Neuro/CNS, Cardiac, Anti-diabetes, and Dermatology. In keeping pace with changing times, Connect2Clinic (C2C), a tele-health online solution was founded to lead the digital revolution in Indian healthcare space. Buy on declines for target price of Rs8000 in medium term.