Consolidation could continue this week

Weighed in by unfavorable global signals, concerns over the advancing monsoon and concerns over the third wave of coronavirus; the stock markets ended slightly lower during the week. BSE Sensex was down 0.19%, while Nifty was down 0.2% for the week, closing at 52,475 points and 15,799 points respectively. However, the BSE Mid-cap index was up 1.3 percent, and the BSE Small-cap index was up 1.2 percent. It is relevant to observe that the FIIs were net sellers of stocks worth over Rs 2,000 crore, bringing the total outflow to Rs 4,256.45 crore in July so far.

However, net DIIs bought Rs 1,903.45 crore of shares in July. Smoke signals of unrest are visible from different parts of the country, in the increase in Covid-19 cases, the reduced rate of vaccination and the shortage of vaccines.

A hiatus in the southwest monsoon in early June affected Kharif plantings in many parts of the country this year, with overall coverage falling 10% through July 8 compared to the same time it a year ago. Follow the progress of the monsoon warn market watchers.

Many investors accumulate stocks of companies emerging from bankruptcy, attracted by stray cases of bargains and without understanding the risk inherent in such investments. Market watchers expect equity market consolidation to continue over the coming week. The near-term direction will be dictated by developments on the new variant of Covid-19, international crude oil prices, first quarter earnings, macroeconomic data, monsoon progress and global indices. Equity-specific actions may continue as companies report their June quarter results.

Heard in the Street: Investors seem increasingly optimistic about the performance of their portfolios in the years to come. Disappointment is inevitable. Optimism is as Indian as Vada Pav and Idli Sambhar.

What if you chose a big winner? Top performing companies are made up mostly of companies that you probably never heard of 10 years ago or now – Avanti Feeds, Caplin Point Labs, Vaibhav Global, Alkyl Amines, and Tasty Bite.

The biggest winner of all 10 years until the end of 2020 was Avanti Feeds, up 214 times.

Quote of the Week: “We won’t forecast macro factors, we look at our companies from a bottom-up perspective on their long-term return prospects; Mellody Hobson.

It is very difficult to predict when the next recession or the next stock market crash will occur, which is why many of the best investors don’t even give it a try. Rather, look for good companies with

the strength to navigate the sometimes difficult economic environment.

O&M / sector watch

Equity-specific action has marked the trading model in the derivatives segment. On the options front, maximum open put interest was seen at 15,000, followed by 15,700 and 15,600 strikes, while maximum open call interest was seen at 15,800 strike followed by 15,700 and 16,000 strikes. Call writing was seen at 15,700 strikes then 15,800 and 16,200 strikes, while minor Put writing was seen at 15,700 strikes then 15,000 and 15,600 strikes. Techs expect the current earnings season to provide a trigger for the Nifty to break out of the current range of 15,600 to 15,900 levels. Implied volatility (IV) of calls closed at 12.56 percent, while that of puts closed at 14.07 percent.

The week’s Nifty VIX closed at 13.56 percent. OI’s PCR for the week closed at 1.32. Technical indicators suggest that volatility is likely to continue in the markets in the near term. Nifty is expected to face a significant hurdle at 15,850 levels, while the 36,000 level for Bank Nifty would continue to remain crucial.

The stock futures that look good are Alkem Labs, Biocon, InduSind Bank, Tata Steel, Torrent Power, Shriram Transport, and Zee Entertainment. Looking weak stock futures are Aarti Inds, McDowell, Tata Motors, TVS Motors and Wipro.

(The author is a stock market expert. He is the former vice-chairman of the AP Planning Board)

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