Moneycontrol Pro Market Outlook | September starts on a positive note

Stocks where one can expect positive momentum to pick up are Maruti, Hindalco, L&T, LTIM, Bajaj FinServ and Bajaj Finance

Dear Reader,

The week ending September 1, 2023, saw the market breaking five consecutive weeks of negative closing. Indian benchmark indices closed the week with a 0.9 percent gain. Incidentally, all gains for the week were because of a strong market rally on Friday.

A strong set of numbers published on Friday helped the Indian market rally by nearly 1 percent. While GDP numbers were announced a day earlier, Friday saw the announcement of record auto sales numbers, a strong GST collection, high electricity consumption, strong rail freight, coal production and very good Manufacturing PMI numbers.

The markets were also helped by subdued selling by FIIs during the week at Rs 4,700 crore. However, FII sales stood at over Rs 20,000 crore for the month.

Global markets, too, were subdued ahead of a long US weekend.

Market showing positive divergence

As the Nifty made a lower low on expiration day, the daily swing indicator made a higher low, indicating a positive divergence in this short-term sentiment yardstick that measures the number of F&O stocks showing rising momentum. The reading of 81 percent shows a larger number of stocks advancing. Readings above 90 percent can result in a 1-2 day pause in the market's advance.

Source: Strike.money

Daily charts showed the Nifty close above the 20-dma after the RMI indicator gave a buy signal. The market looks structurally strong, as seen from the performance of independent stocks in the index. We looked at this chart last week as the reading was coming close to 20, and it has now jumped to 62 percent after a positive divergence in the reading with the Nifty itself. This shows that several stocks are now participating in the market's rebound from 19223.

Source: Strike.money

FII derivative data showing long build-up

FIIs were long over 1 lakh contracts at the top in July, but in August, for most of the month, they were short. Not in a big way, but 20-40 thousand contracts short position was seen throughout the week. On expiry day, that position turned into a long position, meaning the new series started with FIIs long in index futures by 1,694 contracts. It is a small position, but the positive number may indicate an early sign of a change in sentiment.

Source: Strike.money

Historically, September is a very volatile month, posting a wide gap between the high and the low for the month. We started September with a 181-point jump in Nifty on the first day.

Indices and market breadth

As has been seen recently, the action was in smaller stocks. The BSE Mid-cap, BSE Small-cap, and BSE Large-cap indices gained 2.3 percent, 3.8 percent and 1 percent, respectively.

The BSE Metals and the BSE Realty indices saw weekly gains exceeding 5 percent on the sectoral front. Over 100 small-cap stocks gave double-digit increases during the week.

Among the small-cap stocks, the top performers were Railtel Corporation of India which jumped 45 percent in a week, India Pesticides posted a 36 percent move, and Optiemus Infracom also jumped 36 percent in a week.

The Mid-cap top performers were Bharat Heavy Electricals jumping 29.3 percent, Vodafone Idea 14.94 percent, Gland Pharma 14.32 percent and Steel Authority of India 13 percent.

The advance-decline indicator showed more stocks giving a positive close over the previous week.

Global markets

During the week, the Dow Jones rose 0.33 percent, S&P 500 gained 0.18 percent, and the Nasdaq Composite was flat. European markets were flat even as luxury and auto shares fell, but gains in mining and healthcare offset this. The MSCI's gauge of stocks across the globe gained 0.10 percent while emerging markets rose 0.51 percent.

Oil markets saw some activity expected to continue in the coming days. Oil prices touched a seven-month high on expectations of tightening supply. Brent crude was up 1.98 percent at $88.55 a barrel.

During the week, positive news came in from China. A pleasant surprise was the Caixin PMI, survey which found factory activity ticking back into expansive territory. Three of China's largest banks cut interest rates on Friday across various deposits to ease some of the pressure on their margins.

Stocks to watch

Kotak Bank will be the stock to watch next week on news of the resignation of Uday Kotak, the CEO and MD of the bank. Though his resignation was expected by the end of the year, the early announcement has taken the market by surprise.

Among other stocks in the limelight are the metal ones led by Steel Authority, Tata Steel, Jindal Steel and Hindalco.

Adani Group stocks have been in the news last week, but a strong rally on Friday despite negative news indicates positive strength.

With oil prices increasing, refining stocks, beaten down after the government announced a cut in LPG prices, should see some momentum.

Stocks close to a breakout zone are Axis Bank, HCL Tech, LIC Housing, L&T, M&M and SBI Life, among frontline stocks.

Stocks where one can expect positive momentum to pick up are Maruti, Hindalco, L&T, LTIM, Bajaj FinServ and Bajaj Finance.

Cheers,

Shishir Asthana