One lesson I have learned is to make fewer decisions. Sometimes the best thing to do is to do nothing. The hardest thing to do is to sit with cash. - Lou Simpson
There's no panic yet in the market, despite a steep fall over the last couple of sessions. One could say that it reflects a bullish outlook among participants, while another way of looking at it is that they may be beginning to get complacent.
Kotak Bank
There was a massive deal in the stock with the Canadian Pension Fund offloading 3.3 crore shares on Friday. Despite the huge size of the deal, not a single counterparty’s name has shown up in the exchange filings. Dealers tracking the stock say some domestic fund houses and foreign funds have picked up small blocks, as have a few wealthy individual investors.
Open short positions in the Securities Lending and Borrowing window total around 6.3 million shares. The stock was in play last week following the increase in its weightage in the MSCI Standard Index. The increase in short positions is surprising considering that sentiment for the sector in general is not bearish and the stock could be a beneficiary of higher inflows from passive funds.
India Cements
The recent wave of buying frenzy pushed the cement company into the NSE ban list of F&O securities. Meaning no fresh derivative positions can be taken up; only existing positions unwound. Massive trading in its options
contracts perhaps caused the ban. There was a steep rise in outstanding positions in call options of 240 and 230 strikes and in put options of 220 strike. India Cement is the least preferred pick in the cement sector because of its weak operating performance. Institutional interest is low, given punters in the stock plenty of room to play around with the price.
Voltas
The stock fell on heavy volumes on Friday and is not too far from its 52-week low of Rs 737. It has been under pressure since reporting a tepid set of fourth-quarter numbers. The torrid summer does not seem to have done much good to the bottomlines of air-conditioner manufacturers in general. Shares of Blue Star too have been ranged between March and now. The weakness in Voltas shares is despite domestic institutions increasing their exposure by around 4 percent points in the last couple of quarters. A big jump in call options of 800 strike seems to suggest that smart money is betting on further weakness in the stock near term.
IEX
Massive selling over the last couple of sessions following the government approval for market coupling in the electricity sector has led to the stock moving into the ban list of F&O securities. The stock could see some volatility in the near term. Bears appear to be in command, for now, considering the flood of analyst downgrades and chatter about institutional investors paring their holdings. At the same time, if bulls are able to hold the prices in the cash market somehow, bears will be forced to cover their positions as they can’t build fresh short positions owing to the ban.
Broking firm UBS is in the bull camp, with a 'buy' rating on the stock and a price target of Rs 200. UBS feels concerns over market coupling may have been overdone and also that the Market-Based Economic Dispatch (MBED) could be difficult to execute given complex settlement procedures.
Profit booking
Companies and their largest investors are selling shares at a fast clip, reports Wall Street Journal, adding this is a pace not seen in years. The good news is that sales were done at smaller discounts than usual, indicating a strong bullish undertone in the market.
Since the end of April, companies and private-equity firms have sold more than $24 billion of stock in follow-on sales, according to Dealogic. More than $17 billion changed hands in May alone, well above the $6.9 billion monthly average last year.
Calm before the storm?
The current calm in the market is similar to the deceptive lull just before the global financial crisis erupted in 2008, says Bob Michele, chief investment officer for JPMorgan Chase’s asset management arm. In an interview to CNBC, Michele said that it would be a miracle if the US economy managed to dodge a recession even after a sharp rise in interest rates. He expects economy to tip into recession by the end of the year, while the downturn’s start could get pushed back, thanks to the lingering effects of Covid stimulus funds, he said the destination is clear.
China realty
China’s struggling real estate industry could see an L-shaped move in the coming years, weighing on economic growth, according to a research note by Goldman Sachs Group Inc, reports Bloomberg.
Goldman Sachs analysts feel policy makers appear determined not to use the property sector as a short-term stimulus tool and instead want to reduce the economy’s reliance on the industry.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
