Hrithik, Salman, Expiry or Fed, What Will Move Markets Ahead?

Welcome back, I hope you all had a good week in the markets and otherwise too. A big day coming up and in fact, interesting few days coming up for investors in India and around the world. Locally we have the monthly expiry today on August 26, and the action in the derivatives market will guide the broader markets. Last Friday we had seen a big churn in options contracts and undoubtedly many traders were caught on the wrong foot once the bounce-back came in the Nifty on Monday and in the Bank Nifty on Tuesday. It will be interesting to see what contracts are settled and what’s carried forward during the day. The bigger event that everyone is watching is the Jackson Hole symposium that gets underway today in the United States. Policy watchers will be glued to their screens, direction for the markets though will only come on Monday as the meeting will end on Saturday and a US Federal reserve statement should move markets either way.

It’s an interesting scenario in our markets as well, the indices continue to climb and hit all-time highs, and yet so many stocks continue to dwindle and retrace as much as 20-30 per cent from their recent highs. Am sure when you look at your portfolio on certain days you too wonder, market new high and my stocks not keeping up and in fact in some cases even moving down, why?

Well, Hrithik and Salman have a role to play in that and I don’t mean our much-loved Bollywood superstars but the stocks that the above acronyms stand for. Not sure who coined these two phrases but the person or organisation was brilliant.  Hrithik -- comprises HDFC Bank, Reliance Industries, ICICI Bank, Tata Consultancy Services, HDFC Ltd, Infosys Technologies, and Kotak Mahindra Bank. Barring Kotak, every share in the above list has fared brilliantly in the past 2 weeks.

Salman companies haven’t done as well, especially after SBI results and Maruti has been beaten down by the factors that plague the auto sector. Salman stocks by the way are State Bank of India, Axis Bank, Larsen and Toubro, Maruti Suzuki, Adani Ports, and NTPC.

Also, as we draw to an end the month of August, we saw significant FII outflows, as of yesterday that amount stood at Rs 4,899 crores, and that follows the Rs 23,193 crores they pulled out in July. On the flip side though, our domestic institutions bought for Rs 5,376 in August, following up on the Rs 18,393 crores of buying in July.  Interesting situation and I wonder who is playing their cards right as things unfold in the days and weeks ahead. Mutual fund inflows stay very robust and the DII’s have so much money to deploy that this trend could continue for a while longer and if the FII’s do turn buyers as well, then as I’d written a few weeks ago we will see the Nifty at 17,000 before we see 15,000.

My plan for the week ahead is to get back into some of those beaten-down midcaps in a limited way. A 30 per cent price correction and retracements of between 50 to 62 per cent on the charts is a good enough reason for me to move back in. The reopening story stays strong and I’m redeploying money that I’d pulled out earlier into some of these sectors like hospitality, travel, and entertainment.  Do consult your financial advisers before making any decisions, this is just my view.

Pharmaceutical stocks have continued to show weakness and may drift for a while, so not doing anything afresh in that sector, those stocks make up my long-term portfolio, four-wheeler companies have their stresses, so holding back over there as well for now. I’m sure you all have your shopping list, just cherry-pick where you see the value and sit down with your financial advisors and see what best fits your goals, whatever the duration may be. It does promise to be an interesting few day and I wish you all the best for the week ahead. Stay safe, stay well and stay financially healthy. Always. 

The author is Founder, Gaurav Bhagat Academy

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.