The US Federal Reserve’s story of higher for longer rates helped send US Treasuries to multi-year highs, making them more attractive to investors. As a result, foreign investors downloaded ₹22,850 crore in Indian stocks so far in October, the biggest for any month since January.
The Fed is widely expected to hold rates in line with its policy decision after the bell on Wednesday, but Chairman Jerome Powell’s comments will be key.
Any indication of rates remaining high for a prolonged period will weigh on IT stocks, which have already warned of weak spending by their US and European customers. The IT index lost 3.78 percent for the month – its worst in 2023.
In its derivatives, monthly transmission report, domestic brokerage firm Religare Broking revealed that Nifty closed around 19,850 after the selling activity based on volume-weighted price (VWAP) was witnessed throughout the day.
In its report, Religare highlighted that at 95 percent, textile, infrastructure, capital goods and banking are the sectors where the highest turnovers were witnessed in the October series. While at 90 percent, power, metals and media were the sectors where lowest reversals were witnessed.
Nifty, Bank Nifty derivatives summary
Nifty futures rallied around 83 percent compared to 76 percent, which is lower relative to the previous series. The open interest for the new contract is also higher by around 13 lakh compared to the last month’s contract implying fresh short positions in the November series.
Bank Nifty futures rallied 79 percent compared to 85 percent, in the previous month. Bank Nifty futures saw higher open interest of around 1.54 lakh with respect to October. Bank Nifty underperformed the Nifty in October, and the brokerage believes this could continue in November as well.
“At expiration, VIX was at around 12.5 per cent levels, implying around 665 odd points swing in the Nifty in next 30 days,” said Religare Broking.
Which stocks to invest in November series according to Religare Broking?
SBI Life Insurance, Coal India, UBL, and IPCA Laboratories are the top picks for the November series, according to Religare Broking.
SBI Life Insurance (CMP: 1310):
The stock saw short coverage in the October series with an increase in price. ”With cash delivery buying seen along with good runs at 98 percent, we believe it is poised for another step up from 1,300 levels. Be positive on SBI Life keeping a stop at 1,270 for a target of 1,360,” the brokerage said.
UBL (CMP: 1580):
The stock gained about 2 percent in October series with a good OI addition of 37 percent with good delivery buying near the 1,580 mark. Keeping 1,530 as the stop, one can go long with a target near 1,680, according to Religare Broking.
Coal India (CMP: 308):
The stock witnessed short covering of 17 percent OI with prices increasing around 5 percent. The stock is still witnessing a cash buy and maintains 295 as the support, one can buy the same for a move to 335, according to the brokerage.
IPCA Laboratories (CMP: 985):
It added good open interest of 31 percent with prices increasing around 8 percent. Taking support from 970 levels, the stock has seen good cash buying and is likely to continue trading higher. ”One can buy IPCA Lab for a target of 1,060 keeping 955 as a stop,” said Religare Broking.
Read also: FPIs appear net sellers for 2nd month in a row, offload ₹20,356 crore in Indian stocks; this is why
Outlook for November
Nifty November Futures contract Open Interest (OI) started with around 110 lakh compared to 97 lakh in October. Bank Nifty October futures saw Open Interest of around 23.5 lakh compared to 22 lakh in October.
Short rolls were seen mostly in November series. For November futures, an average price of around 19,400 becomes a pivot for the month. By the time Nifty trades below 19,400, the index is in a sell-on-rise.
”We expect the Nifty to find strong support at 18,500-18,600 levels for November series. Locally 19,200-18,600 could be the range for Nifty for the first fortnight of November series,” said Religare Broking.
The brokerage believes that fast moving consumer goods (FMCG) and pharmaceuticals are the sectors that can outperform the index in the November series.
Foreign institutional investors (FIIs) sold around ₹25,000 crore in cash market for October. FII long ratio is now at 11 per cent compared to 30 per cent previously in Index futures, implying more fresh short positions in the November series.
Nifty ended a three-month long consolidation phase and tested the long-term moving average (200 EMA) after six months.
”It has already retraced about 7 percent from its record high, but a break below 18,800 could trigger the next stage of slide to 18,200-18,500 zone. In case of a rebound, the hurdle around the 19,200-19,500 zone would cover the top,” said Ajit Mishra, SVP – Technical Research, Religare Broking Ltd.
”Among the key sectors, banking still looks weakest while select stocks from auto, real estate, FMCG and pharma are still holding strong so plan your trades accordingly. As volatility is high on the broader front, traders should prefer index majors, with a focus on shorting opportunities on the upside,” added Mishra.
Disclaimer: The views and recommendations above are those of individual analysts and second-hand companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.