Nifty forms Doji pattern ahead of F&O expiry

The Nifty50 on September 28 extended weakness for the sixth consecutive session to hit a two-month low, and closed below the psychological 17,000 mark with a nearly one percent loss, ahead of a day of monthly expiry of September futures and options contracts, tracking consistent nervousness in global counterparts.

The index has formed a Doji kind of pattern on the daily charts as the closing was near its opening levels, indicating the indecisiveness among bulls and bears about the future market trend. The index is near its crucial support level of 16,800-16,700, and if that gets broken then there could be further sharp selling in the market; otherwise, 17,000 is going to act as immediate resistance, experts said.

Banking and financial services, metal, oil and gas, and select FMCG stocks weighed down the market, while the broader markets also traded lower with the Nifty Midcap 100 and Smallcap 100 indices falling a third of a percent and half a percent respectively.

The Nifty50 opened lower at 16,870 and remained under pressure for a major part of the session to hit the day's low of 16,820. The index ended with 149 points loss at 16,859.

"Technically, we are of the view that 17,000 would act as an immediate resistance level, below which, the correction wave is likely to continue till 16,700-16,650," Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities said.

Harsha Engineers makes a bumper listing with 36% premium

Harsha Engineers International clocked gains on listing as expected before rising further but most analysts advise booking profits amid market turmoil. The stock started off the first day's trade with a whopping 36 percent premium over issue price despite nervousness in equity markets. It climbed further six percent as the day progressed to take total gains to 43 percent over issue price.

Analysts said high premium at listing is justified with the IPO generating stronger than expected demand as qualified institutional investors' portion got subscribed over 178 times. Also, the ask price is fairly valued compared to industry peers.

"We recommend booking partial profits while remaining can be kept for the long term as the company is a comprehensive solution provider offering diversified suite of precision engineering products across geographies and end-user industries and has long-standing relationships with leading clientele," said Astha Jain, senior research analyst at Hem Securities.

Rajnath Yadav, research analyst at Choice Broking, urged investors to exit given the market volatility. Although Prashanth Tapse, senior vice president of research at Mehta Equities, sounded "very optimistic" on Harsha Engineers with its dominant position, he too advised booking profits in the current market scenario. "Risk takers can hold with a long-term perspective," he added.

Santosh Meena, head of research at Swastika Investmart, termed the company as a proxy play on India becoming a global manufacturing hub: "Those who applied for listing gains can maintain a stop loss at Rs 400. Our recommendation for investors is to hold the allotted shares and long-term investors can accumulate the stock on dips."

Harsha Engineers, which is the largest manufacturer of precision bearing cages in India, raised Rs 755 crore from the public issue with a strong 74.70 times subscription during September 14-16. Of the total issue size, Rs 455 crore was raised through fresh issuance which will be used in repayment of debts, capital expenditure towards the purchase of machinery, and existing production facilities.

Sensex was down 860.62 points or 1.48 percent at 57,238.30, and the Nifty down 285.50 points or 1.65 percent at 17041.80 following weak global cues. This is the fourth straight day of selling on Dalal Street.

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Recovery in credit growth to go on; NIM to exhibit a positive bias

 CRISIL Ratings hosted a webinar titled, ‘Banking on a new note’ to discuss growth and asset quality outlook, trends in overall earnings, and capital requirements. The webinar was followed by a panel discussion with Mr. Rakesh Jha (Executive Director of ICICI Bank), Mr. KVS Manian (Whole-Time Director and Group President of Kotak Mahindra Bank), Mr. Arun Khurana (Deputy CEO of IndusInd Bank), Mr. Sanjay Agarwal (MD and CEO of AU Small Finance Bank), and Mr. Pralay Mondal (MD and CEO of CSB Bank). Here are the key takeaways:
 
Buoyancy in credit growth to go on; Retail and MSME to be the key drivers
-       After undergoing an elevated period of Balance Sheet fortification, the focus is now shifting towards expansion of credit growth. The credit profile of Banks across the industry has been stable, with an improvement across most parameters. While credit growth in the past few years has been largely driven by Retail, the same for the Corporate segment is seeing healthy signs of a pick-up. Corporate credit is largely driven by working capital requirements as private capex is still a few quarters away.
-       While Corporate credit will pick-up gradually, the Retail and MSME segment will remain the key growth driver. Home and Unsecured loans will continue to keep Retail growth healthy. CRISIL expects overall loan growth to pick up to 14-15% CAGR over FY22-24, with the key risks being rising inflation and interest rates. Among segments, it expects Retail/MSME/Agri/Corporate to grow at 17-19%/16-18%/8-10%/10-12%.
 
Garnering deposits to be a challenge; competitive intensity to increase
Over the past few quarters, there was a faster growth in credit vis-à-vis deposit growth, given the excess liquidity and as Banks were focusing on a gradual deployment of the same. While the increase in deposit rates so far has been controlled, it is expected to rise at a faster pace in coming months. The panelists believe that deposit growth will be in focus over the next six months, given the RBI's stance on further rate hikes and tightening liquidity. As a result, deposits rates are likely to increase, which will intensify the competition to garner additional deposits to fund the increase in lending. This, in turn, will boost deposit growth.
 
Margin to exhibit a positive bias; a high mix of floating loans to aid margins
The mix of floating rate loans remains high ~80%, within which the mix of EBLR loans has increased to 44% in FY22 v/s a mere 2% in 1HFY20. This has resulted in faster re-pricing of the asset book in a rising interest rate environment, which, coupled with higher rates on incremental loans, will benefit yields. While deposit rates will see an increase, the same is likely to be lower than the rise in yields. Hence, margin is likely to exhibit a positive bias. CRISIL expects overall margin to improve to 3% in FY23 v/s 2.9% in FY22, with the key monitorable being the greater dependence on high-cost bulk deposits.

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Key data to watch for next week

 The Nifty 50 has seen the formation of a bearish candlestick pattern on the daily (on Friday) as well as weekly charts, after breaking down strong support at 17,400-17,500 levels.

There was also a breakdown of the gap-up area of August 30, and of the 50-day exponential moving average (17,358). Hence, given the weak environment, the index may break its August lows at around 17,150 levels, followed by the 17,000 mark, in the coming days. The upside hurdle is expected to remain at 17,700-17,800 levels if there is a recovery, experts said.

"On the weekly chart, the Nifty formed a reasonable bear candle with a long upper shadow, which signals a sell-on-rise opportunity in the market. The downside momentum seems to have picked up as per the daily and weekly time frame charts," Nagaraj Shetti, Technical Research Analyst at HDFC Securities, said.

Hence, the present sharp weakness is likely to drag the Nifty down to 17,000-16,900 levels in the near term. Any pullback rally up to 17,500 levels could be a sell-on-rise opportunity for the next week, he said.

After a recent fall of more than 4 percent from around 18,100 levels, Options data indicated that there had been a downward shift in the broader trading range for the Nifty 50 to 16,800-17,800, while in the immediate term, the index could trade in a range of 17,000-17,600, experts said. The added that volatility was going to be high given the expiry week for September F&O contracts.

On the Options front, we have seen maximum Call open interest at 18,000 strike, followed by 19,000 and 18,500 strike, with the maximum Call writing at 17,500 strike, followed by 17,400, and 17,600 strikes.

The maximum Put open interest was seen at 16,000 strike, followed by 17,000 and 16,500 strikes, with the maximum Put writing at 16,800 strike, followed by 17,300 and 17,100 strikes.

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