MARKET ANALYSIS | SEPTEMBER 2021

20th September 2021

By Team A-Quant

COMMODITY MARKET The commodity market in India is regulated by MCX (Multi-commodity Exchange), here we will quickly analyze the trends for the first three weeks of September. And observe which segments were the top gainers and losers. We have taken the two hottest commodities in our analysis: the GOLD MCX, Gold futures study, and crude oil using WTI futures.

• GOLD For gold, we don’t intend to dive deep into chart analysis, but a clear downfall and a bearish pattern have been observed in the values of GOLD; since it’s high on June 3rd, the metal, also considered as the safe-haven asset, has gone down significantly. Post-August, quick recovery in the gold prices was observed. However, the prices have started going down south again in September. The recent analysis showed that gold prices have become weak in the Indian markets. MCX, gold futures were down 0.04% to a near one-month low of ₹46,878 on 16th September from their previous day close, while silver edged 0.28% higher to ₹63,468 per kg.

In global markets, gold rates were down below $1,800 on 16th September and closed at 1753.77 on 17th September. Investors remain cautious ahead of next week's US Federal Reserve meeting. Spot gold fell $1,754 per ounce despite a subdued US dollar, a 2.5% change from 15th September’s $1,793 levels. The Fed's two-day policy meeting is due on September 21-22. Analysts expect the US central bank to provide guidance on when it will start withdrawing its asset purchases and eventual interest rate hike. Since October, the primary reason for the fall was the FED’s announcement of increasing interest rates sooner than 2023, which simply means, there will be a return to buying treasury bonds and, thanks to its risk-free nature, will take a toll on GOLD sale. [SOURCE: GoldPrice]

• Oil Who has forgotten the WTI slipping into the negative? Well, it has come a long way since then, with global market rates at around $70, and the Indian close was at INR 5,291. The reason behind this is simple: the regular supply cuts by OPEC, causing BRENT and WTI crude to go up. This trend will continue as long as the production meets the storage capacity, and yes, this is a strong BUY in every aspect. We see the prices soar as high as INR 6,400 by the end of this year. Even the US has achieved a -6.422 Million compared to the forecasted -3.544M, and OPEC has reduced from producing 13M barrels to 7-8M barrels only. With rising oil prices and RBIs intervention, the USD/INR can be affected.

USD/INR The rupee is now trading with the firm trend and attempting to test the resistance at 73.00, as consistent FII flows on account of various IPOs, stake sales, and diverted flows amid tighter regulations in China have kept the rupee on a rising trend. Global investors await the US Federal Reserve’s policy meeting next week to indicate when the Central Bank will taper monetary stimulus. However, the elevated global oil prices and fears of RBI intervention could limit the rupee’s rise beyond the 73.00 level. The local stock market has been termed extremely bullish at record highs, and the forex reserves are estimated to reach as high as $ 680 Billion by March 2022. With the substantial forex reserves in place, the Fed tapering announcement may only provide a slight reaction in the rupee to the 75 levels. As it looks now, the rupee is not expected to rise beyond that, barring any unforeseen events happening in the interim period. Even if the Fed and ECB announce the quantum of tapering of asset purchases over a period of time, the rupee is expected to remain broadly stable, and any intermittent weakness in the currency shall remain unsustainable. However, RBIs intervention to keep the rupee at the 73 levels as long as the interest rates in the USA are low is a crucial strategy to make the best of the situation.

MARKET WATCH Top 3 losers in the market

• JSW Steel and Tata Steel JSW lost 10.42%, whereas TATA lost 8.79% in a span of a month, with a final closing price around the 760 mark. The decline in metal stocks came as investors booked profits in the segment on concerns over Chinese steel production, faltering global growth, and the prospect of reduced US stimulus. Moreover, a depreciating rupee, which slumped 15 paise against the US dollar, added to the woes.

• Mahindra and Mahindra Mahindra lost a lot of gains it made after its XUV 700 launch due to a report stating that they expect a 20%-25% drop in September vehicle production due to semiconductor shortages, following supply chain disruptions due to the pandemic. Its 6% market cap gain suddenly vanished after this statement became public.

• Vedanta Vedanta share price extended losses for the second consecutive session after the Madras High Court issued a notice to the firm on remediation of contaminated sites at the Tuticorin unit. On August 18th, Vedanta fell around 12% in just two trading sessions, and ever since, it has not been able to recover. With its losses at around -10.25% for the month.

Top 3 gainers in the market

• ZEE entertainment ZEE went up by a whopping 40% this month, and in just one week went by 25%, thanks to the news of Rakesh Jhunjhunwala buying 50 lakh shares in the company through a bulk deal of INR 220.40 apiece. This news was more than enough to make the bulls enter the market and increase the value.

• ITC ltd. The up movement observed in ITC on Thursday 16th September comes on the back of reports that the Indian government is contemplating increasing foreign direct investment (FDI) in the tobacco industry. The move will benefit ITC that derives 48 percent in revenue and over 80 percent in profit from this segment. ITC could not break its high of February, and the 240 mark is still a hurdle, but this rally will not stop and can touch 260 if it crosses the 240 mark now.

• Eicher motors Surged as much as 10 percent on Monday 6th September after the scrip went through a stock split, resulting in its share capital base increasing ten-fold and stock prices coming down by one-tenth of the last closing price. Its 1:10 split helped it rally over 10 percent in the day and around 27% for this month.

MARKET WRAP

Index Highlights 1Week (13-09-2021 – 17-09-2021)

​Indices	​Open	​Close
​Nifty	​17,300	17,585
Sensex	58,200	59,015
​Bank Nifty	36,608	​ 37,811

Stocks in focus SpiceJet, InterGlobe Aviation, and Jet Airways.

• Jet airways announced their operation would be commencing on 1Q FY22.

• SpiceJet and Tata bid for Air India

• Air traffic surges as Covid restrictions ease to 85% pre-covid capacity, an increase from the current 72.5%

Zomato, ITC, and IRCTC

• Credit Suisse updates its target for Zomato.

• Zomato closes its grocery services.

• Co-Founder of Zomato, Mr. Gaurav, quits from the management.

• Zomato to be brought under the GST slabs.

• ITC Share price took a surge of nearly 7%, still facing severe selling pressure.

• IRCTC share price hits the new high of 4000+, entering into the cruise business.

Banking Sector Stocks

• Government announces a guarantee of Rs 30,600 crore to NARCL

• Kotak Mahindra group has acquired the vehicle loan portfolio of Volkswagen Group, also being the top gainer of the week - 5.6%

• HDFC Mutual Funds’ first global scheme will invest in 23 countries.

Catalyst

• IndusInd bank moved around 9% as Government grant relief to the telecoms, IndusInd bank is a money lender to Vodafone-Idea. Government is likely to hold 30-70% equity in Vodafone-Idea after four years. The share price of Vodafone-Idea zoomed around 93% in the last month.

• Zee Limited moved around 30-40% in nearly two days after announcing a change in management. Price target update.

SECTORAL ANALYSIS

Aviation Sector After the announcement of Jet Airways commencing its operations in Q1 of FY22, the stock went on an upper circuit for the whole week. After the following event, the aviation sector remained in the hot seat, as SpiceJet and Tata submitted their final bids to acquire Air India. SpiceJet surged around 4-5% in the last trading session after announcing the expansion of their domestic routes. Indigo (InterGlobe Aviation) surged 8-10% as the government’s Covid restriction eases; the stock also looked good on a technical level in the last trading session. The continuing week will also be crucial as air traffic is picking up and the fares for the upcoming days and months are at a very high cost. Three weeks from now, the government is expected to release the data of Air India bidding, which makes SpiceJet a hot stock.