Stock Market Watch: What to Expect in the Week Ending October 8, 2021

Synopsis

Instead of the “Buy on Dip” phase, traders now treat it as a “Sell on Rally” phase and sell with whatever strength from the last 67 trading days. Futures and options (F&O) data also suggests a long sell-off and a short build.

Nifty takes a breather: After persistent rally over the final two months, the showcase chosen to require a breather within the final week as anticipated by specialists within the past week. Reinforcing of the US dollar is the most reason for this disposition alter and this come about in outside portfolio financial specialists (FPIs) booking a few benefits. Since we are entering a comes about season, be prepared for expanded stock level instability now.

So, what ought to dealers / brief term financial specialists do presently?

“Since the technical signs are stretched after a pointy rally, investors want to be a piece careful now. The 17,900-18,000 sector appear to be the close to time pinnacle and hazard of it surpassing withinside the subsequent 1-2 weeks is low,” says Sameet Chavan, Chief Analyst, Technicals & Derivatives, Angel One.

Instead of ‘purchase on dip’ section, investors are actually treating it as ‘promote on rally section and are promoting into any electricity for the remaining 6-7 buying and selling days. The futures and options (F&O) information additionally indicates a few lengthy unwinding and brief construct up. “October collection might be risky and the subsequent leg of the up move will come most effective after a sparkling backside advent in the course of this time,” says Navneet Daga, Senior VP, Yes Securities.

As stated in preceding week, Nifty is now buying and selling inside a broadening formation among 17,four hundred and 18,070. “The threat of Nifty breaking the decrease band of 17,four hundred is low. So, buyers can begin growing their lengthy bets near that stage with a prevent loss located at 17,260,” says Sacchidanand Uttekar, Deputy VP, Trade Bulls Securities. The help of 17,260 is important as it changed into the lowest earlier than the remaining jump. “October collection may be a hard one and buyers ought to watch the 17,200-250 carefully and if broken, Nifty can pass under 17,000,” says Chavan.

Sector update: Oil & Gas

Rising tide lifts all boats

Rising home gas deliver and development in oil and gas realisation ought to force upstream companies’ income increase and valuations. We estimate APM fuelling fee to be revised upwards with the aid of using over 60% to $3/MMBtu in Oct-Mar 2021-22, and similarly with the aid of using over 45% to extra than $4/ MMBtu in Apr-Sept 2022-23. We agree with Brent crude fee, presently at extra than $75/bbl, ought to continue to be elevated, as OPEC deliver increase is possibly to lag worldwide call for increase. We estimate 3% GR oil & fuelling manufacturing increase and 28% GR development in realisation for ONGC and OIL over 2020-21 to 2022-23 ought to force income increase of as much as 30-45% GR. Further, it ought to result in inventory fee upside ability of over 26-36% for ONGC and OIL.

Oil rate to stay improved over the medium term: Brent crude rate is presently at $75/ bbl, up 47% YTD, pushed via way of means of recuperation in worldwide call for with commencing up of economies. The US changed into hit via way of means of Hurricane Ida in July end, which has led to disruption of manufacturing from Gulf of Mexico (GoM) of 1.7mb/d in August. The IEA expects deliver from GoM to normalise via way of means of Oct-Dec 2022. With crude oil and product stock in decrease 1/2 of the five-12 months variety and EIA estimating worldwide crude oil deliver increase to lag call for increase in 2021 as worldwide recuperation maintains to accumulate pace, we see an upside threat to crude oil prices.

Domestic gas costs to witness a pointy jump: We estimate the home APM gas charge to be revised upwards with the aid of using over 60% to $3/mmbtu in Oct-Mar 2021-22, and in addition with the aid of using over 45% to $4/ mmbtu in Sept-Mar 2022-23 from present day charge of $1.79/mmbtu. The APM gas charge, that’s presently at a decadal low, ought to upward thrust sharply, supported with the aid of using toning up of world gas costs submit unlocking of economies and the present day scarcity of deliver in Europe in advance of the wintry weather season.

Improving realisation to gain upstream

Companies: We expect, in 2022-23, ONGC (standalone) to provide 23.zero mmt of oil and 24.eight bcm of gas, and OIL to provide 3.2 mmt of oil and 2.6 bcm of gas. Increasing gas costs and growing Brent crude oil rate must enhance realisation and in flip power profits CAGR of 30-54% over 2020-21 to 2022-23 for ONGC and OIL. ONGC must additionally gain from boom in gas manufacturing with the aid of using as much as 12mmscmd over 2020-21 to 2024-25 as manufacturing from its KG basin blocks. Every $10/bbl change in oil rate realisation adjustments ONGC’s 2022-23 profits with the aid of using Rs 7.2/share (19.5%) and OIL’s profits with the aid of using Rs eight/share (11.3%). Every $1/mmbtu change in gas rate realisation adjustments ONGC’s 2022-23 profits with the aid of using Rs 4.5/share (12.3%) and OIL’s profits with the aid of using Rs 7.eight/share (11.zero%). We boost our profits estimate for 2021-22 and 2022-23 with the aid of using up to 21% for ONGC and OIL on better oil and gas realisation.

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