By Rahul Shah
Equity benchmark indices Sensex and Nifty plunged over 2% against the previous week to close at three-month low due to selling in banking, financials, cement, utilities and oil shares triggered by an unfavorable report on Adani group as well as FIIs taking a cautious stance ahead of the Union budget and FOMC interest rate decision. For the week, the indexes slipped more than 2% each and are more than 6% away from their all-time high level seen early December. The India VIX Index, a measure of volatility expectations, rose 25% this week, the most since Feb. 24. Sensex dropped 1291 points or 2.1% to close at below 60k of 59331 and Nifty nosedived 423 points or 2.3% to close at 17,604 against the previous week close.
Continued FIIs selling and two-month high oil prices had negative impact on the market. FIIs were net sellers nearly Rs 30,000 cr this month while over Rs 9,000 cr net sellers last week (4-trading sessions). Both, Sensex and Nifty, lost 1700 points and over 500 points (3.5%) respectively in the last two trading sessions. On the other hand, Bank Nifty tanked 2600 points or 6% in the last two trading sessions on account of aggressive selling in private and PSU banks. PSU Banking stocks witnessed biggest loser this week and PSU Bank Index declined by 10%.
A $50 billion selloff in Adani Group’s empire following US short seller Hindenburg Research’s scathing allegations has dragged the Nifty Index to its lowest since Oct. 21 with the stocks becoming the top losers in the market. There was bloodbath across Adani group. Adani Enterprises lost nearly Rs 1000 or 30% in just two trading sessions. Adani Enterprises FPO worth Rs 20,000 cr is between Rs 3122-3276. Others Adani group stocks like Adani Ports, ACC, Ambuja Cement, Adani Green, Adani Gas nosedived between 20-30% this week.
Next week will be important not only for the global markets but also for the local market. US Fed interest rate decision and FY24 Union budget will be presented on 1st Feb. Expectation that the US Fed may turn into dovish stance from hawkish stance after recent economic data showed that the inflation is cooling down as Core personal consumption expenditures and inflation moderated in December, which provided a boost to the sentiment. The US central bank is widely expected to downshift to a 25 basis point rate hike while earlier expectation was 50bps rate hike. However, US Fed commentary will be more important for the global market’s sentiment.
In the domestic markets, FY24 Union Budget will be presented on 1st February. There are lot of expectation in the Union Budget ahead of nine state elections that will be held in 2023 and general election in 2024. Market hopes that government will present populous budget and focus on middle class people to provide more SOPs along with higher expenditure in the infra sectors to boost the economy. Hope of possible changes to capital gains tax structure and new personal tax regime, extension of concessional 15% tax rate for new manufacturing units, and higher import tariffs on PLI-related products. Expenditure focus is likely to be on rural, welfare, infrastructure, PLIs, and energy transition.
There are expectations that the government will provide more allocation for food and fertilizer subsidies, health, and NREGA. Government may reduce its fiscal deficit through disinvestment like stake sale in IDBI Bank, Concor, Shipping corp, BEML, and NMDC Steel.
Stock Recommendations
Maruti
CMP: Rs 8734 | SL: Rs 8550 | Target: Rs 9250
Maruti has given Range breakout on daily chart and holding well above the same. It has formed a bullish candle on daily scale and managed to surpass and hold above its crucial 50 DEMA. Buying is visible across Auto space and small follow up can take it to higher territories. RSI on the daily and weekly scale is in the bullish zone which will take the prices higher. Considering the current chart structure, we advise traders to buy the stock for an up move towards 9250 with stop loss of 8550.
HAL
CMP: Rs 2465 | SL: Rs 2420 | Target: Rs 2560
The price has formed a base at the 100 DEMA and it has surpassed the falling supply trend line which implies positive setup for higher levels. RSI oscillator has reversed from oversold territory and it has given a breakout of the trend line indicating strength. Considering the chart structure, we advise to buy HAL with SL of 2420 target of 2560.
(Rahul Shah is the Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution at Motilal Oswal Financial Services. The views expressed are author’s own.)