By Rahul Shah
Equity benchmark Sensex slipped 672 points or 1.5% to close at 57427 while Nifty shed 233 points or 1.4% to close at 17094 on Friday. Weak global markets and aggressive FIIs selling have negatively impacted the market. However, market on Friday recovered partially (Sensex gained 1000points) after the Reserve Bank of India raised the benchmark repo rate by 50 basis points, along expected lines. Sentiment boosted after the RBI retain its inflation target at 6.7% and marginally downgraded on FY23 GDP target to 7% from 7.2% which has been already factored in. Indian Macros continue to improve, this is the eighth month overall and the seventh month in a row that the monthly GST revenues have been more than the Rs 1.4-lakh-crore mark. Monthly auto numbers were also very strong both Passenger vehicles and two-wheelers both had a strong set of numbers.
Volatility may continue in the domestic market due to weak global cues during a short-spun period next week (Wednesday Indian Market close). US, Europe and India’s PMI and Industrial production data will be announced next week. Auto and consumption sectors would be in focus ahead of monthly sales data and high demand in the ongoing Navaratri festival. Positive factor that the RBI was not as hawkish stance compare to the other global players. Reasons is that the domestic micro far better place than the global peers. India’s has adequate food grain reserve and above normal monsoon which may control inflation in the next few months.
Moreover, oil price is below $90/bbl while previously RBI projected at $100/bbl. There was concern that the heavy FIIs selling in the last few days and USDINR spiked to record high of nearly 82 . FIIs were net sellers $2bn (net sellers Rs1862cr) this week while DIIs bought almost same amount net buyers (net buyers Rs15988cr) of $2bn. Strong retail participation ahead of Diwali traditional pick and local fund buying interest may stable in the local bourses. Any dips will be good buying opportunity otherwise short-term traders will miss the train.
Among the Global markets, US Federal Reserve and every US Fed official are hawkish stance due to 40-year high inflation. Investors fled the market on fears of stubbornly high inflation and a Federal Reserve intent on raising interest rates to fight it, even at the risk of triggering a recessions Treasury yields climbed, with the 10-year rising to 3.82% and 2-year yield 20-year high at 4.30%. The US Cboe Volatility Index, or VIX, hovered above the key 30 level all week which is also concern. Among the European markets, new UK government witnessed biggest cut tax since 1970 and the Bank of England said on Wednesday that it would buy as many long-dated government bonds as needed between now and October 14 to stabilize financial markets.
It is interesting that most of the global central banks are selling bonds for monetary tightening, while the UK is buying bonds to control their currency which is against nature. Germany’s inflation spiked to above 10%, the highest since the last 70 years or World War 2 amid soaring energy prices caused by Russia’s war on Ukraine. Technically, Nifty has formed a Hammer candle on the weekly frame and covered most of the losses of its entire fall in the week. Now, it has to hold above 17017 zones for an up move towards 17250 and 17442 zones whereas supports are placed at 16888 and 16750 zones.
CMP: Rs 3004| SL: Rs 3090| Target: Rs 2850
TCS has formed a bearish candle on a weekly and monthly scale, the stock has given negative breakout stock can fall from here. Technology stocks have been seeing considerable sell-off since the last two months and still money will be made on the short side. One can initiate short on TCS with a SL of Rs 3090 and target of Rs 2850.
CMP: Rs 8828| SL: Rs 8650| Target: Rs 9150
Auto sector has been outperforming in the last three months, most of the auto names have delivered recently. Buying is visible across auto Space and small follow-up can take it towards the higher territory. Maruti also after a good run, has been consolidating in the range. The stock has given a consolidation break out on a weekly scale, we would advise traders to buy Maruti with a SL of Rs 8650 with a target of Rs 9150.
(Rahul Shah is the Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. The views expressed are the author’s own. Please consult your financial advisor before investing)