By Rahul Shah
Equity benchmark indices posted their biggest weekly advance in a month as a retreat in oil prices eases cost pressure on companies, though the central bank remains concerned that inflation is above its targeted band. The sentiment was boosted on account of the smart rally witnessed in global markets. Asian and European markets soared between 3-6% on account of sharp decline US Bond yield from the recent high and fall in Dollar Index. Auto stocks were the star of the previous week after fall in oil prices and hopes of good monsoon to improve demand, followed by FMCG stocks account of benefit of fall in palm oil price. Banking stocks witnessed fresh buying due to stable bond yield and bargain hunting.
Expect, Indian bourses to make a strong come back this week on the hope of fear of global recession to cool down after the US economy data showed longer-term consumer inflation expectations to settled back from an initially reported 14-year high, potentially reducing the urgency for a steeper Federal Reserve interest-rate hikes. US market climbed by 6% while Indian market gained by 3% against the previous week close. On Friday, US New Home sales data during the month of May announced better than expectation despite significant increase in US mortgage interest rate which implies that the US economy might not yet see recessions.
Hope that the market is in an oversold condition, cash balances are at record levels and US Inflation had peaked. After touching 3.48% the week before last, the benchmark 10-year note traded as low as 3.02% before ending the week at 3.13% on Friday which clearly indicated peaked out US Inflation from the 40-Year high. US Fed Governor Michelle Bowman said she supports raising interest rates by 75 basis points again in July (in line with market expectation), followed by a few more half-point hikes. Back home, Indian markets tends to be driven by the global market trend. Improvement of monsoon, stable USDINR and cool down in oil price are positive for the market sentiment and expectation of RBI may not aggressively hike interest rate in the next policy meeting. However, June F&O expiry next week may keep intra-day volatility higher. Although the volatility can remain high in the near term, it presents an attractive opportunity to build up on equity exposure, as healthy earnings momentum will remain a key pillar for the markets. Expects, FMCG, Banking, Auto, NBFC, Cement and IT will be positive while avoid metal stocks due to soft global metal price.
Nifty formed a Bullish candle on daily scale and an inside Bar on weekly frame. Bulls have given a strong comeback after the roller coaster week and a hold above 15555 zones can drive for an up move towards 15888 and 16000 zones whereas on the downside supports shift higher to 15555 and 15350 zones
TVS Motor: BUY
Target: Rs 840 | Stop Loss: Rs 778
TVS Motors has given a breakout on the daily scale and has formed a strong bullish candle indicating strength in the counter. There is momentum across the auto sector which will support the prices to move to higher levels. RSI oscillator is positively placed on the daily and weekly scale. Considering the current chart structure, we advise traders to buy the stock for an up move towards 840 with a stop loss of 778
Target: Rs 3450| Stop Loss: Rs 3220
TCS is bouncing from its major demand zone on the weekly chart and holding well above the same. It is forming higher highs-higher lows from past three trading sessions and supports are gradually shifting higher. RSI oscillator is showing positive divergence on the daily chart which implies strength in the counter. Considering the current chart structure, we advise traders to buy the stock for an up move towards 3450with a stop loss of 3220.
(Rahul Shah is a Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. Views expressed are the author’s own. Please contact your financial advisor before investing.)