By Rahul Shah
Truly Amrit Mahotsav in Dalal street, as the nation celebrated 75 year of independence so did the markets. Equity benchmark Index closed nearly 5-month high last week and rallied for the 4th straight week led by banking, metal and energy stocks. Sensex advanced 1075 points or 3% to close at 59,463. Its broader peer, Nifty, added over 300 points to close above near the 17,700 mark (17698). Impressive quarterly results, strong micro data and above normal monsoon boosted the market sentiments. A largely positive trend in global equities and foreign capital inflows also supported the domestic equities.
Going ahead, a tug-of-war between global and domestic factors would determine the market direction. While large caps have already moved up, we expect outperformance from midcaps to continue from hereon. We maintain our positive view on BFSI, Consumer, Auto, Retail, QSR, Real Estate, hospitality while selectively looking at IT sector.
Expect north-bound journey to continue in the domestic equity market on account of strong micro and macro data across the globe. Cool down July inflation in India, US and China are positive sign that the growth in the global economy may back in the pre-covid level. India July Inflation fell to 4-month low at 6.7% against 7.01% previous month. US Inflation fell to 8.5% in July against 9.1% in the previous month. Expectation that the global inflation may have peaked out and it may fall gradually due to cool down commodity price like oil, food grain and other commodities. Both US and European market surged to nearly 3-month high (gained 3% US market against the previous week close) and to post their fourth straight week of gains.
Expect US Fed to avoid an aggressive hike in September policy meeting (expectation 50bps while earlier was 75bps) on account of cool down inflation. Most of US economy parameter like US Dollar Index fell to below 105 from high of 109, US CBOE (Volatility Index) fell to below 20 on closing while touched high of 34 on 16th June. US 10-Year Bond fell to 2.82% from the recent high of 3.50%. Back home, domestic factors remain promising due to strong FII buying support, oil fell to below $100/bbl (RBI projected above $100/bbl) and stable USDINR. FIIs were net buyers nearly $1bn in the four trading sessions which indicated that the FIIs were back in the buying seat in Indian equity. Quarterly results have been completed, thus expect no upcoming events. However, most of the corporates announced impressive quarterly results which may boost the market sentiment. June Industrial production spiked to 3-month high at and 8% above normal monsoon during the month of July will support the investors’ confidence.
Nifty has formed a Bullish candle on weekly scale and has been making higher lows from the last eight weeks. Now it has to hold above 17600 zones for an up move towards 17850 and 18000 zones whereas support is intact at 17550 and 17442 zones.
Tata Steel: BUY
Target: Rs 123 | Stop loss: Rs 107
Tata steel has formed a flag and pole pattern on the daily chart and it has given a breakout of the consolidation of last 6 trading sessions with a formation of a bullish candle which indicates start of a fresh up-move. RSI oscillator is positively placed on daily and weekly charts indicating strength in the counter. Considering the current chart structure, we advise traders to buy the stock for up move towards 123 with a stop loss of 107.
Target: Rs 3000 | Stop loss: Rs 2760
It is making higher high since the last 3 months which indicates positive price setup. It has given a breakout around 2500 of previous 7 months and has formed a bullish candle which means there is strong buying interest in the counter The momentum indicators are placed in positive zone which will take the prices to higher levels of 3000 Supports are placed at 2760 zones.
(Rahul Shah is a Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. Views expressed are the author’s own.)