By Rahul Shah
Equity benchmark indices closed on a positive note last week. During the week, the Reserve Bank of India raised its key policy rates by 50 basis points to 5.40% which was in line with expectations. Sensex settled at 58,388, up 818 points or 1.40% while the broader Nifty index finished at 17,397, up 239 points or 1.4%. RBI kept a hawkish stance after delivering a half-point hike interest rate and maintained its forecasts for economic growth (GDP) at 7.2% on a positive note and inflation at 6.7% in the year ending March 2023. Sentiments were also boosted on account of Brent crude falling to a 6-month low, encouraging domestic economy data, good quarterly results and strong FIIs buying interest. Among the global markets, Asian, Europe and US Markets gained 1-3%. Cement, tyre and paint stocks gained as owing to a fall in oil prices. Impressive July auto sales data lifted auto stocks.
Expect, market to move in a narrow range after a rally of nearly 7% in Nifty in the last two weeks and ahead of short spun week (Tuesday holiday). Domestic factors continued to remain positive on account of strong FIIs buying and oil price falling to a 6-month low as India is the second largest oil importer in the world. FIIs were net buyers of over $1 billion in the last six trading sessions. In India, FPIs turning buyers has changed the sentiments in favour of the bulls. The market momentum is so strong that it is overpowering negatives like higher valuations and rising trade deficit. If FPI buying sustains, the market may continue to remain resilient, but investors should exercise some caution.
The strength in Nasdaq indicates that IT will continue to maintain the current uptrend. Encouraging economy data, better than expected corporate results and above monsoon rainfall to support market. The Bank of England raised interest rates by 50bps to 1.75%, the most in 27 years on Thursday. BoE interest hiked has already factor in the Eurozone area. Across the globe like US, China, Europe, India CPI number will be announced. Geo-political tension between Taiwan-China-US will be an important factor in the global markets. Among the global markets, strong US Job data announcement and ahead of US CPI data may keep the global market on a cautious approach. The two-year US Treasury yield jumped past 3.20% on Friday while the 10-year rate pushed past 2.80% after employers added 528,000 jobs last month, more than double what economists expected. Wage growth also came in stronger than anticipated. The market now has recalibrated expectations for Fed policy, with a hike of three-quarters of a percentage point the more likely scenario at the September meeting as the central bank battles inflation. The Bank of England raised interest rates by 50bps to 1.75%, the most in 27 years on Thursday. BoE interest hiked has already factor in the Eurozone area. Across the globe like US, China, Europe, India CPI number will be announced. Geo-political tension between Taiwan-China-US will be important factor in the global markets.
Nifty index, on the weekly frame, formed a Bullish candle and has been making higher lows from the last seven weeks. The index is taking a breather after the rally of 1000 points in the last eight sessions. Now it has to hold above 17250 zones for an up move towards 17500 and 17777 zones whereas support is intact at 17150 and 17000 zones.
Havells India: BUY
Target: Rs 1400 | Stop loss: Rs 1260
Havells has given a breakout of the inverted head and shoulders pattern on the daily scale and retested the same. It has formed a bullish candle which indicates strong buying interest in the counter. RSI oscillator is positively placed on daily and weekly charts indicating positive move ahead. Considering the current chart structure, we advise traders to buy the stock for up move towards 1400 with a stop loss of 1260.
Target: Rs 1750 | Stop loss: Rs 1560
Infosys has formed a strong base and is consolidating in broad range of 1367 to 1530 on the daily scale. Currently it is giving the breakout of the range on the upside and picking momentum for the next leg of upside which is indicating strength in the counter. RSI oscillator is positively placed which will support the move towards higher levels. Buy with a stoploss 0f 1560 target 1750.
(Rahul Shah is a Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution at Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)