By Rahul Shah
Equity benchmark BSE Sensex plummeted nearly 500 points (1%) while the Nifty dived below the 17,400-level (down 142 points or 1%) against the previous week, tracking heavy selling in global equities after US consumer inflation soared to a 40-year high in January, raising the prospects of faster-than-expected rate hikes by the Federal Reserve and geo-political tension. A sharp fall in the rupee and unabated foreign fund outflows added to the pressure. Nifty information technology, realty, Banks, mid-cap, small cap and FMCG Index fell 1-2% while Nifty metal Index climbed up by 3% on account of increased base metal price on LME (Copper price 13-year high). Nifty Auto Index managed to end on a flat note against the previous week close. Of the five sessions, Sensex and Nifty advanced in three sessions and declined in two sessions, including Friday.
Sentiment has been dampened on account of US Bond yield spiked to 2-year high of above 2% after US Inflation (CPI) reported to 4 decade high at 7.50%. Market expectation that the US Fed may significantly hike interest rates in the next policy meeting (March 15). As a result, the global markets witnessed sharp decline on fear of the US Fed to hike interest rates much higher than anticipated. Moreover, geo-political tension between US and Russia and rising oil prices have a negative impact on market sentiment. Back home, continued FIIs selling and mixed bag on quarterly results pulled down the market. RBI dovish stance in its credit policy meeting and kept unchanged repo and reverse repo rate. The Reserve Bank of India signaled it is not in a hurry to hike rates.
FIIs were net sellers of nearly $1.5bn during the month of February. The volatility in the markets may continue on account of US-Russia geo-political tension. The U.S. warned Russia could take offensive military action against Ukraine as early as next week.
Surging inflation and monetary policy tightening elsewhere, notably in the US and Europe, is making investors nervous. Brent crude rose to $95 a barrel for the first time since September 2014 is a concern in the domestic market. Continued FIIs selling and mixed bag of quarterly results may have a negative impact in the market. Among the global economy front, India, China, and the UK will release inflation figures. Minutes of the US FOMC meeting will also be out. With earnings season winding down, investors will turn their attention back to macroeconomic concerns, with special focus on inflation numbers.
LIC is expected to bring its public issue at a valuation of around Rs 12 lakh crore to Rs 15 lakh crore, which would help the government raise enough funds to meet its Rs 78,000-crore divestment target for 2021-22 and may reduce fiscal deficit.
For the Nifty 50 index, sustaining above 17400 is the key factor from a short-term perspective. If the market is unable to sustain the level of 17400, the market might see the correction till the level of 17100 while resistance is expected at 17600- 17780.
CMP: Rs 542, Stop loss: Rs 525 Target: Rs 575
Hindalco has given a multi-year breakout and has been consistently forming higher highs – higher lows on the monthly scale. It is trading into the lifetime high territory and has formed a bullish candle on a weekly scale with substantial pick up in volumes. RSI oscillator is moving northward on a weekly and monthly scale and thus showing further strength in the counter. Considering current chart structure, we advise traders to buy the stock for an up move towards 575 with stop-loss of525
CMP: Rs 880 , Stop loss: Rs 865 Target: Rs 920
Sun Pharma has given breakout on daily scale and retested the same. It has given a range breakout on higher degree frame as well which indicates overall strength in the counter. RSI oscillator is also 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 920 with a stop loss of 865
(Rahul Shah (Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution at Motilal Oswal Financial Services). Views expressed are the author’s own.)