By Rahul Shah
Dalal street was in party mode last week as stock markets roared back smartly and closed above the psychological 17000 level. Equity benchmarks Sensex and Nifty spurted nearly 3 per cent to close over three-month high levels following buying in metal, banking & NBFC, IT and Auto stocks. Strong quarterly results, FII buying and expectations that the US Fed may temper its aggressive interest rate hikes boosted investor sentiment. Sensex barometer jumped 1498 points or 2.70 per cent to settle at 57,570 — the highest closing level since April 25. The broader Nifty rallied 439 points or 2.60 per cent to end at 17,158.
There was across-the-board buying amid impressive quarterly earnings. Largely buoyant global trends also helped indices continue their gaining streak. Sentiments were boosted on account of impressive quarterly results and FIIs reducing their selling substantially (from Rs 58,100 crore in month of June to Rs 7,600 crore in July) even turning buyers for 8 days this month. Global markets, from US to Europe surged 5-8% (Nasdaq Composite gained 7.5%), the biggest rally since November 2020 after strong quarter results announced by Microsoft, Amazon and big oil and Big Tech as Exxon Mobil and Chevron reported record quarters. Moreover, US Fed Chair Jerome Powell’s observations this week indicated that the Fed is likely to slow down rate hikes after one more large hike in September. Investors turned optimistic about corporate earnings and bet that the Federal Reserve will slow its rate hikes amid recession fears. Data showed the US economy shrank 0.9 per cent in June quarter, following a 1.6 per cent retreat in the first quarter, entering a technical recession. The GDP print, however, raised hopes that the US Fed may go slow on the pace of rate hikes in future.
The rally may continue in Indian bourses supported by strong quarterly results, up-move in the global markets and a bet that the US Federal Reserve will slow its rate hikes amid recession fears. However, this week will be important ahead of major events like RBI Credit policy (Friday), quarterly results (M&M, ITC, SBI), July Auto monthly sales data and Bank of England policy meeting. FIIs reducing their selling substantially and even turning buyers is one the factor to boost investor sentiments. Expected outperformance of financials, auto, cement, capital goods have played out well. Q1 blockbuster results indicate improving prospects for these segments.
US Fed changing its stance on interest rate hike from hawkish to mild hawkish and weak US GDP data in second successive quarter has pulled down dollar index to 106 from its 20-year high of $109.30 levels. Bond yield has also come down to below 2.70% from 3.50% after the ease in dollar index and mild hawkish tone by the US central bank. This staged a robust US recovery after a shaky opening due to a contraction in the US economy, as the market perceived that aggressive monetary policy will soon come to an end. This added optimism in the domestic market, and the rupee strengthened against the dollar-increasing appetite for FIIs.
Nifty has witnessed a stellar move from the last 3 consecutive sessions and formed a strong Bullish candle on the weekly frame along with higher lows for the last six consecutive weeks. Now it has to hold above 17000 zones for an up move towards 17350 and 17500 zones whereas support is intact at 17000 and 16888 zones.
Target: Rs 9200 | Stop loss: Rs 8400
Tata Elxsi has given a breakout of the symmetrical triangle on the daily scale. It is forming higher highs since last 3 trading sessions and follow up buying is visible which will support prices to move to higher zones. 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 an up move towards 9200 with a stop loss of 8400
Target: Rs 2520 | Stop loss: Rs 2320
HDFC LTD has given a breakout of the supply trend line on the daily scale. It has formed a bullish candle on the weekly scale as well which is indicating 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 an up move towards 2520 with a stop loss of 2320
(Rahul Shah is a 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)