Nifty’s weakness to continue below 17100, index may head to 16800, check stocks to buy

Nifty formed a Bearish candle on weekly frame but respected its previous week’s low levels. Now till it remains below 17100 zones.

Investors turned cautious amid central banks taking a hawkish stance and a surprise rate hike by the Bank of England.

By Rahul Shah

Nifty saw a sell-off last week and was not able to move out of range 17650 on Nifty levels. Equity benchmarks logged their second-worst week in almost 10 months since the week ended February 26, 2021, dragged by broad based losses across sectors barring information technology. Sensex tanked by 1775 points or 3% to close at 57012 and Nifty nosedived by 526 points (3%) against the previous week close. As the selloff in the market intensified on weak global cues, tightening monetary policy, USDINR spiked to a 20-month high to above 76 and continued FIIs selling (FIIs net sellers over Rs 10,000 crore).

Investors turned cautious amid central banks taking a hawkish stance and a surprise rate hike by the Bank of England on Thursday. Adding to the volatility, the daily Covid-19 cases witnessed a sharp uptick across some areas of the country, whereas the Omicron tally stood at 101, the health ministry said on Friday. The Bank of England unexpectedly raised interest rates by 15bps to 0.25% on Thursday for the first time in three years, setting aside concerns over the coronavirus to tackle the highest inflation in more than a decade. A day earlier, U.S. Federal Reserve officials decided to double the pace of tapering (The stimulus will now be reduced by $30bn a month starting in January) , while projecting a series of rate increases (Three quarter-percentage-point interest rate hikes by the end of 2022) in coming years. In a more nuanced move, the European Central Bank temporarily boosted monthly bond buying for half a year to smooth the exit from pandemic stimulus, while the Bank of Japan took a cautious stance on winding down support on Friday. Globally monetary tightening, uncertainty surrounding Omicron variant, continued FIIs selling and rising USDINR may dampen market sentiment. FIIs were net sellers nearly $4bn or Rs 26,500 crore during the month of December and $1.5bn this week. Tech stocks recorded smart gain after Nasdaq listed Accenture announced strong quarterly results and rising earning guidance.  With no key domestic events expected, markets will continue to take cues from global indices and their macro data. One should take stock specific approach to participate in this fall obviously clear winner looks like to be IT stocks and they have been one of the best performing sectors.  Happy Trading!!!

Technical Outlook:

Nifty index opened flattish but failed to surpass 17300 zones and fell sharply to break its psychological 17000 marks. Bears completely overruled the market and selling pressure was visible at all key levels. It formed a strong Bearish candle on daily scale and has been forming lower lows from the last five sessions. It formed a Bearish candle on weekly frame but respected its previous week’s low levels. Now till it remains below 17100 zones, weakness could be seen towards 16800 then 16500 zones whereas major hurdle exists at 17200 and 17350 zones

Zensar Tech
Target: Rs 510 | Stop-loss: Rs 458

IT stocks witnessed sharp rally against the market and loos like the trend might continue to be on upside, Zensar has given a consolidation break out after touching low of 416 and bouncing back smartly of the range of 470  which was the key resistance . We believe stock can go to 510, one can buy with a stoploss of 458 for next week.

IEX
Target: Rs 285 | Stoploss: Rs 242

The weekly chart of iex indicates that the stock has been trading in strong uptrend and has maintained its momentum within the rising parabolic channel. It has recently found support at 238 which is the lower end and looks like stock can perform better in coming week. Volumes has been high in the stock, one should buy IEX with a stoploss of 242 and target of 285.

(Rahul Shah, Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Servcies. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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