Traders avoid aggressive buying interest and stick to buy on decline strategy in a volatile market.
By Rahul Shah
Indian equity managed to eke out its third straight weekly gain. Both the indices gained over 1.5 per cent during the previous week thanks to a near 8 per cent jump in shares of Reliance Industries Ltd. (RIL). Nifty gained 232 points to close at 16584 and Sensex advanced 885 points to close at 55769 against the previous week’s close. India reported May Service PMI at an 11-year high (highest since April 2011), quarterly GDP growth at 4.1% (expectation of 3.9%), strong monthly auto sales data during the month of May and GST collection above Rs 1.4 lakh crore, the third month in a row. Fresh buying was seen in beaten-down tech stocks after a fall of 15-20% in the last few sessions. cement stocks declined sharply after sector bellwether UltraTech approved capital expenditure of $1.7 billion to increase capacity. Market expectation of significantly increased cement capacity to miss match demand-supply. Moreover, rising input costs (oil price) may negative impact on cement companies.
This week will be important on Indian bourses as RBI credit policy meeting will be held. Market Expects, RBI to hike interest rate by 50bps from 4.40% to 4.90%. Commentary by the RBI governor will, for future course of action, be important for the market sentiment. RBI has already unexpectedly hiked interest rate by 40bps just one month ago on concern of higher inflation. However, the global market trend (US market) will be important for our market despite strong economy data reported in the last few days.
Market is likely to remain in a broader range on local and global cues including geopolitical developments, crude oil price movement, and institutional flows. US markets declined over 1% against the previous week close following a stronger-than-anticipated economy data that prompted traders to increase bets that the US Federal Reserve will remain aggressive in its fight against inflation on account of US inflation spiked to a 40-year high. Investors continue to worry about whether the pace of interest rate hikes and monetary tightening by the Federal Reserve will push the US economy into recession. As a result, traders avoid aggressive buying interest and stick to buy on decline strategy in a volatile market. India VIX falling by 10% below 20 levels is giving some comfort. G-Sec Yield surged to 3-year high at nearly 7.46% and USDINR spiked to nearly record high of 77.65 are major concern in the domestic market.
Nifty has to hold above 16550 zones for an up move towards 16800 and 17000 zones whereas supports are placed at 16442 and 16400 zones.
Target: Rs 265 | Stop loss: Rs 234
BEL has given falling supply trend line breakout which is formed by connecting swing highs of 258, 240 and 235 zones. It has retested breakout zone on weekly scale and inched higher. Buying is visible across Defence space and small follow up can take it towards higher territories’ oscillator is also positively placed on the daily and weekly scale and supports are gradually shifting higher. • Considering the current chart structure, we advise traders to buy the stock for an up move towards 265 with a stop loss of 234.
Target: Rs 1175 | Stop loss: Rs 1100
Trent has given range breakout of past nine trading sessions and holding well above the same. It has also given Narrow Range breakout on weekly scale and closed above its crucial 200 DEMA. RSI oscillator is also positively placed on the daily and weekly scale and supports are gradually shifting higher. • Considering the current chart structure, we advise traders to buy the stock for an up move towards 1175 with a stop loss of 1100.
(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.)