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Last Updated : Jul 08, 2019 07:15 AM IST | Source: Moneycontrol.com

A morning walk down Dalal Street | Market could remain rangebound, create short positions on any rebound

The upsides shall remain capped around 11,982 and hence for any short positions, ideal stop loss level shall be a close above 11,982.

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A volatile week for Indian markets and wiped out most of the gains made in the week after the Budget failed to light up fireworks on D-Street.

The budget has the intent to make India to become a USD 5-trillion economy, with some concrete and decisive proposals, but the absence of any stimulus measure hurt sentiment.

Close

The broader market faces the brunt as both small & midcap indices closed in the red. The S&P BSE Midcap index fell 0.56 percent while the S&P BSE Smallcap index was down 0.69 percent for the week ended July 5, compared to 0.20 percent rise in the Nifty50, and about 0.30 percent gain in the Sensex in the same period.

As many as 23 stocks fell 10-30 percent in just five sessions in the S&P BSE Smallcap index which include names like Atlanta, Eros International, KRBL, Nitin Fire, McLeod Russel, Cox & Kings, MT Educare etc. among others.

In the S&P BSE 500 index as many as 7 stocks lost 10-20 percent which includes names like PC Jeweller, CG Power, Eveready Industries, Thomas Cook, Yes Bank, Quess Corp, etc. among others.

The rupee opened at 68.55 per dollar, but soon recovered lost ground and touched a high of 68.40, as Finance Minister Nirmala Sitharaman presented her maiden budget in Parliament.

On the institutional front, FPIs were net sellers in the Indian market for Rs 89 crore, while DIIs were net buyers to the tune of Rs 275 crore, institutional data showed.

Big News:

The Budget dashed expectations of Mr. Market. After strong mandate investors were eyeing big-ticket reforms and some stimulus measure from the Finance Minister. It was a pragmatic budget with a focus on financial inclusion.

The first full budget of NDA 2.0 came at a time when the economy faces multiple Headwinds in the form of rural distress, domestic demand slowdown, and rising unemployment. Thus, expectations were high that the government could outline some short term measure, suggest experts.

Finance Minister Nirmala Sitharaman reduced the fiscal deficit target by 10 bps to 3.3 percent of GDP for FY20 which is a welcome sign.

The budget has tried to address multiple challenges but taxation on HNIs and buyback are likely to be short to medium term challenges.

“Indian equities fell during the day, due to a possible liquidity squeeze in the secondary market on account of proposed higher public shareholding and PSU disinvestment increasing the supply of paper. Higher tax on UHNIs also reduces their investible surplus in stocks directly, through MFs and PMSes, especially in the midcap space,” Amar Ambani, President & Research Head, YES Securities.

Government has proposed to increase special additional excise duty and Road and infrastructure cess each by Rs1/litre on petrol and diesel which will be negative for OMC stocks.

The government envisions India as a global hub of manufacturing of electric vehicles. Government has already moved GST council to lower the GST rate on electric vehicles from 12 percent to 5 percent could be negative for auto stocks in the short term.

Technical View:

Nifty forms a shooting star pattern on weekly charts

The index ended way below 11,900 and formed large bearish candle on daily charts while for the week it gained 0.2 percent and as it saw a formation of Shooting Star, which implies that selling pressure was seen at higher levels.

Considering the trend, the market could remain rangebound in coming sessions, feel experts who advised creating fresh short positions on any rebound if it happens.

The upsides shall remain capped around 11,982 and hence for any short positions, ideal stop loss level shall be a close above 11,982.

Three levels: 11797, 11981, 12100

Max Call OI: 12000, 12500

Max Put OI: 11500, 11300

Technical Recommendations:

We spoke to Angel Broking and here’s what they have to recommend:

Colgate Palmolive India: Buy| LTP: Rs 1178.20| Target: Rs 1250| Stop Loss: Rs 1137| Upside 6%

United Breweries: Buy| LTP: Rs 1380.80| Target: Rs 1450| Stop Loss: Rs 1338| Upside 5%

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jul 8, 2019 07:15 am
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