If the Nifty breaks the current resistance placed at 12,150, then there is a good chance of a Christmas rally as global macros are expected to pick up after Fed Chairman’s bullish comments on the economy, Umesh Mehta, Head of Research, Samco Securities, says in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) Indian market closed the week with gains of more than 1% and above 12,000. Do you think the weak macro data will spoil the party for bulls?
A) The bulls seem to be rejoicing as there is good news from all corners. The US President has agreed to a phase one deal with China to postpone the new tariffs and Boris Johnson has won the UK election with a majority, raising hopes of a swift Brexit.
Macros on the international front are acting as a stimulus for the Street to rise further. However, uncertainty over this week’s GST (goods and services tax) meeting can pause the rally.
Q) Do you think we will see a Christmas rally?
A) For the Nifty, 12,150 is likely to act as a strong resistance level. If the index breaks the current resistance, then there are high chances of a Christmas rally, as global macros are seeing a pickup after Fed Chairman’s bullish comments on the economy.
The GST meet will also be a deciding factor to guide the bourses, as a rate hike on certain goods will lead to a correction.
Q) The recent macro indicators cement fears of a slowdown. Do you think investors should say goodbye to a 25 bps rate cut in February?
A) The entire year he RBI was on a rate-cutting spree but this time they surprised the Street with a pause. Hence given the condition of the economy, there is a high probability of a rate cut over 25bps in February.
Fears of a slowdown and lower-than-expected GDP numbers will entail for a rate cut in the next meet.
Q) Any big factors or important levels that investors should watch out for during the week?
A) The GST meeting will be a very important event for investors to watch out for, as a tax change, good or bad, will impact many companies.
Also, any Brexit outcome will be vital for the companies which have exposure to the EU. 12,150 will be important for Nifty, as a breakout from these levels will entail a merrier Christmas.
Q) Three stocks which according to you are displaying signs of a breakout? A) Hindalco, Mahanagar Gas, and Tata Motorsseem ripe for a breakout.
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