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'December quarter earnings and Budget 2020 will keep Nifty extremely volatile'

Nifty50 is attempting to touch a new high territory. However, volumes and open interest will probably not support it
Jan 12, 2020 / 08:33 AM IST
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The earnings season and expectations from Union Budget 2020 will keep bourses extremely volatile. Support for Nifty exists around levels of 11,900, Umesh Mehta, Head of Research, Samco Securities, said in an interview with Moneycontrol’s Kshitij Anand.

Q) It has been a roller-coaster week for Indian markets, but Nifty managed to recoup losses and close the week on a positive note. However, in the last five trading sessions, we saw Nifty50 retesting crucial support levels -- can we say the worst is over? And are all eyes on the Budget and earnings?

A) Yes, indeed the worst is over and the next couple of weeks would be high on volatility mainly due to results and the expectations from the upcoming Budget.

Speculation will be rife around the Budget which will keep the markets on their toes. Unexpected global issues, the phase one trade deal between US and China can be one of the international factors causing knee-jerk reactions on Indian bourses.

But largely, the domestic macros would decide the direction of the Indian equity markets.

Q) As we hit a fresh record high above 12,300 on January 10, what are the important support and resistance levels to watch out for in the coming week?

A) The Nifty50 is attempting to touch a new high territory. However, volumes and open interest will probably not support it.

Nonetheless, support does exist around levels of 11,900. Realistically, the Nifty could touch levels of 12,350 and very optimistically it could reach levels of 12,500.

Q) Any crucial events which investors should take note that can impact D-Street sentiment?

A) The result season and expectations from the Budget 2020 will keep bourses extremely volatile. In case there is a further escalation in issues between the US and Iran -- equity and commodity markets can experience knee-jerk reactions.

Lastly, how the trade deal pans out between the US and China will be crucial to understand the relationship between them. All these events would impact D-Street sentiment in the coming weeks.

Q) What is your view on Infosys results? What do you recommend -- buy, sell or hold?

A) Infosys is a quality company with stable growth and sound fundamentals. Hence, for investors, it is a long-term buy. Currently, the bulls do not have a conviction that is visible in the stock price due to the whistle-blower complaints clouding the company.

Hence, any positive surprise will take the stock up and if the numbers are in line, the stock might underperform for in the near term.

Q) Any top three stocks which you think are good breakout buys given the fact we have seen a sharp recovery in the week gone by?

A) Here is a list of top three stocks that could give 13-30 percent return in the short term:

Sobha Ltd: Buy | LTP: Rs 414 | Target Rs 471 | Stop Loss: 400| Upside 13 percent

Sobha would be a good buy from the small-cap space which deserves a high rating multiple and is currently available at attractive valuations. Investors can buy the stock at current levels for a target of Rs 471, and a stop loss can be kept below Rs 400.

Sun TV Network Ltd: Buy | LTP: Rs 463 | Target: Rs 551 | Stop Loss: Rs 410 | Upside 19 percent

Sun TV Network has undergone an intense correction and is now a good pick from the media sector. Investors can buy the stock at current levels with a target of Rs 551, and a stop loss can be placed below Rs 410 levels.

National Aluminium Company Limited: Buy | LTP: Rs 45.50 | Target: Rs 60 | Stop Loss: Rs 41 | Upside 31 percent

National Aluminium Company is currently consolidating but with the pick-up in the aluminium commodity, there are high chances that this stock will shoot up substantially. Investors can buy the stock at current levels with a target of Rs 60, and a stop loss can be placed below Rs 41.

Q) Why have small & midcaps stocks started performing recently -- is it the FII flows, or pre-Budget euphoria catching up?

A) The mid and small caps have got battered the most amidst the liquidity crises and have undergone massive correction over the past year.

The recent pick up in the broader indices is a mixture of attractive valuation, constant boost by the Government to revive the economy, FII flows along with a bit of expectation of greater impetus from the Budget in February. But among all these, valuations play the biggest role in attracting flows.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Kshitij Anand Kshitij Anand is the Editor Markets at Moneycontrol.

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