The announcement of macro data such as IIP for July month and CPI & WPI for August month will provide direction to the markets.
The disappointing GDP growth for Q1FY20 and possibility of the slowdown continuing through Q2FY20 has also made FIIs jittery, Ajit Mishra, Vice President Research, Religare Broking, said in an interview with Moneycontrol’s Kshitij Anand.
Q) The holiday-shortened week closed on a muted note. What are your views for the coming week – any important levels to watch out for? Will Nifty be able to climb 11,000 levels?A) The markets remained volatile and in a range. It settled with a cut of over half a percent. The coming week is also a holiday-shortened one and we expect further consolidation with a bias on the positive side.
The Nifty50 has an immediate hurdle placed at 11,000 and a breakout above the same would help the index to inch higher toward 11,250. In the case of decline, 10,850-10,750 zone would act as a cushion.
Q) What is your call on currency? This week we saw some pullback, do you see the trend continuing in the coming week? Any levels which investors should keep in mind?
A) The Indian rupee gained strength against the greenback in the week gone by, tracking a rebound in domestic equities amid improved sentiment after China said the two sides agreed to hold high-level trade talks in early October.
The sentiment seems to be somewhat improving for the rupee and the current pullback can continue in the coming week as well.
The major levels for the local unit are 71.40 followed by 71.00 whereas on the flip side the level of 72.00 will provide good support to the domestic unit.
Q) What are the important factors or news which will chart the direction for the market in the coming week?
A) In the next week, the announcement of macro data such as IIP for July month and CPI & WPI for August month will provide direction to the markets.
IIP grew at a dismal rate of 2 percent in June, while CPI (retail inflation) had eased marginally to 3.15 percent in July.
Investors will watch if CPI remains within RBI’s comfort zone of 4 percent as it would heighten the chances of a rate cut in the bi-monthly policy in October.
Also, there is anticipation that the government will announce more measures in order to address the on-going economic slowdown.
In addition, various global factors will provide direction to the markets. We believe US-China trade war, Brexit, geopolitical tension between US-Iran and rupee movement (w.r.t US$ and Chinese Yuan).
Expectations are building up for a rate cut by US Federal Reserve in a meeting scheduled in mid-September. This shall also have a bearing on the markets in the coming week.
Q) The voice for small & midcaps are growing louder especially after the recent correction which we have seen in that space. Do you think that investors can start increasing their allocation towards this space though selectively and why?
A) We believe the valuation concerns have alleviated for most of the midcap companies and are now trading at decent multiples.
However, given the slowdown in the economy and the consequent correction in the markets, the midcap space is unlikely to outperform until there are meaningful signs of revival in the economy.
Hence, it would not be prudent to invest the entire amount in one go as further correction cannot be ruled out.
Investors, with healthy risk appetite, can accumulate companies with sound fundamentals and strong growth prospects in a staggered manner.
Q) Any small & midcap stocks which you think are available at attractive valuations and can be considered a good buy at current levels for the long term?
A) For long-term investment, there are quite a few good small and midcap stocks available at attractive valuations. We like Whirlpool, Elgi Equipments, Godrej Consumer Products, Akzo Nobel, IGL, KEC and Minda Corp.
All these companies have sound fundamentals and strong long-term growth prospects. These companies can be bought in a staggered manner at CMP and on dips of 8-10 percent from current levels for healthy returns over the next 2-3 years.
Q) Despite recent measure introduced by the govt. FIIs continue to pull money out from the cash segment of the Indian equity market. Can we now safely say that the selling is due to global factors as on the policy front many steps were taken by the govt to boost sentiment?
A) While it is true that the recent measures by the government are steps in the right direction, these measures will take time to deliver results.
Hence, any substantial impact of the same on the economy and subsequently on the markets will be visible only in the medium term.
On the other hand, disappointing GDP growth for Q1FY20 and possibility of the slowdown continuing through Q2FY20 has also made FIIs jittery.
It would not be correct to say that the selling is entirely due to global factors such as global slowdown, U.S.- China trade war; etc.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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.