Nifty has potential to test 11,250-11,300 on the upside while 10,950-11,000 would act as immediate support for the index
Amongst the sectors, we would prefer sticking to sectors like FMCG and IT at this point along with select counters from the private banking space, Ajit Mishra, Vice President (Research), Religare Broking, said in an interview with Moneycontrol’s Kshitij Anand.
Q: Sensex is back above 37,000 while the Nifty reclaimed 11,100. How are markets likely to pan out in this week?
A: Apart from favourable outcome post-RBI policy meet, the sudden upsurge in the markets is led by media reports of several likely measures by the government to revive the economy.
Hence, the likelihood of government rolling back or tweaking the FPI surcharge, providing several relief measures for the auto sector and ensuring liquidity for NBFCs has led to Nifty reclaiming 11,000 -11,100.
Since we’re now in the last leg of the earnings season, the focus will again shift back to global developments such as China-US trade war, US-Iran tensions and rupee vs dollar movement.
Besides, the outcome of the recent meetings of the finance minister with various stakeholders would play a key role in guiding markets.
We feel that Nifty has potential to test 11,250-11,300 on the upside while 10,950-11,000 would act as immediate support for the index.
Q: Many news reports suggest removal of a tax surcharge on FPIs and a possible recapitalization of PSU banks from September. Could these trigger a relief rally in Indian markets?
A: Yes, these measures could surely trigger a relief rally, but, at the same time, we believe that the rally would be short-lived as concerns over the consumption and economic slowdown would continue to haunt markets.
Further, earnings outcome have been largely muted and valuations remain elevated. Hence, until there are meaningful signs of recovery in earnings, we expect that the markets would remain choppy.
Q: What is your call on the rupee amid rising fears of currency wars?
A: The Indian rupee has fallen sharply against the dollar on the back of steep sell-off in global equity markets coupled with a fall in emerging market and Asian currencies.
China’s devaluation of Yuan has thrown the global currency markets in turmoil. Going forward, the rupee is expected to weaken further, where it has minor support around 71 and a break of that can take it towards 71.50-71.80.
Q: Morgan Stanley highlighted in its report that a bottom is in place for markets. What are your views and what would be your strategy?
A: We would remain cautious on Indian markets, considering the economic slowdown and muted earnings growth. Further, re-escalation of trade tensions between US-China is also expected to induce further volatility in the markets.
Factoring the current scenario, it would be prudent to invest in quality stocks with sound fundamentals and strong prospects.
Amongst the sectors, we would prefer sticking to sectors like FMCG and IT at this point along with select counters from the private banking space.
Q: Are there any stocks that could benefit the most from the revocation of Article 370?
A: It would be too early to comment on any specific stock that would do well, as it would depend upon each company’s strategy for growth.
However, in terms of sectors, we believe infrastructure and hospitality sector would be a key beneficiary.
Q: Credit risk funds recorded outflows of Rs 2,695 crore in June, according to data released by the AMFI, while equity funds saw inflows of Rs 8,092 crore in July, up 6.7 percent month-on-month. Do you think the spillover will affect equity funds in the near future?
A: The increase in outflows in credit risk funds is a result of several defaults by NBFCs. Further, rating downgrades of many NBFCs have also not gone well with the investors, leading to withdrawal from these funds.
A part of this redemption money may have flowed to equity markets in terms of SIPs/long-term investments as long-term underlying fundamentals of the Indian economy remain intact.
Going forward, monsoon recovery, revival in earnings as well as easing liquidity may lead to a revival in growth and that could lead to more inflows to the equity markets.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.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.