The outlook for the next couple of weeks is likely to remain bearish, and the Nifty is likely to further decline and take cushion at 14,250 levels in the short term. March expiry is expected to be in the 14,100 to 14,150 range, Nirali Shah, Head of Equity Research, Samco Securities said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:
Q) Nifty50 consolidated in the week but bulls failed to hold on to gains. What led to the price action?
A) The Nifty50 witnessed heavy pressure mainly because of the sudden increase in bond yields towards the end of the week. Rise in bond yields created panic in terms of inflationary pressures which led to the correction.
Despite the reassurance from Fed Chairman Jerome Powell on inflation and unemployment being under control, investors continued to sell.
As bond yields continue their upward journey, FPIs could slowly turn away from Indian equities and towards the States for higher returns. Hence, investors should keep observing the bond yield levels.
Q) The big cause of worry for equity markets is the rise in US Bond Treasury yields which have surpassed S&P 500 Dividend Yields. Does it mean that high-flying equities have a competitor now at a relatively low risk? How does it impact Indian markets?
A) If the long-term US bond treasury yields sustain above the S&P 500 dividend yields, the attractiveness of dividend-paying sectors will reduce.
This could also transfer the flow of money towards relatively low-risk assets compared to equities, which are already deviated from the mean levels and quite overbought in the short term.
Higher bond yields would also impact the currency market which could lead to the rupee’s depreciation as the demand for US dollar increases.
Q) The December quarter GDP data highlighted growth is slowly coming back. Your first take on the data? Your key takeaways for investors based on the data? Does it mean that investors should focus on Economy-related stocks?
A) December quarterly GDP numbers have broadly missed expectations although there have been some surprises in certain industries. Our economy is bipolar as some industries have exceeded expectations while some have negatively surprised.
A 0.4% GDP growth number for Q3 has slightly missed the mark. GVA was dragged mainly by services such as hospitality, transport, etc. which weren’t encouraging while construction and real estate saw strong growth as expected.
This does indicate that there is still a pain in certain sectors and investors should bet more on stocks towards the manufacturing side than services.
Q) Crude oil is also trading above $60/barrel. Which stocks are likely to benefit the most and which ones could remain under pressure and why?
A) Changes in crude oil directly affect the prices of companies ranging from upstream players' to oil distribution companies. Upstream companies such as ONGC directly benefit as they can sell at higher rates while HPCL, BPCL, IOC buy at these prices from upstream players.
In general, crude affects a number of industries from aviation, automobiles, logistics players, etc. as they rely on oil as a key raw material.
Also, India being a net crude importer, an increase in crude negatively impacts India’s current account deficit.
Q) Based on the February series expiry – how is the March series likely to an out. What is the target you see for the March series and important factors or data points to watch out for?
A) Markets have remained deviated from means for longer than usual and this is a required market correction for a healthy uptrend.
The outlook for the next couple of weeks is likely to remain bearish. The Nifty is likely to further decline and take cushion at 14250 levels in the short term. March expiry is expected to be in the 14,100 to 14150 range.
Q) Where are the pockets of opportunities?
A) Going ahead, equity markets could remain under pressure as the normal course of correction continues to take shape. Investors can move their money to pharma stocks amidst this correction as they have been consolidating for some time now and could see some pickup. Long-term investors can continue to remain invested while those in need of liquidity can book profits from certain overvalued counters.
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