For Nifty50, 11,695 is going to be the key level for 2020. The ongoing bull run can only be considered valid if it stays above this level, Gaurav Garg, Head of Research, CapitalVia Global Research, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Nifty50 is above 12,000 levels. Do you think the week macro data could spoil the party for bulls?
A) According to the data released by the National Statistical Office (NSO), India's retail inflation has surged to 5.54 percent in November, while factory output has gone down to 3.8 percent in October from 4.3 percent in September.
These numbers are worse than those in the same quarter last year. All these factors tend towards a negative bias for market growth and could definitely spoil the chances of a major upward movement.
The recent revelation by the Reserve Bank of India (RBI) that Public sector banks have underreported their NPA numbers for FY19 is another bolt to the market.
Q) Do you think we could see a Santa Claus rally before the year ends?
A) So far in December, the market has witnessed a correction after hitting an all-time high in November. The Nifty opened at 12,137.05, made a low of 11,832.3 and is currently trading in between.
We have seen Nifty making higher highs since the last three months, but the momentum has been sluggish. The change percentage in September was 4.68 percent whereas in October it was 3.1 percent and in November it reduced to 1.35 percent.
This indicates a halt in the bullish trend. So, most likely, the Nifty may remain rangebound or correct to some percentage.
Q) The recent macro indicators cement fears of a slowdown. Do you think investors could say goodbye to a 25 bps rate cut in February?
A) In 2019, the RBI has already cut the repo rate by 135 basis points to 5.15 percent, lowest in 9 years. While in its 5 bi-monthly monetary policy statement for 2019-20 the repo rate has been kept unchanged.
India’s economy grew 4.5 percent in the second quarter, these numbers are lowest since March 2013 due to a sharp decline in production data.
To tackle these situations RBI may lower the rate even further. However, a 25 bps rate cut might not be enough to infuse confidence in investors.
Q) Any big factors which investors should watch out for the coming week or important levels?
A) One should keep an eye on any further boost the government provides to stimulate production or to tackle retail inflation.
Other international factors such as recent developments in the US-China deal, as well as, Crude prices may be other events to note.
For the Nifty50, 11,695 is going to be the key level for 2020. The ongoing bull run can only be considered valid if it stays above this level.
Q) Which stocks are displaying signs of a breakout?
A) Here is a list of top three stocks which are on the verge of a breakout and can give 20-200 percent return:Tata Motors: Buy | LTP: Rs 176 | Target: Rs 225 | Upside potential: 27 percent
The stock was in a month-long consolidation in the range of 180-160. It is on the verge of a major pattern breakout and we believe a break above 180 the stock has the potential to move till 225.
Other oscillators too are in the favor of an impending breakout for the stock. Traders can buy it for the target of 225.
Yes Bank: Buy | LTP: Rs 46.65 | Target: Rs 150 | Upside potential: 226 percent
The stock has been in news for a while for its cash crunch and fund-raising efforts. Big bulls from India and abroad have shown their trust in the brand values of Yes Bank.
Historically, as well as currently, it has taken support at psychological levels of 30 and 45 and bounced back from there. Given these parameters, one can accumulate this stock with a target of 150.
Apollo Tyre: Buy | LTP: Rs 166 | Target: Rs 250 | Upside potential: 50 percent
After many years of consolidation, the stock has taken support again within the range of 130-150.
Being a manufacturing industry, it also enjoys the recent tax cut announcements by the government. One can buy it with the target expectations of Rs 250.
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