Investors have begun parking their money into defensive sectors, especially technology and consumption. As the market is barely 9 percent away from all-time highs, investors are turning to sectors they comfortable with, Gaurav Garg, Head of Research, CapitalVia Global Research Limited, tells Moneycontrol’s Kshitij Anand in an interview. Edited excerpts:
Q) The Nifty lost steam in the second half of the week. What led to the price action on D-Street in the week gone by?
A) The Nifty ended below 11,400 on Friday (September 4) amid weaker global cues. The US stock markets plummeted on Thursday with Nasdaq slipping close to 5 percent.
Asian peers, too, were trading with losses on Friday morning, which eventually led to a selloff in the Indian markets.
Apart from global cues, domestic equity markets were influenced by economic data and monthly auto sales numbers.
Q) Which are the important levels that one should track in the coming week? Any data point or meeting to watch out for?
A) The Nifty has formed a bearish engulfing pattern on its weekly charts and has ended on a negative note after two consecutive weekly gains.
The near-term support for Nifty is placed at 11,100 and the resistance is seen at 11,580. On the domestic front, IIP data and the Supreme Court hearing on loan moratorium would provide further direction to the market.
Q) In terms of sectors some action was seen in IT index followed by consumption. Selling pressure was seen in banking and realty spaces. What is weighing on these two sectors—is it just profit taking or moratorium overhang on the banking space?
A) In my opinion, investors have started parking their funds into defensive sectors, especially technology and consumption. As the market is barely 9 percent away from all-time highs, which have turned investor’s funds into sectors where they are finding themselves more comfortable.
Recently, during the lockdown phase, banking and realty space underperformed the benchmark indices due to weaker earnings growth potential.
In terms of performance, high beta banking and financial stocks might show subdued performance. Therefore, at this juncture of time investors have turned to other sectors.
Q) What is your take on the Sebi’s new margin requirements? How have investors responded to these norms?
A) It’s a win-win situation for all participants. Initially, we’ll definitely see some teething troubles and it might take some time before everything is settled.
However, the overall objective behind the process is to preserve capital for investors and to make sure that they are not taking any excessive leverage.
However, brokers might need some time to get acquainted to new margin rules as they need to arrange margins on pledged shares as it takes three days to get settle.
Q) Top three-five short term trading ideas for the next three-four weeks?
A) Here is a list of the top three stocks that can give 5-8 percent returns:
ICICI Lombard General Insurance Company Limited: Buy| LTP: Rs 1,290| Target: Rs 1,355| Stop Loss: Rs 1,260| Upside: 5%
The stock has witnessed a reversal from its support level placed in the zone of Rs 1,255. Further strength might be gained if it sustains above Rs 1,300.
The crossover of its short and medium-term averages on daily charts with strong volumes shows signs of further upside. RSI has also turned positive on weekly charts, indicating limited weakness in the stock.
Trent: Buy| LTP: Rs 649| Target: Rs 705| Stop Loss: Rs 610| Upside: 8%
The stock is forming a bullish flag pattern, if the stock somehow sustains above Rs 649.90, it might lead to positive momentum. The stock has seen a significant addition of volumes in recent days. Risk and reward is favourable at this juncture of time.
Cummins India: Buy| LTP: Rs 465| Target: Rs 489| Stop Loss: 448| Upside: 5%
The stock is forming a bullish flag pattern on daily charts and breakout might result in further strength, which might lead the stock to break its monthly highs.Disclaimer
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