The market is expected to cheer the lower than expected contraction in GDP numbers, and given that India Inc’s Q2 numbers were better than Q1, it seems likely that the Street will take the GDP numbers positively the next week, Umesh Mehta, Head of Research, Samco Group said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:
Q) What a week for Indian markets. Nifty50 rallied over 13000 while the Sensex also made its headway towards 45000. What led to the price action on D-Street?
A) The market achieved a milestone with Nifty hitting the 13,000 mark and Wall Street too behaved in congruence with Dow topping 30,000 for the first time ever this week.
The upbeat sentiments can be attributed to the advancement in the development of coronavirus vaccines and news that the transition of power to United States President-elect Joe Biden is finally on track. The Nifty Metals added largely to the up move.
In fact, India witnessed an FPI inflow of USD 6.7 billion month-to-date (MTD) which is the biggest monthly inflows ever, making India the third-most preferred investment destination in Asia after Japan and Korea.
FPI inflows could be largely because of a probable increase in India’s weight into the MSCI Global Standard Index effective 30th November.
A rejig in this global index could have led many international fund houses to rejig their portfolios which could have led to this aggression inflows into India. All these factors added to the price action on D-Street.
Q) GDP Data for the September quarter was better than expected. How will it impact market sentiment in the coming week on markets?
A) An opening up of the Indian economy led to a revival in many industries. A number of economists and institutional players have in fact improved their expectations of India’s growth.
Given that India Inc’s Q2 numbers were better than Q1, it seems likely that the Street will take the GDP numbers positively the next week.
The market is expected to cheer the lower than expected contraction in GDP numbers, however, if there is any other negative event on the vaccine front over the extended weekend, markets might react accordingly. Traders are advised to keep all factors in mind before taking a trade on Tuesday.
Q) Apart from GDP data another big factor that will impact D-Street is the RBI policy in the first week of December. What are your expectations?
A) Given the nascent recovery seen in the markets along with rising inflationary pressures, we believe the RBI might take an accommodative stance this time around and make no changes to the current rates.
The markets are also unlikely to react majorly in either direction given that there is very little room for rate reductions. It could be more or less a non-event given a status quo stance by the RBI is expected.
Q) Based on November F&O expiry which are the important levels to watch in the coming week with respect to Nifty? Does it look like we could touch 13200-13500?
A) The Nifty 50 index is trading at rising channel resistance and has become overbought in the short term, so there might be a limited upside.
The immediate support and resistance are now placed at 12750 and 13150, a break below the support may lead to a retest of 12400, and a break above 13150 might open targets up to 13400.
As long as the Nifty50 does not break below the lower end of the rising channel there are very good chances for reaching 13500, and not immediately but after a few minor retracements.
Q) Your view on the broader market performance?
A) The Nifty Midcap and Smallcap indices have performed strongly in the past couple of weeks given the improving macros and positive developments around the COVID-19 vaccines.
We expect this trend to continue fuelled by fund inflows and optimism around improving fundamentals. Since our index has become extremely polarized a shift in the money is justified.
Broader markets had been undervalued for the past couple of years and with the rise in benchmark indices, the broader indices too will prosper. Investors can look to accumulate quality midcaps at the current levels.
Q) Any trading ideas for the next 3-4 weeks?
A) IT and Pharma sectors have taken over the baton to drive the market since banking, which was driving the recent bull-run conceded with some retracement this week.
But, despite a retracement, quality well-capitalized private sector banks could still be looked at from an investment perspective.
IT and pharma would also be good defensive themes to add to one's portfolio at the current levels given their recent consolidation.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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