Any escalation in the COVID condition can take markets by surprise and lead to further correction from the short-term support levels, Nirali Shah, Head of Equity Research, Samco Securities said in an interview with Moneycontrol’s Kshitij Anand.
Q) A volatile week but bulls remained in control of D-Street pushing Nifty50 above 14,800 levels. What led the price action?
A) While the concerns surrounding COVID-19 continue to loom over the markets, the confidence among D-Street investors remains more or less intact given that India Inc. seems better prepared this time and has some sense of confidence that they will tide through these uncertainties.
The ongoing result season also gives a sense that things seem to be under control. Apart from that other macro factors such as record GST collections and headline manufacturing PMI numbers indicate steady economic recovery.
Given these factors, a broad-based optimism continued to be witnessed in the markets.
Q) How do you see markets in the coming week? Which are the important levels that one should track going forward taking view of the FII and DII activity.
A) Benchmark indices can continue to remain range-bound as the bulls and bears continue their tussle to gain control.
While more data on the economic performance will come out during the coming week, investors should keep an eye on future COVID developments as the situation continues to remain sensitive.
As long as Nifty trades below the lower end of the rising channel, there are chances of this rally being a bull trap.
Short-term support and resistances are currently placed at 14400 and 15000, and a breach on either side will dictate the short-term direction.
Traders can maintain a neutral bias on the market and maintain stop losses near support levels.
Q) Sectorally, the metal index outperformed for yet another month while Consumer durable was the laggard. What led to the price action?
A) Metal prices have been on a rise ever since there is a strong global demand revival. And this week the metal index especially steel has outperformed because China recently removed the rebate on VAT on their steel exports which means that exports from China will not be as lucrative as before and Indian players will be able to cater to the existing demand internationally.
Consumer durables on the other hand lagged the market as demand saw steep declines in lieu of a surge in COVID-19 cases and restrictions across states.
As per data from CEAMA, consumer durables demand fell 65% in April. Given the data, the market has turned cautious causing the sector to underperform.
Q) After a flat April, ‘Sell in May Go Away’ echoes in the mind of investors. History suggests that bulls have mostly remained in control. Do you think May of 2021 will be different?
A) History, usually tends to repeat itself in the stock market but it is also a fact that markets never fail to surprise investors. It is one of the reasons investors haven’t been good at spotting perfect market tops and bottoms.
Just like April, markets can remain in a tight range in May with FIIs and DIIs taking an opposite stance and keeping indices afloat.
But, any escalation in the COVID condition can take markets by surprise and lead to further correction from the short-term support levels.
Q) 13 stocks on BSE hit a fresh All-Time High that includes names like Apollo Hosp, Adani Transport, JSW Energy, Prince Pipes, and Tata Steel. Do you think these could be the momentum bets at least in the short term?
A) Investors have been cautious on a broad-market level but continue to actively seek out stock-specific investment ideas. And since some of these stocks have witnessed the necessary volumes, it is likely that their up-trend will continue for some more time.
In fact, the momentum can continue for a couple of weeks before there can be some healthy profit booking. The margin of safety and how far a stock is away from its short-term DMA are good measures to judge a stock’s behaviour in the near term.
Q) You top 3-5 trading ideas for the next 3-4 weeks?
A) Investors can look at stock-specific plays in the market over the next 3-4 weeks. Metal stocks have been star performers in this rally and continue to display an undeterred upward momentum.
Investors holding them should continue to ride the rally. Moreover, consolidation in banking stocks provides for a good opportunity in quality names such as HDFC Bank, Kotak Mahindra Bank, and ICICI Bank for the long term.Disclaimer
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