Apart from the Union Budget, the market would also keep an eye on the recommendation of the Bimal Jalan Committee on the central bank's economic capital framework
Not all shadow bankers are in stress, the well-managed firms like HDFC, Bajaj Finance, etc. are able to raise funds from the market. Thus, investors are recommended to invest or remain invested in quality NBFCs and HFCs, Sumeet Bagadia, Executive Director, Choice Broking, said in an interview with Moneycontrol’s Kshitij Anand.
Q. Nifty50 closed June on a muted note and probably a negative close after three straight months of positive closing. Do you think have we hit an intermediate top with respect to markets or we could see a breakout above 12103 post Budget?
A. Well, we cannot say that the Nifty has formed an Intermediate Top with the ending of June Series as we could see another top which would be likely placed at 12,250 in coming trading sessions.
Moreover, on a monthly chart, the Nifty has been trading in a Rising Wedge formation and it seems that the high volatility would be there as the Nifty is squeezing its movement within the pattern which leads to a breakout on either side.
Moreover, the 21-months moving average also acts as strong support which is placed at 10,940 level.
On a daily chart, after forming a Runway Gap, the Nifty is continuously trading above its Gap range along with the support of 50-DMA which suggests a movement in a northward side may take place.
A leading indicator Stochastic is trend near to overbought zone with a negative crossover which shows a negative rhythm in the index.
However, for a shorter time, the Nifty has formed a base near to 11,650 level while upside resistance comes at 11,850. An overall range that we are seeing is 11,600 to 12,250 level.
Q. What are the events to watch out in the month July apart from the Budget? And, what are your expectations from the Finance Minister this time around?
A. Apart from the Union Budget, the market would also keep an eye on the recommendation of the Bimal Jalan Committee on the central bank's economic capital framework.
Amount of excess funds to be transferred by the RBI and the conditions attached to it would be closely analyzed keeping in mind the already fiscal position of the government.
Also, NITI Aayog's view on the EVs and progress of south-west monsoon would be actively tracked by the market. On the global front, developments on US-China trade talks and outcome from scheduled OPEC meeting would be tracked by the investor community.
However, we have certain views like the government should address the agri stress and take steps to resolve the NBFC crisis.
More favorable policies are anticipated to attract private investment and also attract companies, which are looking to shift their base from China. Additionally, the focus areas would also be around water infrastructure, tourism, healthcare, and education.
Q. Any three stocks which you think are good buys in terms of fundamentals ahead of the Budget which are likely to benefit the most from the policies which could be rolled out from the new FM?
A. HUL: Any relaxation in the personal tax rate and favorable policies for easing rural distress would be beneficial for the company.
Va Tech Wabag and Srikalahasthi Pipes: These companies are linked to the development of the water infrastructure in the country. In the election manifesto, BJP has stressed on improving water infrastructure and promised water to all be 2024. We feel that this budget would provide a roadmap to achieve the same.
JSW Steel: In the recent past, there was an increase in the steel imports and profitability of most of the domestic companies was impacted. In the era of restrictive trade, the government would once again put some restrictions to curb imports and revive the domestic industry.
Q. What are your views from the recently concluded SEBI board meet? Do you think high pledge shares will witness further volatility and outflows from the liquid schemes?
A. This action was very much required, nevertheless, delayed action by SEBI is encouraging as this will bring some sort of clarity and proper disclosure of share pledging through any means.
Also, the new regulations would be an eye-opener for the mutual funds, which acted as a lender as against their mandate of an investment vehicle.
Q. Crises at NBFCs, HFCs are a big threat to markets? RBI report calls for tougher supervision of NBFCs. What should investors do with NBFC in their portfolio? Are there any bright spots?
A. There is a no doubt that the NBFCs are critical for the economy, however, in the last 2-3 years, they have grown at a good pace without putting any emphasis on the asset-liability mismatch in the business.
Prominent para bankers like DHFL and Reliance Capital are the recent victims of the liquidity stress in the sector. There may be more in the near-term unless the government through various regulatory agencies take some action to tame it.
Not all shadow bankers are in stress, the well-managed firms like HDFC, Bajaj Finance, etc. are able to raise funds from the market. Thus investors are recommended to invest or remain invested in quality NBFCs and HFCs.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.