Rajeev Srivastava, Chief Business Officer at Reliance Securities, expects the Reserve Bank of India (RBI) to keep interest rates unchanged and continue with the accommodative stance when its monetary policy committee meets in the first week of December.
The market, Srivastava says in an interview to Moneycontrol’s Kshitij Anand, expected GDP numbers to improve in the July-September quarter, so the narrowing of contraction won’t have much impact on Indian shares. Edited excerpts:
- Q) What a week for Indian markets, the Nifty50 rallied over 13,000 and the Sensex made headed towards 45,000. What led to the price action?
A) The Nifty50 traded volatile with expiry rollover movement and MSCI inflows during the week, making an all-time high of 13,146.
There was a record turnover at the exchanges in the derivative segment on the expiry day and in the cash market on Friday (November 27) during MSCI rebalancing.
The price variation was very swift in stocks where in weightages were increased or decreased in the MSCI index. Midcaps and small caps continued to outperform and gained by 4 percent and 6.3 percent, respectively for the week.
- Q) The GDP data for the quarter ended September 2020 was better than expected. How will it impact market sentiment during the week?
A) The numbers are in line with the expectations, so we do not expect any major impact of GDP numbers in the coming week on markets.
India’s economy shrank 7.5 percent in the fiscal’s second quarter after seeing a record contraction of 23.9 percent in Q1. The manufacturing and construction sectors made a jump in the July-September quarter.
While the fall in the construction sector narrowed from 50.3 percent in Q1 to 8.6 percent in Q2, the manufacturing sector registered a 0.6 percent growth in Q2 against a contraction of 39.3 percent in Q1.
The mining sector also improved by reducing the contraction of 23.3 percent in Q1 to 9.1 percent in Q2. On the other hand, the agriculture sector once again registered a growth of 3.4 percent in Q2.
- Q) Apart from the 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) We expect status quo on interest rates and MPC (monetary policy committee) will hold its accommodative stance in the coming RBI policy. As consumer inflation is at the higher end, the commentary will be important, which can impact the markets depending upon the announcements.
The Bank Nifty and financials have gained by 45 percent over the past two months, outperforming the broader markets.
- Q) Based on November F&O expiry, which are the important levels to watch during the week for the Nifty? Will it touch 13,200-13,500?
A) Key supports are placed at 12,730, being the fortnight low, and if that is breached, then we could see support at 12,430, which was the previous all-time high and could now act as support from current levels. On the higher side, the weekly pivot resistance is placed at 13,300 levels.
- Q) The 10 years data suggests that the bulls remained in control in December in the six of the last 10 years. Do you think the trend will continue in 2020?
A) We have a twin stellar expiry of a strong up move across sectors and stocks in October and November, so we expect markets to consolidate in the December month.
The current expiry is very long, of five weeks, and historically, we have witnessed a range-bound move in December. Any decline below 12,400 levels could witness a selloff in broader markets.
- Q) Your view on the broader market performance?
A) We have been maintaining a strong positive stance on midcaps and small caps over the past few months and we continue to believe that they will outperform the largecaps.
Among sectors, we are very positive on pharma as the price and time correction is being over the past few months and news flow with respect to vaccine announcements could continue to keep the sector in positive momentum.
The consumer has also started picking up with volume growth expansion in rural and urban demand improving over the past few months.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.