Removal of tax on dividends could be the biggest welcome step for the Indian equities that would boost the system with long-term consistent inflows and reboot the market sentiment, Sacchitanand Uttekar, DVP – Technical (Equity), Tradebulls Securities, said in an interview with Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) It was a historic week for Indian markets as the Nifty50 surpassed 14,000, while the Sensex is on the verge of crossing 48,000. What led to the price action, and what is your outlook for the year 2021?
A) The US Senate passing the stimulus package at the beginning of the year added to the ongoing momentum for world markets to push forward towards a fresh all-time high.
Despite the travel ban from the UK and the emergence of a new strain of COVID-19, markets across the globe focused on the positive side where more liquidity is expected to flow towards riskier assets.
Most of the key economies are on track towards normalcy thanks to the US stimulus package coupled with vaccine approvals, and their swift rollouts within respective countries have further added confidence amongst market participants.
The year 2021 may not have a constant trend but it would certainly have opportunities arising on both sides citing the overbought nature of the market technically as well as fundamentally.
Off late, liquidity has been the key determinant for the ongoing momentum, hence, any loss of momentum could bring in opportunities for investors.
Technically, we expect the floor for the year 2021 to be set somewhere close to 11,800-11,660 which could provide another round of opportunities within the secular bull-run.
Q) The year 2020 was a terrific year for equity markets as it recorded a 15 percent gain but less than gold, silver and even copper rallied more than 20 percent in the same period. How is 2021 likely to pan out for precious metals?
A) Of late, improved prospects of global economic recovery due to successful vaccine development has been a key factor for money rotation from gold to risky assets like equity in the last couple of months.
But, still, we expect precious metals to give strong returns in 2021, as the increasing money supply has started pushing inflation higher.
With all the money printing, 2021 will be the year that is going to see the return of inflation and when that happens, the next leg of bull-run will take off.
Precious metals will also get a boost from the debt crisis, which will occur in 2021 as there is massive debt to GDP of all countries. The world is already falling into a debt trap and it will be difficult for economies to perform in a negative real interest rate environment.
Q) As we enter January, the countdown to the Budget has already begun. Do you think this could lead to some volatility or maybe even selloff as we trade at the higher end of the valuations?
A) The occurrence of selloff ahead of the event is unlikely as the liquidity flow remains constant along with a strong sector rotational move.
We also have the earnings season kick-starting ahead of the budget which may keep the mood upbeat as IT stocks are expected to provide a good start for the season.
Q) What are your expectations from the budget or any measures that would cheer investors?
A) Priority towards health cover benefits by an increase in standard deduction limits for medical insurance and life insurance benefits under Section 80C limit.
Provide more disposable income in hands by realigning the overall tax slabs and standard deduction limits citing the ongoing situation to recalibrate the spending and growth momentum.
The year goneby saw a robust inflow in trading activity as total Demat accounts at the end of fiscal 2020 stood at 40.8 million, up from 35.9 million as of March 2019.
On the other hand, the MF industry saw continuous redemption pressure despite the outstanding performance by the benchmark indices.
It is observed that there could be a likely shift of flavour as participants remained more focused on short-term commitments, arbitrage opportunities and hybrid investment vehicles due to a lack of confidence in investing for the long term at such high valuations thus deteriorating the value investing phenomena which is gradually losing its sheen.
On the other hand, rising inflation and softening of interest income is weighing hard on the low-risk investment and pushing investors further away from their core nature of risk tolerance investment avenues.
Hence, the removal of tax on dividends could be the most welcome step for the Indian equities which would boost the system with long-term consistent inflows and reboot the market sentiment.
Q) What is your outlook for the small & midcap space for the year 2021?
A) Mid-cap and small-cap have made a dashing comeback in 2020 thanks to retail participation. Opening of economies, improvement in lead indicators, and positive FPI flows have all contributed to pushing mid-cap and small-cap stocks out from their slumps to a 52-week or fresh all-time high.
If economic revival is strong and retail participation is on a higher side, mid-cap indices may continue to outperform the larger indices in 2021 too. There is still room for mid/small-cap as they are yet to touch their 2018 peaks.
Q) Top three-five trading ideas for the next three-four weeks?
A) Here is a list of top trading ideas for the next three-four weeks:
HDFC Life: Buy | LTP: Rs 678 | Target: Rs 730 | Stop Loss: Rs 650 | Upside 8%Positive sector outlook. Fresh breakout from a ‘Flag Pattern’ formation on its weekly scale compliments the ongoing bullish move.
We expect the up move to extend towards Rs 730 as indicated by the pattern & the same could participate with a stop below Rs 650.
Thyrocare: Buy | LTP: Rs 937 | Target: Rs 1055 | Stop Loss: Rs 860 | Upside 12%
A ‘Bullish Hammer’ candlestick formation on its weekly scale marked the completion of its pullback move followed by another pin bar formation.
The ongoing corrective wave displayed characteristics of a zig-zag pattern formation which also looks complete & an impending up move may resume soon as its short-term averages are now converging.
We expect the momentum to amplify once above Rs 960 hence stock could be accumulated up to Rs 900 for an up move towards Rs 1055 with a stop below Rs 860.
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