Nifty’s movement this week will be driven by the way forward for resumption of business after lockdown, an announcement of any stimulus package, and stock-specific earnings results, Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Sensex and Nifty rallied over 14% each in April. The Sensex is back above 33,000 while NIFTY reclaimed 9800. What is fuelling market rally on D Street?
A) The Indian benchmarks jumped nearly 3 percent on the closing of the long weekend for the market. The investors are still in hope for the stimulus package by the government.
The positive results of Covid-19 treatment trails by Gilead’s drug have added to the positive sentiment to the market. Sectors like metal, auto, IT and tech have majorly contributed to the rally.
The indications of easing of lockdown and partially giving permission to the manufacturing companies in the green zone to operate have added more value to the market.
Q) As we close the month of April on a positive note after a massacre in March –how is May likely to pan out for investors. There is a very popular Wall Street adage “sell in May and Go away? Do you think we could hold onto gain if not why?
A) The indices have closed in the positive note for the fourth consecutive session and posted the second-biggest weekly gain which rose nearly 8 percent in the week. The ongoing positive developments like plasma treatment, Gilead’s drug which is showing some promising results, and Oxford efforts for a vaccine will be the keynotes to the market in May.
The month of May will be crucial for India as cases surpassed 35,000 marks, although the doubling rate is quite good as compared to the earlier weeks.
Officially the lockdown will end on 3rd May, and the government is taking various steps for easing the lockdown and focusing on improving the economic conditions. So any stimulus package or confirmed vaccine is the key things to watch out in May.
Mumbai School of Economics and Public Policy (MSEPP) had published a paper studying the infection pattern of different countries like China, Australia, and New Zealand said that most of the states in India might stop reporting the new cases by 7th May and a whole country by 21st May.
If the market continued the rally and sustains above 9,750, we can expect it to break the next resistance level at 10,000 which is the crucial resistance level for Nifty and next level at 10,300, and on the downside, the support levels will be 9,700 and 9,500.
Q) What is your call on banking and auto stocks which have run up quite sharply in the week gone by?
A) The domestic markets settled positive on 30th April, which was supported by buying in financial, IT, auto and metal stocks. On the sectoral front, the Nifty Auto index was up 6.45 percent.
Investors took positives from the news that India may attract $1.3 billion in passive flows as the country has moved into a new regime in which the FPI limit has been increased to the sector foreign limit.
Indications of easing of lockdown measures and stimulus hopes helped drive the markets. Short covering and roll-overs in the market also contributed to the gains. Global markets today rallied after early results from US-listed Gilead's trial of its drug Remdesivir showed on 30th April, it helped speedy recovery from the illness caused by the Coronavirus.
The risk of a correction has increased in the near term after the strong rally this week. Investors should keep this in mind and trade accordingly. Nifty has good resistance near the 10,000 mark.
The Nifty50 has support near 9500 – 9600 zones. The Nifty Bank’s resistance is coming near 22000 - 22300 zones, and it has support in the 20250 – 20700 zones.
Q) What are the important factors which investors could track in this week and in the month of May which could dictate the trend for markets?
A) Nifty’s movement this week will be driven by the way forward for resumption of business after lockdown, an announcement of any stimulus package, and stock-specific earnings results.
India is expected to roll out a stimulus package to help mitigate the damage from the crisis. The market has rallied 25 percent in a straight line and the future outlook is not going to be the same and things will not start improving in a straight line even after the lock-down is removed.
So one needs to be careful about his positions and the sectors he/she has invested in.
Q) What is your view on Tech Mahindra and HUL which came out with results on Thursday? What should investors do- buy, sell or hold?
A) Tech Mahindra posted nearly 29 percent less profit than Q4 last year mostly owing to environmental changes and disruption due to COVID-19. A dividend of 5 rupees per share has been declared and therefore sending positive vibes on the street.
The slowdown in economic activity is bound to impact IT industry however it could be seen that firm reported increased revenue than quarter ending March ‘19 which is a good sign and with the current trend of remote working and growing reliance on digital operations it is expected to see growing business opportunities for IT sector.
HUL reported nearly 3.5 percent less net profit on a YoY basis with a decline in the domestic customer base of up to 9% due to nationwide lockdown and EBITDA down by 40bps.The firm being in FMCG segment volume plays an important role in its profit margin and with extended lockdown, the buying may gain momentum again.Tech Mahindra - Buy at current level of 550-552 and hold.
HUL- Buy at the levels of 2150-2155 after it bounces from support.
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