By Rahul shah
The equity benchmark index ended the previous week on a flat note. However, it was one of the busiest weeks during the year 2023 – both US Fed and ECB interest rate decision, a bunch of quarterly results from both India and the US, lots of economic data, April series F&O expiry and auto monthly sales data. Both Nifty and Bank Nifty sharply declined at the end of the week on Friday which resulted in the index losing the entire last three days’ gain. Bank Nifty lost over 1000 points, one of the biggest falls since budget day and lost nearly most of the gain in the last eight trading sessions. Finally, Nifty ended flat at 18069 while it touched a 5-month high last week at 180267 level. Sensex dropped 58 points to close the previous week’s level at 61054. The sell-off in HDFC twins along with mid-cap banking major Indusind Bank and unfavourable global cues pulled down the market on Friday. Moreover, traders were booking profit after a rally of eight trading sessions.
This week’s calendar includes inflation data with the consumer price index on Wednesday and the producer price index Thursday. Another busy week in earnings is expected in the US with Disney, PayPal, Under Armour and Airbnb quarterly results. Bank of England interest rate decision to be announced this week. Across the globe, markets declined 1-2% last week led by mounting pressure on the US banking system and a mild hawkish statement by US Federal Reserve. US Fed announced a 25bps hike in interest rate to 5.25% last week. Fed chair Jerome Powell signalled a possible pause on further tightening, but stocks sold off when he said it might be too soon to lower rates. Renewed concerns about the solvency of the US regional banks, higher than expected US Jobs data and interest rate hike by the ECB along with a hawkish statement pulled down the global markets.
There are expectations the Fed may have to start cutting borrowing costs by July in response to the tightening credit conditions. However, the US market climbed up to 2% on Friday after data showed that the US added more jobs in April than expected and the unemployment rate fell back to a multi-decade low. This complicates the Federal Reserve’s task of fighting inflation but signals economic resilience. Both US 10-Year and 2-Year yields spiked to a 2-week high after Jobs data came in better than expected. Expect global markets to be volatile – US CPI data and Fed official statement will be important for the market sentiment.
Bank home, Equity benchmark index ended flat and lost the entire last three-day gain on account of the sharp decline in banking stocks. Both HDFC and HDFC Bank nosedive 6% each on Friday after media reported that the merger of both companies might result in slight global outflows of $150 to 200 million. However, a merger of both HDFC and HDFC Bank will strengthen their balance sheet. Sentiments in the domestic market remain strong in all parameters compared to the global peers. Domestic April Composite PMI and Service PMI surged to decade high, April GST Collection touched a record high of nearly Rs 2 lakh cr, FIIs were net buyers of nearly Rs 6000 cr in just four trading sessions and improved April auto sales data, are all big positive for the market sentiment. Moreover, importantly, quarterly results by most of the corporates reported are better than expected, especially for auto, auto ancillary, mid-cap banks, capital goods, select pharma and chemical stocks. It reflects that the capital goods, two-wheeler, tyre and NBFC Index spiked to a near-record high.
Nifty technically has formed a small-bodied or a Shooting Star sort of Bearish candle on the weekly frame but is forming higher highs from the last six weeks. Now it has to cross and hold above 18081 zones to witness a bounce towards 18181 and 18250 zones while on the downside supports are placed at 18018 and 17887 marks.
Siemens: Buy – CMP: Rs 3578 – Target: Rs 3750 – SL: Rs 3500
Siemens has been making higher lows from the last eight trading sessions and supports are gradually shifting higher. We have witnessed good momentum in the entire Capital Goods sector and momentum indicators are well-placed for the next leg of a rally to take it towards higher zones.
TCS: Buy – CMP: Rs 3231 – Target: Rs 3500 – SL: Rs 3125
TCS has formed a strong base and started a fresh move to higher levels. On the daily scale, the stock is in the process of forming a double bottom pattern with divergence in momentum which indicates strength in the counter. The RSI oscillator is positively placed which will support the move towards higher levels. Looking at the overall price structure, we are expecting the stock to inch higher towards 3500 zones.
(Rahul shah Senior is Vice President, Group Advisory Leader-PCG, Broking & Distribution at Motilal Oswal Financial Services. Views expressed are author’s own.)