Below is the Views On Weekly note by Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote
Bulls to dominate this Diwali
Markets witnessed buying from FPIs and DIIs on improved sentiments and better prospects going ahead for the economy. FPIs have initiated buying equities aggressively and have covered their short positions which has relieved Mr. Market and cleared a major overhang. Therefore, new highs are expected sooner than earlier estimates. Ministry of Railways run IRCTC witnessed a bumper listing of 101.25% over its issue price which has signaled that people are ready to assume risk and increase their equity exposure in the market. This in turn helps our Government’s initiative to quickly divest some of the companies that are up for strategic disinvestments. Monies in the hand of the Government will eventually help in bridging fiscal deficit and will boost infrastructure spending necessary to fuel the growth in economy.
When IMF and World Bank beats the drum of slowdown of any economy, means that the phase is already over and better times are ahead. Recently, IMF as well as World Bank trimmed India’s GDP growth prospects by a whopping 0.9% and 1.5% repectively which when historically seen acts as a good indicator to identify bottoms. Considering a holistic perspective of corporate tax cuts, recapitalization of PSU Banks, FPIs paring their short positions, continued domestic inflows – all point to one thing that maybe the worst is behind us. But unless something dramatically goes haywire on a global front, Nifty50 is all set to touch new highs before Christmas
Event of the week
The Q2 result season continued with a bang as Mr. Market felt the glitters and jitters of results such as HUL and ZEE Entertainment which were announced during the week. HUL reported a strong set of numbers where PAT was seen up by nearly 21% YoY which was fueled by controlled costs and margin improvement. Whereas, ZEE Entertainment reported a disappointing marginal increase in PAT of 6.87% which was mainly due to the one-time loss of Rs. 170 Crs raising issues of corporate governance.
Nifty50 is likely to face resistance at higher levels. 11950 levels will act as strong resistance; however, some profit booking is expected at 11700 levels in the near term. There is marked weakness in Bank Nifty as compared to Nifty50 which makes this rally a fractured one susceptible to sharp dips in the short term. Traders to wait for correction before buying long.
Expectation for the week
Mr. Market’s rally is currently in a catch-up phase and is likely to percolate to individual sectors which were largely underperformers. Small and Midcaps are likely to witness buying interest. India’s two respected mammoths namely Reliance Industries and HDFC Bank’s quarterly results will set the ball rolling for the end of Samvat 2075. International metal prices have bottomed out after few quarters of steady price declines. Precious metals are also showing signs of consolidation and can move higher in the near future. Hence, investors may deploy fresh funds at current levels keeping in mind appropriate diversification and individual risk-taking abilities. Nifty50 ended the week at 11661.85 up by 3.2%.
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