Crucial support for Nifty50 at 17000-16800 after Death Cross; 4 trading bets for 3-4 weeks: Mohit Nigam, Hem Securities

A volatile week for Indian markets but bears remained in control despite some pullback seen for couple of sessions. What led to the price action?
At the start of the week, Indian and global markets were jolted when Ukraine announced that a long-awaited offensive drive into eastern Ukraine’s Donbas region had commenced, with escalating assaults in the country’s north and east.

As petroleum and metal prices climbed, the market became anxious about growing geopolitical tensions and hyperinflation.

Following sectoral headwinds revealed in poor Q4 results, the Indian IT sector has continued to lead the decline.

Fearing war and inflation, foreign institutional investors have been relentless sellers of Indian equities this year.

The reappearance of Covid-19 cases in China, which has enacted a zero-Covid policy and imposed restrictions to curb virus spread, is exacerbating the situation and is predicted to stifle the country’s economic growth, affecting global growth as a result.

In the coming days, investors should stick to solid equities and avoid stocks with weak fundamentals. Investors should be cautious and retain enough cash in hand to keep buying solid equities when the market dips.

We will be entering the F&O expiry week. We saw Death Cross on both the indices in the week gone by. Any specific levels which investors should watch out for in Nifty and NiftyBank?
Recently on the daily chart, 50-MA crossed 200-MA from above i.e. Death Cross crossover in both Nifty and Bank Nifty. Technical wise, death crossover is negative for the company/ indexes, and generally stock/indexes witness some selling pressure after this crossover.

So the key levels to watch in Nifty and Bank Nifty in the coming trading sessions are:

For Nifty 50: Support- 17000; 16800; 16500

Resistance- 17500; 17800; 18000

For Bank Nifty: Support- 35500; 35000; 34000

Resistance- 36400; 37000; 38000

Sectorally, energy stocks and oil & gas stocks rose while selling pressure was seen in IT as well as banking stocks. What led to the price action?
In April, the Nifty Energy index has risen by 13% while many stocks like ONGC, Gail, IOC etc. have rallied.

The major reason for the same was their cheap valuation, an increase of crude oil and natural gas prices etc.

The market is discounting upcoming results for oil and gas stocks, as sustained higher crude oil prices and gas realisations can result in better profitability.

In April, the IT Index corrected more than 10%. The major reason for the same is high valuation and margin pressure which was visible in their Q4 results.

IT majors like TCS, Infosys, and LTI have seen a huge attrition rate which increases their operating cost and affects their profitability.

The Nifty Bank has corrected around 5 per cent so far in April. The major reason was selling seen in HDFC twins.

US Fed has signaled an aggressive 50 bps rate hike in near future. Is it priced in or could we see further adjustments in global investors’ portfolios that could weigh on markets? FIIs pulled out more than Rs 26,000 crore from the cash segment of Indian equity markets.

US Federal Reserve officials’ hint of a more aggressive hike of the benchmark interest rate in recent days has pushed up key treasury yields.

US Fed Chairman Jerome Powell has signaled that a 50-basis points rate hike is on the table in the May 3-4 policy review.

This hawkish tone has triggered weakness in markets across Asia with India being no exception. The Fed is going to enter into a quantitative tightening phase from May which will make the US debt market more attractive to foreign investors.

Trends in global markets, the movement of the rupee, and crude oil prices will dictate the trend in the near term. FIIs are selling not only in India but also across other emerging markets.

Starting late October, it has continued till date and has been triggered by basically three reasons: first, the Fed stance has changed quite rapidly during the Q4CY2021 in terms of monetary policy normalisation.

Apart from that, Russia’s offensive against Ukraine has pushed up energy, commodity, and food prices impacting the current accounts of many emerging markets including India.

In its recent bi-monthly policy, the RBI MPC raised the annual inflation forecast to 5.7 percent from 4.5 percent, which further indicates a rate hike in the coming months.

And lastly, FIIs follow the earnings cycle and earnings growth in India has slowed over the last two financial years. Therefore, we advise investors to remain cautious about FII flows in the near term, adding to volatility.

However, we believe that the DIIs have been like a knight in shining armour for markets as they have been holding the fort with sustained buying with the future growth prospects of India.

Where is smart money moving? Have you seen a shift in the trading patterns – cautious or aggressive?
Smart money is a phenomenon where a large amount of money is deployed in order to influence the markets. There has been a clear shift in trading patterns in the last month.

Strong buying has been witnessed in the oil and gas, logistics, and electrical utilities sector. Whereas the IT sector has witnessed a major selling.

The FII data released by NSDL also supports this as we can observe that FII has increased its stake in the logistics sector by more than 900cr. Other sectors which have witnessed money infusion from FIIs is oil and gas, electrical utilities, and financial services.

On the other hand, the IT sector has witnessed a major selling with FII’s pulling out more than 30,000 cr in the last month. Overall, we can say investors are following a cautious approach in making new positions.

Your 3-5 trading ideas for the next 3-4 weeks?
Here is a list of top trading ideas –

Trent: Buy| LTP Rs 1287| Target Rs 1400| Stop Loss Rs 1238| Upside 9%

We are expecting a better FY22-24E revenue and EBIDTA on the back of recovery from the Covid-19 pandemic, and a 33.5 per cent increase in the footfall.

RIL: Buy| LTP Rs 2758| Target Rs 3000| Stop Loss Rs 2620| Upside 8%

Green hydrogen is gaining a lot of attraction and Reliance is best positioned to capitalize on this opportunity. The stock should be added for both the short and middle term.

Tata Power: Buy| LTP Rs 252| Target Rs 280| Stop Loss Rs 240| Upside 11%

With Higher coal prices and strong demand especially from the EV space, Tata Power is bound to give fabulous returns.

It is India’s largest integrated power company and is also one of the largest renewable energy players in India.

Sona BLW: Buy| LTP Rs 671| Target Rs 708| Stop Loss Rs 642| Upside 5%

Given the traction in the BEV and hybrid vehicle space, we believe that Sona BLW will post healthy annual earnings growth as it is one of India’s leading automotive technology companies that derives around 40 % of its revenues from battery electric vehicles and hybrid vehicles.

DISCLAIMER: Stocks mentioned in the above answers can be part of the HEM Securities PMS Fund. Hem Securities Ltd, its Associates, PMS, their Directors, employees, and their relatives may from time to time, have long/short positions and may buy or sell the securities of the above-mentioned company(ies).

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)