Edited excerpts
Q: Nifty has ended positive 9 times in July with its best performance in 2022 at 9% returns. What are your expectations this time around, considering the belligerent mood of the markets?
Markets had a dream rally in June, with the benchmark index Nifty gaining 2% WoW, whereas Bank Nifty gained 1.3% WoW. Overall, the markets continue to be driven by bullish investment sentiments, on the back of positive global cues, rally in heavyweights and on the hopes of rate-cut materialising, most probably in this quarter.
Given that June ended on a strong note and with budget expectations running high, and across the spectrum rally in sectoral stocks, it appears that July will prove to be a very eventful month, with the bulls having the upper hand, unless any unforeseen event happens.
US non-farm payrolls data is to be released later this week, along with inflationary trends that could have a bearing on the markets. Hence, investors are advised to trade with caution, and be selective in their stock picks.Also Read: Nifty logs positive returns 9 times in 10 years in July, FIIs net buyers on 8 occasionsQ: What are important levels for Nifty and Bank Nifty for this week and the July series?
Overall, the leading indices, Nifty and Bank Nifty continue on their upward trajectory, on the back of strong performance from market heavyweights such as Reliance Industries (RIL), HDFC Bank, Infosys, Axis Bank, Mahindra & Mahindra (M&M), Tata Consultancy Services (TCS), Tech Mahindra, Ultratech, Wipro & Bharti Airtel, to name a few. For Nifty, the crucial level of support is seen around the 23,600-23,800 zone whereas resistance is seen around the 24,300-24,500 levels. As far as Bank Nifty is concerned, support is seen around the 51,600-51,800 zone whereas resistance is seen around the 52,800-53,200 zone for the July series.
Q: FPIs were back to buying in June from net outflows to net inflows at the end of the month. What has changed in the last few weeks?
FPIs have been net investors in equities to the tune of Rs 26,565 crores in the month of June, which are positive signs nonetheless, but over the past many years, we have seen the emergence of the Domestic Financial Institutions (DIIs), Mutual Funds and the retail SIP, which have added significant strength to the domestic players.
If we look at the FPI holdings in Indian stock markets, that’s less than 20% for the quarter ended March 2024, which is the lowest FPI holdings since December 2012. Despite all this, markets trading at record levels speaks volumes about the maturing of the Indian markets and it is here to stay. FPIs have turned positive, on the back of easing concerns about the continuity of economic and policy reforms with the formation of the new government at the centre and also with the belief in the Indian growth story in the decade ahead.
Q: FIIs net long positions are up at 76% on the index versus their three month average of 70%. Is it a cue that markets will continue their winning momentum this month too?
Reading too much into this data would not be very advisable, given that market direction to a certain extent will be shaped by the upcoming budget, which market participants are hoping for it being pro-reforms with a major impetus on infrastructure.
But given that the government steps up its spending on uplifting the masses, it would be interesting to see how that plays out in the budget.
FIIs generally have had a reverse midas touch for quite some time now, so it is better to be cautious at the current levels, with lighter positions and be as stock selective as one can be, given the heightened valuations across many sectors and stocks.
However, the overall uptrend of the market remains intact, and it continues to be a buy on dips till such time we see a reversal in trend. For that to happen, Nifty would be required to consistently trade below the 23,200-23,300 levels.
Q: It was a great month for two laggard sectors viz. private banks and IT which have delivered over 6% returns, each. Do you think these are health signs as we enter into the earnings season in less than two weeks. Which stocks will you be eyeing in both sectors?
We have witnessed a sharp rebound in both the private banks and the IT space with the Nifty Bank & Nifty IT gaining 9% & 4% YTD, on the back of strength in HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank amongst the banking space, whereas amongst the IT space, Infosys, TCS, Tech Mahindra, Persistent, Wipro are a few IT stocks which are displaying positive sentiments on the back of global positive cues.
Both these sectors are expected to perform well going forward, but investors need to be selective and have a long-term approach.
Q: Among the top gainers this week were India Cements, Titagarh and Amara Raja while RCF, NMDC and MOFSL were among major laggards. What should investors do with them?
Investors can look at holding their positions in India Cements and Amara Raja with stop-loss below 270 and 1,530 levels as the overall uptrend remains intact for both these stocks while one can look at booking profits in Titagarh as the stock is up almost 75% YTD.
On the losing stocks, investors can hold RCF, while in the case of NMDC & MOFSL, investors can look at booking part profits.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)