smart money: Mohit Nigam lists 2 areas where smart money seems to be heading
In an interview with ETMarkets, Nigam said, “India’s automotive sector is poised to rebound as demand and supply issues appear to be easing. businesses are likely to see a recovery in demand.” Edited excerpts:
Both Sensex and Nifty50 have fallen more than 1% over the past week. What led to the price action?
India’s benchmarks have corrected more than 1% over the past week as investors worry about the upcoming earnings season. Indian companies are expected to face the full brunt of rising inflation which will likely squeeze their profit margins. IT companies began reporting earnings this week. Investor sentiment hit as IT heavyweight
the results were below market sentiment. In addition, the US consumer index experienced inflation of 9.1% in June, which is the highest ever recorded in the last 4 decades. This sent negative signals to the market as investors were wary of higher than expected rate hikes by the Fed to curb the rising inflation situation.
Where do you see Nifty50 in the coming week? Are there any important levels that traders should pay attention to?
This week, Indian markets have been very volatile. Nifty was trading in a range of 15,850 to 16,250 driven by various global and domestic indices such as rising fear of inflation, volatility in crude oil prices, falling prices of various commodities, the results of computer science majors, etc. In the coming week, the market will face high volatility driven by the first quarter results of various companies and fluctuating commodity and currency prices. We believe that Nifty should hold the 15,700-16,300 level range, breakouts and breakouts on either side will decide the future direction of the Indian market.
The IT sector has fallen the most over the past week. What led to the price action? Do you think the weakness will continue or can some stocks make long-term bets at attractive valuations?
During the pandemic, the IT sector was in the limelight and rebounded, mainly driven by the growing importance of digital transformation in various sectors. This rally in the IT sector has led to very premium valuations, which are very difficult to maintain. Currently, the IT sector is under pressure due to recession fears.
The NASDAQ, the tech-heavy U.S. index that includes stocks like Amazon, Tesla and Google, has fallen about 34% from its 52-week high. The Indian IT sector follows a similar trend as most of its revenue comes from the United States. The continuous increase in the attrition rate, which leads to increased personnel costs and outsourcing costs, is also one of the challenges that IT companies face. This also results in lower margins and bottom line.
However, according to our analysis, the IT sector is now attractively priced and the current challenges would gradually start to subside from S2FY23. Thus, investors can start accumulating good quality IT stocks in a staggered manner over the long term.
The rupee is approaching Rs 80/USD. What is weighing on the currency and where do you see the currency moving in the short term?
The Indian Rupee edged closer to nearly 80 against the US Dollar yesterday. The continuous selling of Indian stocks by foreign institutional investors for nine consecutive months is now weighing on the Indian currency. After the release of higher than expected inflation figures, the US dollar continued to rise and hardened expectations of a faster and more aggressive tightening of US Fed policy. With growing recession fears, the attractiveness of the US dollar as a safe haven has also been strengthened. Through the channel of capital flows and exchange rates, emerging markets will be under pressure due to the continued aggressive monetary policy action of the US Fed. Expectations of a widening current account deficit in the current fiscal year and a bullish greenback would continue to keep the rupiah under moderate pressure. We expect the Rupee to depreciate to 81 levels before the end of FY23. However, with the intervention of RBI in the foreign exchange market with a proposal of a number of initiatives to attract investment international markets will cushion the fall of the national currency.
Where does the smart money seem to be moving? What do the techniques suggest?
Smart money seems to be heading towards the FMCG and automotive sectors. India’s automotive sector is poised to rebound as demand and supply issues appear to ease. Additionally, with expectations of a normal monsoon and a slowdown in commodity prices like palm oil, FMCG companies should see demand recover.
Any top 3-5 technical trading ideas for the next 3-4 weeks?
Asian Paints: The stock bottomed forming a cup and handle pattern on the daily charts and recently it broke out of this pattern. The stock is now moving in a higher higher lower pattern with large volumes.
Hindustan Unilever: The daily chart recently saw a breakout of the Head and Shoulder pattern with large volumes and after breaking out, the stock retested the pattern’s neckline to levels around Rs 2,450 and started moving again.
Larsen & Toubro: The title is showing strength after experiencing a sharp drop. It formed a W pattern, and pattern breaking also occurred with large volumes. Now the stock is rising and has started to form a higher higher lower pattern.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)