By Rahul Shah
Bulls attempted a comeback in the Indian bourses last week as Sensex and Nifty managed to end in positive territory despite most of the global markets closing on a negative note. Soft oil price, favourable government policy, improved GST collection (Rs 1.44 lakh crore, up 56.5% YoY) and impressive June auto monthly sales data boosted the market sentiment. Sensex gained 180 point (0.3%) to settle at 52,907 while NSE Nifty index advanced 53 points or 0.3% to end at 15,752.
However, the market was highly volatile last week, on account of the June series F&O expiry and volatility in the global markets. Upstream oil companies witnessed a sharp decline after the government imposed a Rs 6 per litre tax on the export of petrol and ATF and a Rs 13 per litre tax on the export of diesel. Reliance slipped by 4% against the previous week’s close. FMCG stocks gained due to fall in palm oil price.
This week, the stock market will be important both locally as well as globally. TCS Q1 results (Friday) and US Fed minutes of meeting (Wednesday) will be in focus. Indian markets are in a much better place than global peers. Reasons that the palm oil price fell to two month low, Brent crude declined from the recent high after OPEC+ announced an additional 6.5 lakh barrel oil supply which may cool down inflation. The government raised basic import tax on gold to 12.5% from 7.5% and hiked the export tax on petrol and ATFs (Rs6/liter and diesel (Rs13/liter) to control local currency and to reduce current account deficit. The performance of the domestic stock market in July would also depend a lot on how the Q1 earnings season turns out to be and the management commentaries around the impact of inflation and growth outlook.
The domestic currency depreciated to hit a new low of 79.11 against the dollar on Friday amid persistent foreign equity outflows. Data showed foreign equity outflows breached the Rs 50,000 crore mark in June over a 1-year high, taking year-to-date outflows to Rs 2,17,358 crore. A weakening rupee makes investments in domestic equities unattractive to foreign investors. US Fed’s rate tightening cycle, fears of recession and the unending war between Russia and Ukraine have made foreign investors jittery, leading to outflows for the ninth consecutive month in June.
Nifty has formed a small body Bearish candle with a long lower shadow on the weekly frame which indicates a tug of war between bulls and bears. Now it has to hold above 15735 zones for an up move towards 15888 and 16000 zones whereas on the downside support is intact at 15600 and 15500 zones.
Shriram Transport finance: BUY
Target: Rs 1400 | Stop loss: Rs1230
Shriram Transport Finance has retested the breakout on the daily charts after giving a breakout of the consolidation zone. It has formed a bullish candle indicating buying interest in the counter. RSI oscillator is positively placed on daily and weekly charts and supports are gradually shifting higher. Considering the current chart structure, we advise traders to buy the stock for an up move towards 1400 with a stop loss of 1230.
Tata Steel: BUY
Target: Rs 925 | Stop loss: Rs 852
Tata steel after a severe sell-off in June series stock is at a support zone of 860 levels, considering the chart structure on a weekly scale current price offers good risk to rewards opportunity. We advise traders to buy the stock for bounce back for an up-move of 925 with a stop loss of 852.
(Rahul Shah is a Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)