By Rahul Shah
Equity benchmark index recorded its worst weekly performance in eight months. All the five trading sessions, the index ended in the negative territory and investors have recorded more than Rs 6.8 lakh crore erosion in wealth. After a long time, all the major Nifty indices dropped sharply from auto to metal sectors. Nifty media, realty and PSU Bank Index slipped over 5% each against the previous week. Nifty IT, auto, mid-cap, small cap and Financial Index lost between 2-3%. Sensex plunged by 1539 points or 2.5% to end at 59,464. While Nifty closed at 17,466 lower by 478 points or 2.70% against the previous week close.
Next week will be important as US Housing and retail sales data would be in focus along with European countries CPI and GDP data. On the domestic front, GDP data and Manufacturing data will be announced next week. Next week will see reports from other US retailers such as Target and Macy’s, which should shed more light on the state of consumer spending during the all-important holiday sales quarter. Expect weakness to continue in the domestic indices on account of sharp decline across the global markets this week. The US market slipped 3% this week and Europe and Asian markets fell 2-4% as concern of higher than expected US Inflation to negatively impact the market. Disappointing forecasts from retail giants Walmart and Home Depot (HD) dented the sentiment further.
Higher-than-expected inflation data spurred worries that the Federal Reserve will have to tighten policy even more aggressively than previously anticipated. PCE (Personal Consumption) increased 0.6% in January from the month before, the most since June. Consumer spending, meanwhile, rose the most since 2021. Recent US data boosted expectations that the Fed will keep rates higher for longer to fight inflation and cool the labor market. US Fed minutes of meeting statement highlighted that the rate hike will continue till inflation levels come down to 2% levels. Market hopes that the US Fed is likely to take three more rate hikes more than earlier expected.
Back home, RBI minutes of the meeting stated an similar stance to that of the US Fed statement but slightly dovish. RBI governor indicated one more hike or 25 bps interest rate hike on expectation of gradual fall in domestic inflation. Government supplies, food grain and hopes for a good monsoon to help adequate kharif crop production to cool down inflation level. On the other hand, continued FIIs selling, rising fall in advance decline ratio and low march roll over indicate weakness in the domestic market. Indian markets have underperformed against the global peers. Domestic market declined 3% on a YTD basis but most of the global equity gained 2-8% in the same period.
Technically, Nifty has formed a bearish candle on the weekly scale and it has been forming lower high lower lows since the last 6 sessions indicating weakness. Now as long as we are trading below 17,620, we can expect levels of 17,350-17,200. Resistance is placed at 17,620-17,777.
Stock recommendations
ITC
CMP: Rs 385 | SL: Rs 377 | TARGET: Rs 400
ITC is holding well in spite of market sell off and is on the verge of range breakout above 389 zones. It has formed a bullish candle on the daily chart and declines are being bought into. It is holding above key moving averages and supports are gradually shifting higher. RSI on the daily, weekly and monthly scale are placed in the positive zone which indicates strength in the counter. Considering the current chart structure, we advise traders to buy the stock for an up move towards 400 with stop loss of 377.
NTPC
CMP: Rs 171 | SL: Rs 167 | TARGET: Rs 180
NTPC has given a breakout of the triangle pattern on the daily scale which has bullish implications. It has formed a bullish candle at the breakout which indicates strength in the counter. There is momentum across the power stocks which will support the up move. Considering the current chart structure, we advise traders to buy the stock for an up move towards 180 with stop loss of 167.
(Rahul Shah is the Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution at Motilal Oswal Financial Services. The views expressed are author’s own.)