By Rahul Shah
In the first week of year 2023, equity benchmark Index closed over 2-week low and selling pressure was seen across the board amid weakness in the global market along with sustained selling by FIIs. Sensex fell 940 pts or 1.54% during the week to close at below 60k at 59772, while the Nifty shed 246 pts or 1.35% to close at 17,829. Sensex declined 2by 1400 pts, while Bank Nifty by 1200 pts in the last three trading sessions. FIIs were net sellers of nearly Rs 14,000 crore in the last eleven trading sessions. Moreover, traders were caution ahead of quarterly results which will begin from this week. Mixed bag by domestic corporates’ pre-quarterly business update and the Hawkish stance by the Fed minutes meeting had a negative impact on the market.
Banking and Financial stocks recorded sharp decline after NBFC major Bajaj Finance announced lower than expected quarterly AUM growth. Back home, Nifty IT Index was the biggest sectoral loser last week, and fell over 2%. TCS, Infosys, HCL Tech, and Wipro will announce Q3 results this week. Nifty Banks, NBFC, Media, and Realty Index slipped 2% each. However, tyre and FMGC Index posted modest gains. Banking and NBFC stocks declined sharply while 10-year bond surged by 5 bps to 7.37%. Bajaj Finance slipped fell 9% in the last two trading sessions after the company announced lower-than-expected quarterly growth.
CPI inflation data, Q3 earnings to set market trend
This week will be important for domestic as well as global markets. US, Europe, and India CPI data will be in focus this week. More importantly, domestic quarterly earnings season will also begin which would act as a key driver to deciding trend in the equity market. Indian markets unperformed against the global markets this week due to mixed pre-corporate updates, aggressive selling by FIIs and weak global cues. Most of the large-cap tech players will announce Q3 results this week, and their future prospects’ commentary will be more important in the market. FIIs and DIIs flow will be an important part of the market trend. However, a positive factor is that the rally in the global market may support Indian bourses. Hope of the US Fed to cool down hike in interest rate decision in the next policy meeting, expectation of favorable union budget,FIIs return to Indian equity, expectation of good quarterly results, and fall in oil price would provide much-needed support to market sentiment.
Easing inflation may give room for Fed to change hawkish stance
However, global markets soared 2-6% last week. Sentiments were uplifted in European and US markets after the US wage gains slowed more than anticipated, providing the latest sign that inflation may be easing. US average hourly earnings MoM in December reported at 0.3% growth while expectation was 0.4%, 50% lower than the previous year’s growth of 0.6%. Average Hourly Earnings is the average amount employees make per hour in a given month. The Federal Reserve uses average hourly earnings as a key indicator of interest rate decisions on whether to raise or lower interest rates. Hope that the US Fed to comfort in the fact that real wage growth is decelerating faster than expected. US 10-Year bond fell by 10% to close 2-month low at 3.55% last week and Dollar Index fell from 105 to below 104, suggesting a modest ebbing in inflation pressures that could give the Federal Reserve room to potentially change its stance.
Nifty Outlook
Nifty technically has formed a Bearish candle on daily scale and has been making lower highs from the last three sessions. It formed a Bearish candle and an Inside Bar on weekly frame. Now, till it holds below 17950, weakness could be seen towards 17777 and 17650 zones whereas hurdles are placed at 17950 and 18081 zones.
Stocks to buy
HDFC LifeCMP: Rs 611 | SL: Rs 598 | Target: Rs 640
HDFC Life has given Cup and Handle breakout on daily chart and holding well above the same. It has negated lower top-lower bottom formation on weekly scale and supports are gradually shifting higher. Buying is visible across the insurance space with noticeable volumes. RSI on the daily and weekly scale is in the bullish zone which will take the prices higher. Considering the current chart structure, we advise traders to buy the stock for an up move towards Rs 640 with a stop loss of Rs 598.
Tata Consultancy Services (TCS)CMP: Rs 3,211 | SL: Rs 3,170 | Target: Rs 3,450
TCS has formed a strong base near the key retracement levels and it has given a breakout of the consolidation zone. RSI oscillator on the daily and weekly scale is placed in the positive zone which will support the up move. Considering the overall current chart structure, we advise traders to buy the stock for an up move towards Rs 3,450 with a stop loss of Rs 3,170.
(Rahul Shah is the Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. The views expressed are the author’s own. Please consult your financial advisor before investing)