Dalal Street likely to start the week on a negative note on backdrop of a weak closing at Wall Street in last week's trade, according to Prashanth Tapse, AVP Research, Mehta Equities.
U.S. financial markets will be closed on Monday Jan. 18 for the Martin Luther King holiday.
"All investors' eyes will be glued on Capitol Hill this week with the inauguration of Joe Biden as the 46th President of the United States. The street will spy with one eye if the speech addresses the program of the new US administration which is likely to implement over the next four years - from trade policy with China, as well as domestic policy when it comes to investment in energy, renewables and other infrastructure, where Federal spending has been rather lacking in recent years," he added.
Last week, the President-elect outlined a new fiscal aid program of USD 1.9trn worth of support in a variety of areas, specifically in the form of USD 350 billion in state aid, an increase in the minimum wage, and a further USD 1,400 in stimulus payments to US workers.
The street suspects, worries over the potential for tax increases in the future could limit upside on stock markets across globe.
Prashanth Tapse opined, "Volatility likely to be the hallmark amidst ongoing overly bullish sentiment, lofty valuations; rising inflation, crude oil, the U.S. & U.K. suffering its worst days for Covid-19 cases, deaths, and hospitalizations, and also due to fears of emergence of new strain of COVID-19 virus across globe."
Deaths in the U.S. from the coronavirus were at 395,882, according to Johns Hopkins University. Meanwhile, according to the Union Health Ministry data, India's Covid-19 caseload climbed to 10,558,710 on Sunday with 15,144 fresh infections while recoveries surged to 10,196,885, pushing the national recovery rate to 96.58%, India continues to be second-most-affected globally, and ranks 13th among worst-wit nations by active cases.
The first Covid-19 vaccine shots in India were given on Saturday to more than 190,000 frontline healthcare and sanitary workers as Prime Minister Narendra Modi rolled out the world's largest inoculation drive against the pandemic that has caused 152,311 deaths and upended millions of lives in the country, he said.
Commanding attention will also be the upcoming Union Budget 2021 to be presented on 1st Feb 2021. Finance Minister Nirmala Sitharaman has said that the Union Budget for 2021-22 would have emphasis on sustaining high public expenditure on infrastructure to revive the economy which contracted in the first two quarters of the current financial year, he said.
"The gyan mantra is to stay nimble as in near term volatility will reign supreme as stock markets across globe are fundamentally divorced from the real economy. Naturally, this perilous backdrop makes investors suspicious amidst key disparity ever between growth and value strategies," Tapse said. "Hence, the gyan mantra is to focus mostly on long term. The remaining 3-months of Financial Year 2020-2021 promises to be a challenging."
"For the stock markets to move up remain buoyant - the need of the hour is more fiscal stimulus," opined Prashanth Tapse.
Commanding attention at our stock markets will also be the two big catalysts- Q3 earnings and the Budget expectations ahead of Union Budget 2021. The street is quite hopeful that the Budget will be a good starting point for deeper banking reforms, Tapse said.
"Technically speaking, from a chartist standpoint, all bullish eyes will be on the much awaited psychological 50,000 mark. The sequence of higher high/lows is intact on all-time frames. On the downside, the supports are placed at 47,901 and then at 46,750 mark. Only a move below 44,923 will trigger waterfall of selling," Prashanth Tapse said.
"The options data for January Series suggests Nifty is likely to be in a broader trading range of 14,000-14,600 as maximum Call OI is at 14,500. Maximum Put open interest stands at 14,000 levels. Call writing was seen at 14,500 and then at 14,600 strike price, while there was meaningful Put writing at 14,200. Well, the said data indicates a wide trading range between 14,000 and 14,800 levels," he added.
"For perma-bull investors, the gyan mantra is to establish long positions on any sharp corrective declines while aggressive traders can look to sell with strict stops above 50,001 mark."
"Preferred trade for the week:Sensex (49,035): Sell at CMP, targeting 47,901/46,750 mark followed by aggressive interweek targets at 44,923 mark. Strict stop at 50,251," he said.
Amongst momentum stocks looking bright on any corrective declines, he recommends, "COROMANDEL INTERNATIONAL (CRIN), TINPLATE, SUMITOMO CHEM, JB CHEMICAL, INFOSYS, HCL TECH, TCS, WIPRO, NIPPON LIFE INDIA ASSET MANAGEMENT, ALEMBIC PHARMA, POLY MEDICURE, TATA ELXSI, IDEA CELLULAR, SIEMENS and LUPIN & SUN PHARMA." Meanwhile, APOLLO TYRES, LIC HOUSING FINANCE, PVR, INDIGO, MOTHERSON SUMI and EQUITAS looks negative, he added.
Most preferred pair strategies include- Long BOSCH and Short MOTHERSON SUMI, Long BANK OF BARODA and Short RBL BANK and Long APLL and Short GLENMARK, stated Prashanth Tapse.
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