As we start a new week to trading, there are two big positive catalysts:
The much awaited good news came on the weekend from Washington was that the House passed President Biden's USD 1.9 trillion Covid-19 relief package - sending the legislation to the Senate as Democrats faced intraparty rifts over the future of a worker-pay increase.
Lawmakers are likely to alter the legislation before passing it in the Senate, meaning the House will then need to approve the amended bill before sending it to the president's desk. Democrats are racing to finish the package before March 14, when certain types of federal unemployment assistance are set to expire.
India Exits Recession with 0.4% Quarterly Growth:
The Indian economy has exited recession after two consecutive quarters of de-growth as the gross domestic product (GDP) expanded by 0.4 per cent in the three months ended December 2020 as against a contraction of 7.3 per cent in the September quarter. India is among the few major economies to post growth in the last quarter of 2020. For the full year, GDP is estimated to contract by 8 per cent in the financial year, the National Statistical Office (NSO) said in a press release.
The biggest concern for Dalal Street however is that India’s active caseload of Covid-19 continues to rise over past few days sparking fears of a fresh wave of the pandemic in the country.
Cabinet Secretary Rajiv Gauba on Saturday reviewed the situation on states reporting a high active COVID -19 case load and an increasing trend in new cases in the last week. India reported 16,488 new cases in the last 24 hours. "Maharashtra, Kerala, Punjab, Madhya Pradesh, Tamil Nadu, Gujarat, Karnataka and Haryana are displaying an upward trajectory in daily new cases. In the last two weeks, Kerala has shown the maximum decline in the number of active cases, from 63,847 on February 14 to 51,679, while Maharashtra has shown the highest rise, from 34,449 to 68,810," said the Ministry.
The big question: Will last week's panic at bourses continue?
The biggest negative catalyst from here on could be the higher bond yields which could spoil the party at global stock markets. In times like these, it makes lots of sense to keep low profile. Confirmation of strength only above Nifty's only above its intermediate high at 15,157 mark.
Remember that cash is a position and even if we see a rebound in near future. Going all in long is not advisable until we have closed in bullish territory and confirming to the upside the following day. Our chat of the day says, at the moment there are more of headwinds than tailwinds. This was a market which was seen rising despite all the negativities.
Establishing long positions advisable only if market breadth; indicating the overall health of the market stays positive for couple of days.
Please note, Nifty’s 200DMA at 12127 mark. The price action for Nifty is suggesting that we are likely to see a 13,501- 15,200 range in near term with negative bias.
Stay Light. Stay Nimble - that should continue to be the gyan mantra.
For aggressive traders however, the gyan mantra is to establish short positions on any excessive strength.
On the weekly, daily and intraday time-frames cracks are seen appearing.
On investors radar will be Foreign institutional investors (FIIs) activity at the bourses. The FIIs bought for the fifth straight month and have bought equities worth Rs 42,044.46 crore in February. On the contrary, domestic institutional investors (DIIs) sold equities worth 16,358.10 crore.
Last week, foreign institutional investors (FIIs) bought equities worth Rs 4,408.26 crore, while domestic institutional investors (DIIs) sold equities worth Rs 6,283.73 crore.
The options data for March Series suggests Nifty is likely to be in a broader trading range of 14,200-15,100 as maximum Call OI is at 15,000 followed by 15,500 strike price. Maximum Put open interest stands at 14000 levels followed by 14,500 levels. Call writing was seen at 15,000 and then at 15,500 strike price, while there was meaningful Put writing at 14,300 and then at 14,500 strike prices.
Commanding attention would be auto sales data for the month of February which will trickle in on Monday, 1st of March 2021. So auto stocks like, Tata Motors, Maruti Suzuki, Eicher Motors, Bajaj Auto, Ashok Leyland, M&M, Hero MotoCorp, TVS Motor Company and Escorts will be in action.
Economic Views:
On the economic front, Markit Manufacturing and Services PMI data for the month of February will released on Monday and Wednesday respectively.
India's manufacturing sector activity turned stronger further as factories continued to ramp-up production in response to rising sales and new export orders. The IHS Markit India Manufacturing Purchasing Managers' Index rose from 56.4 in December to 57.70 in January, while the Services PMI rose to 52.8 in January from 52.3 in previous month.
Foreign exchange reserves for the week ended February 26 will be released on Friday.
IPO Note:
MTAR Technologies, a Hyderabad-based precision engineering solutions company engaged in the manufacturing and development of mission critical precision components and critical assemblies catering to clean energy, nuclear and space and defence sectors, will open its around Rs 597-crore initial public offering for subscription on March 3. The same will close on March 5.
The price band for the issue has been fixed at Rs 574-575 per share. The IPO comprises a fresh issue of around Rs 124 crore and an offer for sale of around Rs 473 crore by promoters and investors.
Preferred trade for the week:
Nifty (14529): Sell between 14,827-14,901 zone, targeting 14,291 mark followed by aggressive intermonth targets at 14,000/13,597 mark. Strict stop at 15,257.
Amongst momentum stocks looking bright on any corrective declines are: TATA STEEL, HINDALCO, RATNAMANI METALS, IDFC FIRST BANK, CANARA BANK, NMDC, NTPC, PNB, JUBILANT FOODS, ICICI BANK.
Meanwhile, we are negative on stocks like: AXIS BANK, ASHOK LEYLAND, BHARAT FORGE, BOSCH, INDIGO, LIC HOUSING FINANCE, HAVELLS, PEL, SBI, ITC, EICHER MOTORS, RBL BANK, ZEE ENTERTAINMENT and EQUITAS.
Before we end, our most preferred pair strategies:
• Pair Strategy: Long BAJAJ AUTO and Short ASHOK LEYLAND.
• Pair Strategy: Long INDUSIND BANK and Short AXIS BANK.
• Pair Strategy: Long INFOSYS and Short TECH MAHINDRA.
(By Prashanth Tapse, AVP-Research Head, Mehta Equities)
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