Dalal Street will first react to Reliance Industries’ strong operational results in Q3 with a robust revival in O2C and Retail segments, and a steady growth in Digital Services business. Also, Ultratech posted over two-fold jump in consolidated net profit to Rs 15,845.8 million in the December quarter.
We however recommend to approach the trading week with caution on backdrop of a negative close at Wall Street in last week’s trade. Caution also likely to prevail as FIIs net sold on Friday that raises questions about sustainability of the flow in the near term.
Now, commanding major attention will 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.
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.
Long story short: Focus mostly on long term. The remaining 3-months of Financial Year 2020-2021 promises to be a challenging.
Bottom-line: For the stocks markets to move up remain buoyant -the need of the hour is more fiscal stimulus.
Commanding attention at our stock markets will also be the two big catalysts:
1. Q3 earnings.
2. 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
Q3 Earnings to trickle in this week:
• Monday: KOTAKBANK, LARSEN, CAN FIN HOMES.
• Wednesday: EMAMI, INDIACEM, PNB HOUSING, CANARA BANK, HINDUSTAN UNILEVER, AXISBANK, MARICO, ICICIPRULI, BANKBARODA, MCDOWELL
• Thursday: EQUITAS BANK, TVSMOTOR, COFORGE, TATACOFFEE, GRANULES, RBLBANK, CUMMINSIND, LUPIN, INDIGO, MARUTI, TATACHEM, KPITTECH, SRTRANSFIN, PIDILITE, ENGINERSIN, COLPAL, UNITED BREWERIES, OFSS.
• Friday: DR. LAL PATH LABS, IOC, BLUESTAR, UPL, JSWENERGY, GESHIP, EXIDE, DRREDDYS, UNIONBANK, TATAMOTORS, VEDL, WOCKPHARMA, CHOLAFIN, SAIL, DABUR, DISHTV, CIPLA, SUNPHARMA, JUSTDIAL, LICHOUSING, INDUSINDBANK.
IPO Note:
Kitchen appliances maker Stove Kraft will open its Rs 4,130 million maiden public issue for subscription on January 25 and the same will close on January 28. The price band for the offer has been fixed at Rs 384-385 per share. The Rs 11,540 million initial public offer of Home First Finance Company India, an affordable housing finance company, will remain open for one more day till January 25. The issue was opened on January 21, with a price band of Rs 517-518 per share.
FOMC Meet: All anxious eyes will be on the 27th January Federal Open Market Committee meet. This is the first time after the formation of new government under the Democratic party's Joe Biden who sworn in as the 46th US President last week.
Consensus is that the Fed will leave monetary policy unchanged on Wednesday with the Fed funds target rate range staying at 0-0.25% with the Quantitative Easing program maintained at USD 80 billion of Treasuries and USD 40 billion of Mortgage-Backed Securities. That said, it will be interesting to see how the Fed interprets the economic outlook.
Technically speaking, from a chartist standpoint, all bullish eyes will be on if the benchmark can close above the psychological 50,000 mark on Sensex. Despite last two day's drop, the sequence of higher high/lows is intact on all-time frames.
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 15,000. 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 13,800. Well, the said data indicates a wide trading range between 13,800 and 14,600 levels.
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 stop near nifty all times high.
Amongst momentum stocks looking bright on any corrective declines are: COROMANDEL INTERNATIONAL (CRIN), MINDTREE, RELIANCE INDUSTRIES, JB CHEMICAL, INFOSYS, HCL TECH, TCS, WIPRO, NIPPON LIFE INDIA ASSET MANAGEMENT, SIEMENS and LUPIN.
Meanwhile, we are negative on stocks like: INDUSIND BANK, LIC HOUSING FINANCE, PVR, INDIGO, MOTHERSON SUMI, ZEE ENTERTAINMENT and EQUITAS.
Before we end, our most preferred pair strategies:
• Pair Strategy: Long HEROMOTO CORP and Short TATA MOTORS.
• Pair Strategy: Long BANK OF BARODA and Short RBL BANK.
• Pair Strategy: Long RATNAMANI METALS and Short VEDANTA.
(By Prashanth Tapse, AVP Research Head, Mehta Equities)