The gyan mantra is to stay bullish and be optimistic as we start a fresh week of trading as stealing limelight will be TCS’ net profit which rose 7.2% to Rs 8,701 crore for the quarter ended December 2020, backed by strong demand-led revenue growth. Consolidated revenue for the quarter increased 4.7 percent sequentially to Rs 42,015 crore, and the year-on-year increase was 5.4 percent for the quarter. TCS said it was the strongest third quarter growth in last nine years. Constant currency revenue growth at 4.1 percent QoQ (0.4 percent YoY) was ahead of streets' expectations.
The spectacular perfomace at TCS was despite the fact that over 96% of TCS employees continue to work from home. As on Friday's trade, the market cap of TCS rose by Rs 72,102.07 crore to Rs 11,70,875.36 crore, while Infosys added Rs 21,894.28 crore to reach Rs 5,58,772.73 crore m-cap.
Also, hopes for a brighter post-covid future likely to keep on supporting the risk-on theme at Dalal Street. Helping sentiments would be investors' assessement on prospects for more economic stimulus in the U.S following a weaker-than-expected U.S. jobs report. The U.S lost 140,000 jobs in December.
On the Covid -19 front, India will start the Covid vaccination drive on January 16 after the forthcoming festivals such as Lohri, Makar Sankranti, Pongal, Magh Bihu, giving priority to around 30 million healthcare and frontline workers.
Expect, celebration and cheer to continue, but that said, Dalal Street is seen facing difficult circumstances - primarily on backdrop of technical overbought conditions.
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.
That brings us to the one big question that’s on every investor's mind: With Donald Trump's presidency getting over this month, what changes is Joe Biden going to make to the U.S and his stand on the global economy?
Well, global stock markets performance from here to the end of March 2021'will be on what comes as a stimulus package from Washington. And with Biden becoming the 46th President of the world’s super economy, all hopes will be charged up for a fresh round of stimulus from Washington.
We believe the bull market at Dalal Street has more room to run and should continue to push the key benchmark indexes higher in the long term. But having said that the pathway for Dalal Street in the near term is likely to become more perilous. Hopefully, the bullish stand is maintained and this market continues to be infected with a several dose of optimism. At its December meeting, Federal Reserve Chair Jerome Powell had also stressed that gains cannot happen without further fiscal support from Congress and the U.S. Department of the Treasury. This, the Fed believes, will push the economy toward a faster and stronger recovery.
Powell also revealed that he is hopeful that the economy should perform strongly again sometime in 2021. He and other Fed participants also revised their economic outlooks to reflect a more positive outlook.
So, the remaining 3-months of Financial Year 2020-2021 promises to be a challenging. The recent USD 900 billion package is quite inadequate.
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
On the economy front:
> The Industrial Production and Manufacturing Production data for the month of November, along with CPI inflation for December will be released in the evening on January 12, while WPI inflation for December is due on January 14.
> The CPI inflation in November had fallen to 6.93 percent, compared to 7.61 percent in October, while industrial production increased by 3.6 percent in October, which continued growing for second straight month after six months of contraction.
> On Friday, the bank loan and deposit growth for fortnight ended January 1 and foreign exchange reserves for week ended January 8 will be released, while balance of trade data for December is also due on same day.
Q3 Earnings to trickle in this week:
GNA, ZICOM, CSL, HATHWAY, INDIAN BANK, KTK BANK, TATA ELXSI, INFOSYS, WIPRO, CESC, DEN, HFCL, RIIL, BIRLA MONEY, HCL TECH, L&T FINANCIAL, ONWARD TECH, PVR, SHOPPER STOP.
Bottom-line:
For the stocks markets to move up remain buoyant - the need of the hour is more fiscal stimulus. Technically speaking, from a chartist standpoint, Sensex now will aim 49,000 mark and then all bullish eye will be on the much await psychological 50,000 mark. The sequence of higher high/lows is intact on all-time frames.
Downside for the week likely to be well supported at 47,500-47,750 zone and then at 46,000 mark. Only a move below 44,923 will trigger waterfall of selling.
The options data for January Series suggests Nifty is likely to be in a broader trading range as maximum Call OI is at 14,500. Maximum Put open interest stands at 14,200 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 14,200 and 14,800 levels.
For perma-bull investors, the gyan mantra is to establish long positions on any corrective declines with strict stops below 46,001 mark.
Preferred trade for the week:
Sensex (48,782): Buy at CMP, targeting 49,001 mark followed by aggressive intermonth targets are at psychological 50,000 mark. Strict stop at 46,551.
Amongst momentum stocks looking bright on any corrective declines are: BANDHAN BANK, JM FINANCIAL, COAL INDIA, NMDC, COROMANDEL INTERNATIONAL (CRIN), TINPLATE, SUMITOMO CHEM, SPARC, WABAG, HDFC LIFE, JB CHEMICAL, INFOSYS, HCL TECH, TCS, WIPRO, NUCLEUS SOFTWARE EXPORTS, NIPPON LIFE INDIA ASSET MANAGEMENT, ALEMBIC PHARMA, SIS, FDC, POLY MEDICURE, TATA ELXSI, IDEA CELLULAR, SBI LIFE, SIEMENS and PETERONET.
Steel stocks could do remarkably well on backdrop of record high steel prices led by strong demand and tight global supply. SAIL & JSW STEEL is our preferred bet on the buy in this space. Meanwhile, we are negative on stocks like: APOLLO TYRES, ITC, and EQUITAS.
Most most preferred pair strategies:
• Pair Strategy: Long MARUTI and Short TATA MOTORS.
• Pair Strategy: Long BANDHAN BANK and Short PNB.
• Pair Strategy: Long NMDC and Short VEDANTA.
(By Prashanth Tapse, AVP Research, Mehta Equities on market outlook)
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