FII selling hampering domestic participation in global rally; buy these stocks to pocket short-term gains

FII selling hampering domestic participation in global rally; buy these stocks to pocket short-term gains

By Rahul Shah

Sensex zoomed 909 points or 1.52 per cent to settle at 60,842 while Nifty advanced 250 points or 1.40 per cent to end at 17,854 on Friday. Good quarterly results announced by PSU Banks and growth oriented Union Budget announced by FM boosted market sentiment. Moreover, US Fed hiked interest rate by 25bps in line with expectation on optimism that the rate hike cycle may be nearing its end after global central banks hinted at inflation easing. In Europe, BoE and ECB hiked interest rate by 50bps, in line with expectation.

The week-long rout in Adani Group stocks persisted, erasing $100 billion in market value as of Thursday as they extended decline after the group decided to call off its follow-on public offering (FPO), which was fully subscribed. The stocks have been facing steep losses since the Hindenburg report on January 24, which raised concerns over the group’s financials which the Group dismissed as ‘baseless’. Banking stocks recorded smart gained and Nifty PSU Bank Index climbed up by 3% against the previous week close. Good quarterly results by PSU and Private bank lifted banking stocks. IT stocks continued their northbound journey after impressive quarterly results announced by most of the IT players. Nifty Pharma index slipped 3% after Divi’s Lab announced poor quarterly results. Metal Index nosedived 8% this week on account of weak global demand. FMCG  Index surged over 3% on expectation of improve demand in the rural sectors after the government announced various scheme to boost in rural growth.Next week will be important in the domestic market on account of RBI credit policy to be announced on 8 February. It is expected that the RBI will hike interest rate by 25bps while RBI commentary will be important to understand their future course of action. This week, US Fed hiked interest rate by 25bps but Fed recognizes that the pace of inflation has cooled — a signal that it could be nearing the end of its rate increases. Both US 10-Year Bond and Dollar Index fell to 7-month low after US Fed statement. In the Union Budget, government painted a strong growth oriented budget to push infra, energy and hike the capital expenditure (capex) outlay for 2023-24 by 33 per cent to Rs 10 trillion to boost rural as well as urban sector.It is fact that the Indian markets not yet participated in the global markets rally due to continued FIIs selling in Indian equity. FIIs were net sellers over Rs 40,000 cr during the month of January, highest since June 2022. On the other hand, China markets climbed up by 60% from the September low while both US and European markets surged to 5-month and 8-month high respectively. Market expectation that the US Fed rate hiking cycle could be nearing a close, China’s economic reopening and lower gas prices caused by mild winter weather have added more fuel to the rally in the global markets.

Stock RecommendationApollo TyresCMP: Rs 330 | SL: Rs 315 | Target: Rs 365

Apollo Tyres has retested the breakout on the weekly scale and it has formed a bullish candle which indicates strength. On the monthly scale the stock is forming higher highs since last 3 months indicating uptrend. RSI oscillator is positively placed which will support the move towards higher levels. Looking at the overall price structure, we are expecting the stock to inch higher towards 365 zones. Hence, we advise traders to buy the stock with a stop-loss of 315.

TCSCMP: Rs 3286 | SL: Rs 3430 | Target: Rs 3600

TCS has given trend line breakout on daily scale and holding well above the same. It is forming higher highs from past five weeks and supports are gradually shifting higher. Buying is visible across IT space and small follow up can take it to higher territories. 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 3600 with stop loss of 3430.

(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.)