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| Edited By: Anuj Shah |Source: DNA |Updated: Jul 31, 2018, 07:15 AM IST
The Indian equity market continued to scale new all-time highs on back of strong June quarter earnings. Last week, the measures and the cut in taxes announced by the GST council also helped boost sentiments and pushed the index to new highs. The Nifty 50 index conquered the 11,250-mark swiftly and managed to close well above that level.
No bad news is also good news. Lack of negative news flow from global markets helped sentiments in the Indian market that witnessed renewed buying interest on account of good quarterly results from India Inc. The results season has kicked off well, with large private banks and FMCG companies announcing inline results. However, the surprise pack has been the cement sector, which has shown good growth in last quarter and raised hopes of an economic uptake. Similarly, corporate facing banks have reported steady asset quality and maintained their net interest margins, showing recovery in the broader economy. Encouraging results from quality mid-cap companies has also been comforting for the market.
We continue to believe that this market is a buy on dip market and our strategy has paid us well in the last few weeks. Going ahead, we continue to believe that one should buy on dips and keep booking regular profits. Smart money has been chasing the top 10-15 quality names in spite higher valuations. Now we are seeing interest moving to the select large names that have been beaten down 30-50% in the last three to four months and quality midcaps. The risk reward is in favour of those names where there is visibility of earnings and good corporate governance.
While we have seen continuous outflow of funds by Foreign Institutional Investors /Foreign Portfolio Investors since the beginning of 2018, the outflow has seen slowing down in the last couple of trading sessions, whereas the inflow of domestic money in Mutual Funds continues to remain strong. Stable oil prices and currency will also provide headroom for our market to inch higher and make new highs. There are some signs of relief between US and EU with regards to trade war. We must watch these developments closely.
Meanwhile this week all eyes will remain on the Reserve Bank of India, which will announce its monetary policy on August 1, 2018. With inflation inching higher, everyone will watch RBI and its stance on interest rates. However, with crude oil prices correcting and expected to remain steady with downward bias, we feel RBI will wait before they go in for an interest rate hike.
As a trader one should buy stocks that are oversold and beaten down, where chances of short covering are high. New stocks and sectors are now participating in the rally and this will take the market to further highs. We believe that the rally or the short covering in mid-caps will continue and the speed of recovery will be very fast. Financials, metals, PSU basket and quality mid-cap should do well over the next few weeks. We expect Nifty 50 index to trade in range of 10,950-11,550 and any dip should be used to enter the market.
The writer is head, Privilege Client Group, Reliance Securities
