Stimulus measures will help Rupee pare losses; Rs 72/$ likely to lend support
The Indian rupee has fallen to its lowest level this year against the dollar on the back of weakness in domestic equity markets and new multi-year lows made by the Chinese Yuan, Ajit Mishra, Vice President Research, Religare Broking, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Another muted week for Indian markets weighed down by both global and domestic cues. The Nifty 50 had a touch and go moment with 10,862 which if broken would turn Nifty in the red for the year 2019. What is your outlook on markets for the coming week? Is it time to remain seller on rallies?
A) Though we may see some rebound or consolidation initially, the bias would largely remain on the negative side in the index.
In case of a rebound, the Nifty would face hurdle around 11,050 and 11,250 levels while 10,600-10,380 zone could act as a cushion.
We expect the volatility to remain high on the stock-specific front due to scheduled derivatives expiry of August month contracts in the coming week. Traders should maintain their focus more on stock selection and trade management.
Q) More than 500 stocks hit a fresh 52-week low on the BSE on Friday mostly from the small & midcap space. What should investors do if they hold any of them in their portfolio – exit the stock, buy on dips or stay put?
A) The continuous slide in many stocks can be attributed to poor earnings, lapses in corporate governance, payment defaults as well as overall bleak demand scenario which are creating the panic.
We recommend that investors should stick to stock-specific approach and buy only those stocks which have a good promoter track record, low leverage as well as healthy industry prospects.
Investors should strictly avoid stocks which have run into trouble owing to mounting debt, promoters’ pledge or several other company-specific issues.
At the same time, fresh investments at this juncture should be done in a staggered manner as markets are volatile and further correction cannot be ruled out.
Q) What is your call on the rupee which has already hit 8-month low? It is down by about 4.6% so far in August. Where is the currency headed in the near term?
A) The Indian rupee has fallen to its lowest level this year against the dollar on the back of weakness in domestic equity markets and new multi-year lows made by Chinese Yuan.
The local unit has performed worse than the Yuan as it has lost 4.6 percent in August on the back of foreign portfolio outflows from the equity markets.
Also, the strengthening US dollar, which is close to a three-week high, has been leading to weakness.
Though the rupee has fallen sharply over the last few days, the level of 72 will act as strong support for the rupee and we expect it to stage some recovery in the immediate short term towards 71.30 mark.
The government came out with reform measures that may underpin the local unit.
Q) Any big triggers which investors have to watch for the coming week?
A) Investors’ sentiments remain weak on the back of worries of an imminent slowdown across the globe. The upcoming events in domestic as well as global markets would provide some direction and stability in the near term.
Globally, the US Fed meet at Jackson Hole is an annual symposium of central bankers from around the world, to foster open discussion about important and current policy matters.
This event is much awaited by participants, as it would provide some clarity on the trend of US monetary policy, US-China trade talks and a stimulus measure for jittery financial markets.
On the domestic front, considering the current slowdown witnessed across sectors, the GDP growth for Q1FY20 is expected to be sluggish which would have a negative bearing on the Indian markets.
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