Metals, real estate sector a good investment opportunity, says Umesh Mehta of Samco Group

Market Outlook
Umesh Mehta

Umesh Mehta

Umesh Mehta, who is the head of research at Samco Group, says metal sector will continue to be in a good space as commodity prices rise.

Mehta, who has 20 years of experience in the capital market, sees tailwinds for the real estate and says the push towards productive spending would lift the sector hit hard by the lockdown. In an interview to Moneycontrol’s Kshitij Anand, Mehta says the market will see fresh bouts of volatility in the run-up to the Budget and mid and smallcaps will likely trade in a narrow range. Edited excerpts:

Q) The Nifty surged to a new high but we got a hint of profit-taking as the index inched towards 15,000. How do you view the previous week?

A) This week has been rather jittery for the Nifty as the price refuses to cross these benchmark levels. Top IT players delivered a phenomenal performance which kept the beat going in the first half but by the end, all the positives were already factored in, hence there was a mild red candle.

Broadly, profit-booking remained the theme across broader indices, which resulted in a see-saw week.

Another barrier is the fact that for both the Nifty and the Sensex 15,000 and 50,000, respectively, are strong psychological levels and given the overbought nature in most stocks, profit-booking was expected.

Volatility will increase as the hype and expectations from the Budget rise, which could pose for a choppy market in the coming weeks too.

Q) We are just two weeks away from Budget 2021, any pre-Budget picks that investors can look at?

A) With the Budget approaching, markets have started getting a little cautious as is visible from the red candles the past couple of days.

At current price points, market participants may look for trading bets rather than invest for the long haul. Medium-term investment opportunities are still available in pockets like metals, commodities, and cyclical, though they have turned risky.

With expectations of a fiscal boost, investors can also keep an eye on infra stocks which can benefit from beneficial spending policies from the government.

Q) How are markets likely to move in the coming week, any important levels to track? Can the Sensex hit 50,000 and the Nifty 15,000 ahead of the Budget?

A) While the Nifty managed to close the week on a slightly positive note, it seems difficult to maintain the velocity without a correction.

Markets will need a convincing reason or positive news to breach through the key benchmark levels as they are currently trading in a narrow trading range and have formed a bearish Shooting Star candlestick pattern on the weekly chart.

Therefore, a short-term dip or weakness in the near term is expected. A break below 14,430 levels can trigger a profit-booking move in the Nifty.

Immediate support and resistance in the short term appear to be at 14,430 and 14,640 levels, respectively, with breaks on either side giving a short-term directional move.

Q) Small and midcaps witnessed some profit-taking. Can this accelerate as we move closer to the event?

A) Like their larger-cap peers, small and midcaps also saw profit booking as markets has risen too soon too fast. As the big day arrives, investors might be more willing to watch the markets from the sidelines since most of these companies have seen a strong run-up and will need a stronger trigger to fuel their rally further. Until then, small and midcaps will trend in a narrow range.

Q) Your three-five trading ideas for the next three-four weeks?

A) With rising metal and commodity prices, metals continue to be a good space to be in going ahead. With the result season just having started, investors will keep an eye on expectations and if the Budget stands to benefit any of the stocks in any manner.

Tailwinds seen in the real estate sector and push towards productive spending could also spearhead this sector going forward.

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