Privatisation buzz fuelling rally in PSU bank and energy space, says Rajeev Srivastava of Reliance Securities

Market Outlook

Rajeev Srivastava, Chief Business Officer at Reliance Securities, expects markets to be volatile as the expiry week begins. A stronger dollar will pressure emerging markets, which can the market texture towards sell-on-rallies

Midcaps continue to perform well, especially the PSU baskets as talk of privatisation of banks gain momentum and PSU energy stocks are doing well on expectations of natural gas being brought under the GST regime, Srivastava says in an interview to Moneycontrol’s Kshitij Anand. Edited excerpts:

Q) It was a week of consolidation where the Nifty broke below crucial support levels. What led to the price action on D-Street?

A) The Nifty50 scaled to a new all-time high at 15,431 during the week and witnessed profit booking in the index pivotal over the past few days.

Equities snapped their gains on the back of a rise in treasury yields at a one-year high and higher valuations weighed on the markets. The sharp jump in the crude oil prices also led to some profit-booking.

Q) The coming week will also see the impact of the monthly expiry. What is your outlook on markets and important levels which one should track? What is the range that you see for expiry?

A) We expect the market to be volatile due to rollover movements in individual sectors and stocks with respect to derivatives expiry this week.

On the higher side, the monthly resistance is placed at 15,300 levels. We expect a bounce from the lower range of 14,680-14,730 as being the previous top and weekly support levels.

Q) Do you think the bulls are losing their grip on D-Street? Has the market texture turned towards sell-on-rallies from buy-on-dips?

A) The dollar index has stopped declining and a breakout above 92 levels could put pressure on the emerging market space, which can change the market texture towards sell-on-rallies.

We believe this correction will offer an opportunity to add individual stocks and sectors for the long term. The third-quarter results have seen earnings upgrade in many sectors, paving the way for higher valuations.

Q) What is driving PSU stocks as well as PSU banking?

A) The broader strong outperformance continues in midcaps, especially the PSU baskets on the back of positive news flow of privatisation of PSU banks and PSU energy basket on expectations of bringing natural gas under the GST regime.

The disinvestment meeting, expected this week, also led to some momentum in stocks like BPCL, BEML and Container Corporation.

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