Unlock theme to boost hard-hit sectors; hotels, airlines, retail may benefit: Nirali Shah of Samco Securities

Market Outlook

With a poor show from the macroeconomic end, investors will look for cues from the upcoming result season to position themselves going forward, Nirali Shah, Head of Equity Research, Samco Securities said in an interview with Moneycontrol’s Kshitij Anand. Edited excerpts:

Q) We hit a record high on Monday and since then Nifty50 was consolidating. It closed lower for the week. What led to the price action?

A) Indian markets had remained in red throughout the week despite the Rs 1.5 lakh crore package announced by our Finance Minister for the upliftment of distressed sectors.

But, investors failed to rejoice this stimulus package as shortly thereafter, twin impacts such as slower recovery in core sector data of 16% YoY in May vis-à-vis a 61% YoY in April and a PMI contraction for the first time in 11 months worried the bulls.

With a poor show from the macroeconomic end, investors will look for cues from the upcoming result season to position themselves going forward.

Q) Smallcap & midcap indices outperformed benchmark indices. What is fuelling optimism in the broader market?

A) Given the current low-interest-rate scenario and ongoing bull market, investors are rushing towards avenues that can generate the most returns.

Hence, one can see the increase in Demat accounts opened in the past year, the exuberance in IPO subscriptions, and the rush into mid and small caps.

Before the pandemic hit India, the broader indices were undergoing a time and price correction which made their timing and value all the more attractive back in 2020.

However, since then there has been a huge bout of liquidity towards the broader indices, proof being an 80% and 120% jump in Nifty Midcap50 and Smallcap50 indices compared to Nifty’s 53% over the past year.

Largecaps are more or less consistent, in the mature stage of the business cycle while mid and small caps are in the growth phase and hence when macros and industry tailwinds are in their favour, they tend to outperform the benchmark indices.

Q) Last 10 years’ data suggests that bulls dominated the price action on D-Street in at least 6 out of the last 10 years. What are your estimates for the month of July, and important levels, events which investors/traders should watch out for?

A) Mr Market was mostly range-bound in the month of June as it touched levels of 15,450 on the downside driven by volatility. Yet, the bulls were able to gain control and drove the overall trend.

Bulls are expected to continue the same momentum in July as well. In terms of important levels, Nifty 50 should be fine above the levels of 15,500 which remains crucial support for the bulls. On the upside 16,100 is a good resistance zone for July. Traders can initiate longs along with the support levels with sufficient stop loss.

Q) Sectorally, power and telecom indices led the fall in the week gone by. What led to the price action?

A) The power sector has been under the limelight driven by strong optimism as power companies look to set up green energy capacities over the long term. While these served as positive developments for the industry, the sector saw a strong upmove over the past couple of weeks.

Now, with the recent rally seeing some cooling off, traders mostly booked profits causing a pullback in the sector.

On the telecom front, Vodafone Idea reported disappointing results with losses of Rs. 7,000 cr. Along with this, the company has not been able to raise the much-required liquidity which has led to investors further doubting its going concern capability.

These developments did not fare well for the sector thereby pulling it down this week.

Q) Your 3-5 trading ideas for the short term?

A) As the economy continues to march forward that is in line with global indices, hard-hit sectors like hotels, airlines, retail may see some fresh buying on the back of the unlock theme.

With the Q1 result season commencing this month, there can be news-specific knee-jerk reactions in stocks based on expectations.

IT and Pharma stocks can witness traction and investors should continue to accumulate quality companies in the space on appropriate pullbacks.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.