Rising oil prices, strong dollar keep traders on the edge: Sacchitanand Uttekar of Tradebulls Securities

Sacchitanand Uttekar, DVP–Technical (Equity), Tradebulls Securities, says Foreign institutional investors (FIIs), who have been net sellers in the cash segment in July, so far, are still sceptical and are closely watching markets trends and new coronavirus strains in other emerging economies. DII seems to have more confidence in Indian shares and the economy.

In an interview to Moneycontrol’s Kshitij Anand, Uttekar says any risk-off owing to concerns over potential interest rate hikes is likely to impact mid and small-caps more in the near future, so one has to be selective in stock-picking. Edited excerpts:

A volatile week for India markets as the Nifty slipped below 15,800. What led to the price action?

Asian stocks tumbled during the week on account of increasing cases of delta variants within their respective economies, which also triggered a corrective action in Indian equities in the final leg of the week.

Rising oil prices with the strengthening dollar have kept traders across the globe on the edge. Expiry day related action ensured that despite a fresh life high closing a day prior, the index retraced itself back to its five-week EMA (exponential moving average) support zone placed around 15,670, as the week managed its close a shade above it.

After the recent selloff where do you see markets this week? Which are the important levels to track?

The recent rebound from the 15,900-mark is no surprise as the index is expected to remain more consolidative within the range of 16,040-15,450 until a decisive breakout is witnessed on the weekly scale.

On the daily scale, the index is trading near the pitchfork tool levels, with a displayed range of 15,450-16,040 and the midpoint is now placed at 15,860.

Options data, too, indicates strong bounds been placed at 16,000-15,500 for the month of July, where the highest CE & PE OI congestion stands firm.

As far as key trend strength indicators are concerned they are yet to report an overbought reading, and hence the declines within the ongoing consolidative range are beneficial for fresh long additions.

Small and midcaps outperformed the benchmark indices. What is leading to the price action and will the momentum sustain if the tide reverses (US Fed minutes)?

Mid-week session ahead of the weekly expiry changed the equation for mid and smallcap stocks again as the Nifty 50 witnessed a marginal corrective move within the ongoing consolidation, while Nifty midcap100 and smallcap index witnessed some relative outperformance.

Midcap and smallcap indices have been firm, and under the control of bulls since the last week, largely supported by healthy earnings, improved sentiments, benign liquidity and low cost of capital.

The US Fed minutes have shown that most of the policymakers are of the view that the economy has recovered and are preparing a timeline for a reduction in asset purchasing.

We believe any risk-off owing to concerns over potential interest rate hikes may impact midcaps and small caps more in the near future, and hence, one needs to be selective while choosing the right industry or stock which has been trending due to its own business strength and foreseeable future during this unlock mode.

Foreign institutional investors (FIIs) have been net sellers in the cash segment in July, so far. What has spooked them and it seems that much of the rally has been led by Domestic Institutional Investors (DIIs) and retail investors?

Clearly, in the last 30 days, DIIs have been dominating the cash segments as they registered a net purchase provisional figure of Rs 9,308 crore against Rs 1,486 crore by FIIs.

DIIs seem to be more clear, and confident when it comes to the unlock moods in the Indian equities and economy as a whole based on the on-ground developments.

FIIs are still sceptical and are relying on a bird’s eye view with context to the other emerging markets trends and developments pertaining to the various variants, etc.

The much-talked-about Zomato IPO will open in the coming week. What are your views and can it give a good 50 percent kind of pop on the listing day?

No prizes for guessing it, an exotic company at an expensive offering when it comes to its profitability performance so far. The timing could be right as the markets are flooded with liquidity and a valuation discovery could be set in the hands of the bidders.

The grey market premiums displayed are suggesting some optimism on the D day but a 50 percent pop looks too optimistic.

We are experiencing selloff on every rise towards 16,000. Has the market turned from buy-on-dips to sell-on-rise?

The Nifty is locked in a trading range of 16,040-15,450 as indicated by the pitchfork tool on its daily scale. The Hammer formation low on June 18 holds the key for a revision in the stance, as the bullish structure still remains valid, with no signs of a lower top lower bottom sequence nor a definite reversal candlestick formation even on its daily or weekly scales.

Even if we look at the key oscillators, and trend strength indicators they are yet to quote above the overbought thresholds, which make the dips lucrative for buying.

Sectorally, buying was seen in realty and banking stocks. What led to the price action?

The banking sector has recorded the highest profit in FY21 when the economy was battered down with the effects of the pandemic. The single biggest reason for the public sector banks to post such Rs 57,832-crore turnaround was the end of their legacy bad loan problem.

Aside from profits, many of the state-owned banks have been shortlisted for privatisation. All these factors have been key contributors in shaping up the rally in banking sector stocks, which will continue to witness strength during the current week as well.

The realty sector, too, was one of the top performers as institutional investors deployed over $ 1.35 billion into the Indian real estate market led by the commercial property segment during the quarter ended June, representing a nine-fold on-year increase.

Warren Buffett’s global residential real estate brokerage has also forayed into the Indian property market this week, which helped the sentiments to lift further.

India is at the start of a new housing cycle after a seven-year downturn, as global head of equities at Jefferies, Chris Wood, also allocated 17 percent of the newly launched Indian portfolio to real estate.

FPIs still continue their investing flows in realty stocks despite the decline witnessed on the final sessions of the week.

Your top 3-5 trading ideas for the next 3-4 weeks?

Here is a list of top trading ideas:

L&T: Buy up to Rs 1470| LTP: 1499| Stop Loss: Rs 1420| Target: Rs 1640| Upside 9%

Prices are trending close to their lower bound of the ongoing Rising Channel formation on the daily scale. Most of the trend strength indicators have flattened out, ruling out any further corrective action from hereon.

With the upper-end of the channel been placed around 1,640, the setup provides a healthy reward to risk opportunity for folio longs as well. Trading longs could be maintained with a stop below 1,420.

Lupin: Buy above Rs 1165| LTP: Rs 1147| Stop Loss: Rs 1140| Target: Rs 1240| Upside 8%

Lupin is expected to continue its secular up move. The recent pullback seems arrested around the 20-week EMA zone as the stock witnessed multiple reversal candlestick formations on its subsequent daily scale around the support zone.

A sustained close above Rs 1,165 from hereon would confirm the triple bottom formation on its daily scale which can lead to a strong rally towards 1,240.

Schneider Electric: Buy| LTP: Rs 128| Stop Loss: Rs 120| Target: Rs 165| Upside 28%

Schneider witnessed a breakout from a rounding bottom formation on May 25 near 120 level. Post breakout, the stock witnessed a quick rally towards 141.

The recent pullback and rebound from its breakout zone provide yet another opportunity for fresh longs. The rounding bottom pattern indicates a price target up to 165 which could be achieved under 6 weeks from hereon as per the patterns time characteristics.

Tinplate: Buy| LTP: Rs 223| Stop Loss: Rs 205| Target: Rs 265| Upside 18%

Positive sector outlook and breakout from a fresh bullish pennant formation on its weekly scale. Its daily ADX has jumped to 29 last week with its price trending well above its 5 WEMA zone around 218.

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