Mumbai, November 21: Markets have been consolidating near its highs for some time now. Post the Q2 results season, the focus has now shifted towards government policy action as well as global developments. There has been a sharp recovery in the telecom stocks including Reliance on the back of the price hike announced as well as hope of some relief, stimulus for the sector. Vinod Nair, Head of Research, Geojit Financial Services Ltd, said that government’s plan to divest PSU stake will help maintain the fiscal deficit target in check.
Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Private Ltd, said, “Market interest in select PSUs increased post talks of divestment in Union cabinet meeting. Going forward, while the Nifty upside remains limited due to fair valuations, stock specific action is likely to continue.”
Technically, Nifty formed a Doji Candle on daily scale which indicates indecisiveness at higher levels. But it managed to hold above previous day’s high throughout the session and formed higher highs - higher lows on second consecutive session. “The support for Nifty is now inching higher towards 11,900 and then 11,850 levels; while immediate hurdle remains intact at 12,100 – 12,150 zones,” Khemka said.
The government’s plan to divest PSU stake to help maintain the fiscal deficit target for the fiscal. On the other hand, fresh concerns emerged over the US-China trade war as US Senate passed legislation supporting Hong Kong protesters, drawing a rebuke from China and potentially complicating trade talks.
Santosh Meena, Senior Analyst, TradingBells said that most of the negative news is behind us and the market is looking ahead for a recovery in both domestic and global economy whereas activeness of government about economic reforms is a key catalyst for a current rally in the market along with global liquidity. “Lots of pain in the financial sector has passed and there is a hope of decent recovery as the NPA cycle has topped out and earning may see an uptick from here,” Meena said.
Talk about corporate earnings then there is a slowdown in top-line but margin expansion is visible where if growth recovers then we can see significant improvement in profitability.
Midcap and small cap sectors are showing signs of bottoming out and trying to come out a bear market where they may outperform, once the growth visibility will be there. Midcap and Small Cap indices may catch up momentum ahead of budget in February, Meena added.
Following is a sector-wise analysis:
The auto sector may not see V-shape recovery but there is a chance of U-shape recovery which also means the worst period in the auto sector is behind us as liquidity crunch is not big worry now and interest rates are coming down sharply.
The pharma sector is doing well as it has underperformed in the past four years and now there are some signs of earning recovery. Investors are looking value in this sector.
There is a frenzy move in telecom stocks as market is pricing in the worst scenario is behind us and tariff rates have bottomed out but there is always a regulatory overhang and there is always a risk of disruption due to technological changes. It is also capital intensive sector.