Indian Stock Market Weekly Outlook by Nirali Shah, SAMCO Research

Indian Stock Market Weekly Outlook by Nirali Shah, SAMCO Research

Indian markets witnessed a volatile week and weakness in stocks markets across the globe led to decline in Indian markets as well. Markets are looking negative at the moment and we can expect markets to take support from lower levels in the upcoming week. However, there are a lot of factors that can decide the direction of the market next week. A research note by SAMCO Research follows....

The first week of March started on a high note with India's Q3 GDP growth returning to positive territory. India is one of the few major economies which sailed out of a technical recession after two successive quarters of negative GDP growth. All credit for this recovery goes to the Government's expenditure, low interest rates by the RBI which led to the reopening of the economy and aided domestic consumption. Market participants especially FPIs validated GDP figures and managed to keep their exuberance high, ascending equity prices higher. Another data point which cheered the street was the GST revenue which crossed Rs. 1 lakh crore for the fifth time in a row. All these stats are pointing towards the fact that this quick rebound in economic activity especially in the industrial manufacturing and infrastructure front is causing a lot of optimism in the Indian markets.

With equities again inching towards their previous highs, the argument of growth vs. value has been reignited. This disagreement was stirred by movement of MSCI World Value Index which rose 4.5% in contrast to a mere 0.3% gain on the MSCI World Growth Index in February. In India too, commodity stocks have hardly ever beaten benchmark indices for a sustained period of time, making them a good fit as value plays. Resembling MSCI index, even a perpetual laggard such as the Nifty Commodities index managed to outperform the benchmark index during the week. Hence, value stocks have picked up momentum since sometime now and going ahead too, the value theme is expected to play out as growth picks up in the second half of 2021. Faster rollout of vaccines, strong Q4 numbers from the low base of last year and a resumption of urban India will all add to the value party. Hence, investors should keep looking for value buys for investment.

Event of the week

Auto sales numbers for Feb’21 have been fairly positive largely fueled by recovery in the urban market and strong traction in demand. Major passenger vehicle makers along with two-wheelers posted impressive double-digit YoY growth numbers. Furthermore, tractor sales have yet again managed to clock robust 20%+ YoY growth prompting sustained resilient rural recovery. This is one sector where the exorbitant rise in fuel prices haven't had any significant impact yet. But if the escalation continues then the sentiment of buyers will be impacted. Hence, it would be imperative to pay heed to the auto numbers in the upcoming months to understand the underlying impact of fuel prices and future trajectory.

Technical Outlook

Nifty50 index closed the week on a positive note on the weekly chart candle however markets witnessed a choppy week of trading with a negative market breadth. The index closed positive only because of some heavyweight movers like Reliance, TCS and Infy in the week, otherwise it is losing momentum on the upside. Other global indices such as S&P500, Kospi, Taiex also remained weak. On the upside, Nifty is likely to remain capped at immediate resistance of 15,270 whereas on the downside immediate support is now placed at 14,630. We suggest traders maintain a neutral outlook.

Expectations for the week

As there are no major events in India in the coming week, all eyes would be on the US events for triggers. Any unanticipated outcome of 3/10/30 year treasury auction arranged next week in the US would directly impact bond yields and in-turn equity valuation. The IPO season in India is going on in full swing and March is expected to flood the gates of D-Street with more primary issues signifying exuberance of liquidity. Value and cyclical stocks have gained traction in the past few months and investors should continue to keep their exposure towards these value and cyclical stocks. Since gold has retraced from its highs, investors can allocate a small portion of their portfolio towards gold for adequate diversification. Nifty50 closed the week at 14,938.10, up by 2.81%.