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  • Devangshu Datta - Independent Technical Analyst and Market Expert

    Devangshu Datta

    Independent Technical Analyst and Market Expert

    DATE: July 22, 2015, 12:00 PM

    SUBJECT: Can the markets scale back to all-time highs?




    Hello and welcome to the webchat with Devangshu Datta

  • I


    What is your outlook on markets with the Greece deal done and US Fed rate hike most likely to occur by the end of the year? Will Nifty reclaim its 9,000 mark by Diwali?


    The Greek deal brings some comfort for sure. Fed, still speculative as to timing but markets are discounting an uptrend now in USD rates. Cautious optimism seems to be the sentiment. 9000 Nifty is approx 5% plus from and we have seen swings of that on monthly basis, So yes it could easily happen by Diwali, Downside: China still seems dangerous

  • D


    What are your views on Bank Nifty? Should one add Axis Bank at current levels from a long-term perspective? Also your outlook for steel stocks, especially Tata Steel?


    The Aug 4 RBI meet may be crucial. Consensus: people don't expect rate cut but if Dr Rajan gives a hawkish prognosis for inflation, Bank Nifty could tank. Right now, Bank Nifty is bouncing between 18600 support and 19200 resistance. The next RBI policy could provide a trigger to move out of this zone. Breakouts could go till 18000 (down) or 20000 (up). Axis is reasonable from long-term perspective. It's high beta with respect to Bank Nifty so it would do better than the sector. Stop loss at 525 or so, if you are buying with a 1-yr perspective Bearish on Tata Steel and metals in general - commodity cycle for metals seems down and that's very long cycle. Tata Steel is hitting successive lows

  • D


    a) What is the future of Tata Motors stock? Do you see any possibility of the same reviving? As all other auto stocks are on rise, why is this stock a laggard? b) What is your opinion on the pharma stocks, specifically Lupin and Sun Pharma? Lupin seems to rise and again fall. c) Do you see the US Fed raising the interest rates, in which case the FIIs may pull back money. Therefore, do you see the yellow metal gaining on this?


    Auto is generally long cycle. Tata Motors will revive but it may fall further before it does. It has been the worst performer in the auto sector - guess you would have to look JLR and at Indian truck demand for answers as to why it is doing badly. I can see a downside from here for Tata Motors. Sun Pharma - market is having issues discounting the Ranbaxy situation - that is probably why the stock is very volatile now, If you can stand the volatility, it may be worth picking up - the potential upside may be 1100-1200 while the downside can be restricted to about 700. Lupin seems to have an uptrend but yes, it's volatile and you would have to set a wide stop loss (3-5%) to hold the stock with a trading position. c) The US fed will raise rates at some stage for sure. At that stage, the USD will get stronger. If the USD gets stronger, the dollar-denominated price of gold could actually fall. But other things are also influencing the bearish gold trend namely forced selling in China and weak demand in India

  • P


    What is your view on the broader markets and your top three picks from the segment?


    Breadth seems good - the Midcaps and small caps have been outperforming the Sensex/ Nifty in the last 3-4 months. I would avoid small caps because there can be sudden drops in liquidity and there is no institutional presence. So it can be difficult to exit a losing position. In Midcaps, Bharat Forge, HPCL, Mindtree look interesting.

  • R


    Strength in the market has surprised many. What is your opinion about the market for next one week and one month. Are we going higher than 9,000?


    Next week - not much change. Upside resistance at 8650/ support downstairs at 8500 and below that at 8450. If there's a breakout, index could move till 8200 (downside) or 8850 (up). Next month - I'd say a +/- 5% move from here - say between 8000 (downside) or 9000 upside is possible. As such, the trend seems positive, bt there's a lot of newsflow which the markets might not have factored - examples, Parliament session and disruptions and of course, issues like China remains on the table. The all time high is higher than 9000 - about 9120 in March 2015, and in a bull market, by definition, we should expect a pattern of higher highs

  • R


    What are your views on oil refining companies like MRPL? Is there any upside left?


    yes there is an upside so long as crude prices stay low. Chance for cleaning up balance sheets, also hopes that further reform will happen. But all depends on the global crude and gas prices. Remain bullish

  • A


    Bharti Airtel chart seems to be very interesting. The stock which had hit a 52-week low on July 21, 2014 has hit a 52-week high yesterday (July 21, 2015). The stock gained momentum from Rs 350 levels around March 10, 2015 onwards. Do you see further upsides or consolidation at current levels?


    There could be a period of consolidation but the stock has outperformed the market in the past 12 months and in the past month. I would remain bullish in the long run. Again by definition, a stock with a very recent 52-week high has a good trend.

  • R


    What is your view on the oil and gas space? Most PSU refiners have seen a good run up, as has RIL.


    Global crude and gas prices are down. So, Refiners/ marketers will do well. In addition, the diesel decontrol has been helpful. Private refiners looking to re-enter retailing and that could be a driver for positive sentiment. Also the upstream guys (ONGC, OIL) have been spared burden of subsidy if crude prices stay below $60/ barrel. But lot depends on the expected next round of NELP auctions - the government needs to clarify the policy for production- sharing contracts. That will shape sentiment. RIL has a specific issue with the arbitrage on KGD6 - there could be positive/ negative news flow from that influencing the stock. In general, downstream stocks (refiners/ mktg, distribution of gas) seem to be bullish. Upstream guys are getting hurt as crude prices and gas prices fall

  • R


    a)In the wake of the Maggi controversy and with the stock crashing in the recent past, at what levels do you see buying interest coming in Nestle India amid its announcement of Q2 results later this month? b)Reliance Industries has hit 52-week high on NSE today ahead of Q1 results Should one use the upside to exit from the stock or remain invested?


    a) Nestle has stayed at above support at 5500 even through the controversy. I would see that as a "floor". Current there's selling but any price below say, 5700, could be attractive.So potential upside may be 7000-plus. b) RIL - just answered in last Q - I'd say stay invested

  • S


    Is there margin of safety to enter markets for long term investors? What is the two year target for SRF?


    Always a "margin of safety" for somebody who can ignore short term fluctuations. In historic terms, the 5-year return and 10-yr return for Indian indices has always beaten inflation and most other assets Right now, stocks may seem a little over-valued but that will smooth out (we hope!) when growth accelerates SRF has just hit a new high. By definition that is bullish. But setting a target for a stock in a new zone is difficult/ impossible. also a consolidation is possible after such a sharp rise. The stock could consolidate / correct between 1150-1250 for a while. If you intend to hold for 2 years, keep a stop loss at about 1125-1150.


    Thank you, Devangshu for your time and advice. Any disclosures?


    I am not holding positions in any of the stocks discussed

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