stocks to buy: SBI Cards, Shriram Finance top stocks to buy this week: Anand James

“As the initial dust settles after an intensely volatile and pensive week, the Indian market is poised towards a more objective assessment this week,” says Anand James, Chief Market Strategist at .

In an interview with ETMarkets, James said: “We closed 1.35% on the first day after the Budget, paving way for more gains in the next week,” Edited excerpts:
Eventful week for Indian markets as we saw Sensex and Nifty50 closing the week in the green. What led to the price action?
The US Fed’s rate hike decision was on expected lines which probably helped prevent a collapse in Indian markets, after markets saw intense volatility following the fallout of an adverse report on Adani group which eventually led to the FPO being called off.

As opposed to the 30-stock composition of Sensex with no Adani representation, the Nifty50 has a 50-stock composition and thus is exposed to more stocks, while also having Adani group stocks with a small weightage.

How do you see markets moving in the coming week? Any key events that traders should watch out for?

As the initial dust settles after an intensely volatile and pensive week, the Indian market is poised toward a more objective assessment next week.

Meanwhile, several green shoots are becoming visible. For one, the valuation premium that India has been fetching over the EMs has fallen, with Nifty having fallen over 1500 points from the peak, and meanwhile EMs staying positive during the same period.

This should encourage foreign inflows, and a near-record low rupee should further increase the purchasing power.

Secondly, the rate rhetoric from the US Fed, RBI, as well as BoJ, has been relatively dovish, taking the sting out of rate fears. Only one more rate hike (by 25bps) is expected of the Fed (March 2023), followed by a pause, and then rate cuts in 2024.

This gives a stable investment horizon for the year ahead. However, this construct will have the first test next week, with NFP data released last Friday, showing a strong labour marker.

Further, the election year brings with it a consumption theme, which is further augmented by increased capital outlay and new tax regime proposed in the budget.

Lastly, Nifty PCR (put call ratio) is near 0.78 after the week-long carnage, and as discussed last week, the last time we had negative close and sub 1 PCR ahead of Budget, we saw a 4% gain in the 3 days post budget.

Incidentally, we closed 1.35% on the first day after the Budget, paving way for more gains in the next week, as per this analysis.

After seeing a steep fall of about Rs 10Lkah cr in Adani group companies (equivalent to the capex package announced by the govt). How should one go about catching the falling knife? Which are the key parameters that one should track before investing in a falling stock?

How does one catch a falling knife? Well, the first approach is to study the cause to gauge the speed of the knife. In this case, the allegation has been primarily a question of debt, and ability to raise money.

So, if there is a pricing mismatch with most of the group stocks falling in tandem at least initially, then key ratios pointing to cash flow, as well as debt servicing ability etc. would be helpful towards picking one stock in favour of another, among the group.

The RBI reported that the banking sector remains resilient and stable as per its current assessment, has served to pacify panic-stricken traders who were fleeing banks fearing the fall out of exposure to the Adani group.

This along with several other reports has at least been successful in fighting perceptions, which is important for the market to arrest a fear-driven sell-off and allow pricing to be done objectively.

In other words, when the dust settles, and the group companies are re-rated, we prefer to look at the proxies, like banks, and other companies that may have been sold off quite steeply.

FMCG, IT stocks saw buying interest in the week gone by. What led to the price action?

, riding on the expectation of better Q3 earnings, saw a big upside driving the FMCG pack to glory this week.

Also, the expectation that increasing capital expenditure outlay and the modification in the new tax regime encourage consumption, supported the upside.

Apart from ITC,

also gained over 5% this week after it announced a 50% jump in its YoY Q3 profits. ITC, on 03rd Feb, came out with a 21% rise in net profits for Q3 driven by better performance from cigarette and hotel segments.

FMCG Sector also saw better earnings numbers from

and . reporting a 6% rise in YoY profits.

Metal, Oil & Gas witnessed double-digit fall – what led to the price action?
Metal index was dragged down by

, , and but towards the end of the week, post the announcement of measures in the Union Budget for steel producers including the decision to continue with the customs duty exemption on manufacturing of cold rolled grain-oriented steel and ferrous scrap, stocks recovered reducing weekly losses.

Oil & Gas stocks were mostly down in the month of January and the fall gained speed with Adani group stocks witnessing big selloff of which ATGL, which form 15% of Oil & Gas index, fell over 44% in the last five days.

emerged as a top gainer in S&P 500 index (up 15% in a week). What is fueling the rally and what should investors do?
Stock has been on the rise since the beginning of February 2023 in the anticipation of better earnings. It reported a 23% rise in net profits. In the last year, the stock has gained around 140% and is trading close to the all-time high level presently, seemingly unaffected by broad market panic.

Technically, we have seen an inside bar doji, exhaustion in the MACD forest indicator in the monthly scale and MACD breaking below the signal line in the weekly time frame pointing towards a consolidation/profit booking in the near term before we see the next leg of upside.

The initial bounce-back zone is identified around 300. However, if weakness persists below 300 then we may see stock moving towards 275-250 levels. Investors may reduce positions and plan re-entry into the stock at the levels mentioned above.

Your 3-4 trading ideas for the next 3-4 weeks.
Here is a list of trading ideas –

SBI Cards: Buy| LT Rs 753| Entry range: 747 – 740| Target Rs 780 – 815| Stop Loss Rs 717

The stock has formed a Marubozu candle in weekly charts after over a month and is supported by exhaustion seen in MACD forest indicator hinting at a possible reversal.

Also, we have seen MACD breaking above the signal line in the daily charts, all favoring a reversal in the near term. We expect the stock to move towards 780 initially and thereafter towards 815 in the next three to four weeks. Longs may be protected with stop loss placed below 717.

Shriram Finance: Buy| LTP Rs 1279| Entry range Rs 1269 1262| Target Rs 1320 – 1370| Stop Loss Rs 1220

The stock has been moving within a Triangle chart pattern and is now close to the lower trendline support of the pattern.

With MACD breaking above the signal line in a daily time frame and narrowing of the pattern ranges are hinting at possible range breakout in the near term.

The range breakout on the upside could take the stock toward the 1530 and 1580 levels.

But on a conservative basis, we expect the stock to move towards 1320 and thereafter towards 1370 in the next three to four weeks before a range breakout happens. Longs may be protected with a stoploss placed below 1220.

(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)

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