The Nifty50 could find support around 11,050-10,800 levels and 11,250-11,400 zone is likely to act as a hurdle.

The Nifty could find support around 11,050-10,800 levels and the 11,250-11,400 zone is likely to act as a hurdle, Ajit Mishra, Vice President Research, Religare Broking tells Moneycontrol’s Kshitij Anand.

Q. A roller coaster ride for Indian markets in the truncated week. Markets lost momentum soon after the RBI policy. Benchmark indices fell by about 3 percent for the week. Where do you see the markets headed in the coming week? What are the important support and resistance levels to watch out for?

A. It turned out to be a bad week for participants as the majority were expecting the momentum to continue. 

Among the benchmark indices, the Nifty lost nearly 3 percent and settled around the week’s low which indicates a further decline, thanks to the weak trend in banking space while others are trading with a mixed bias.

The Nifty could find support around 11,050-10,800 levels and the 11,250-11,400 zone is likely to act as a hurdle.

Q. Banking stocks took a hit in the week gone by – largely on account of the crisis in the industry and RBI policy statement. What are your views?

A. Banking stocks were among the top contributors in the recent surge post the corporate tax cut announcement. However, sentiments turned negative this week, triggered by the crisis in PMC Bank and continued selling pressure in private banks viz. YES Bank, RBL Bank and IndusInd Bank due to asset quality concerns.

Further, heavy exposure to troubled companies also raised fears of fresh non-performing assets (NPAs) in the system.

The 25 bps rate cut by the Reserve Bank of India (RBI) was largely factored in by market participants given benign inflation levels and muted growth data. We do not see this pessimism fade away soon and expect banking counters to remain under pressure ahead.

Q. Earnings season is scheduled to start in the coming week – what are your expectations? Which sectors are likely to outperform and underperform?

A. The Q2FY20 earnings season is expected to paint a better picture mainly on the profitability front post accounting for the reduced corporate tax benefit of the previous quarter and this quarter as well.

Sales growth across sectors is expected to remain tepid, mainly due to the slowdown in the economy.

Amongst banking stocks, the loan growth is expected to remain subdued and asset quality could deteriorate in some cases.

The IT sector which is one of the least beneficiaries of the corporate tax cut is expected to report stable numbers. However, the outlook would be a key determinant for the sector’s outperformance/underperformance given slowing growth in key markets like the US and Europe.

Overall for the consumption space, we believe that more than the quarterly numbers, the demand outlook would hold great importance in deciding their future performance.

Q. The downward revision of GDP for the June quarter of 2020 might not be a surprise but surely a sentiment dampener. What are your views?

A. Considering the economic slowdown and other weak macro data points announced earlier, the downward revision in GDP forecast was expected. 

However, this was a second GDP growth downgrade in the year. Earlier in the year as well, the RBI had marginally reduced the GDP growth target to 6.9 percent from 7 percent.

However, the sharp 80 bps cut (6.1 percent as against an earlier estimate of 6.9 percent) in the current monetary policy is likely to weigh on the investor sentiments in the near term.

Going forward, we expect market sentiments may revive following an anticipated uptick in demand in the festive season, the impact of corporate tax cut on the earnings and other government measures to boost the economy to stimulate demand at the ground level.

Q. Any stocks which are looking good buy or sell ideas based on technicals?

A. HCL Technologies: Buy| LTP: Rs 1,079.10| Target: Rs 1,130| Stop Loss: Rs 1,045

Initiation range: Rs 1,065-1,075

HCL is one of the strongest counters in the IT pack and it is currently hovering around the support zone of multiple moving averages on the daily chart. 

Besides, it is trading in an up-trending channel and recently tested the lower band of the same.

Put together, we expect a gradual rise from here on thus we advise creating fresh longs in the given range.

Biocon: Buy| LTP: Rs 231.10| Target: Rs 256| Stop Loss: Rs 220

Initiation range: Rs 228-232

Biocon has witnessed a decent correction from the top and has now retraced closer to its major support zone of the long term moving average i.e. 200-EMA on the weekly chart.

It has been consolidating around the same for the past two months and now trading on the verge of a sharp rebound from that zone.

Further, oversold positions combined with the existence of major support is adding to the positivity. We advise creating fresh longs in the mentioned zone.

Bharat Heavy Electrical: Sell Oct Futures| LTP: Rs 46| Target: Rs 43| Stop Loss: Rs 51

Initiation range: Rs 48-49

BHEL has been trading in a downtrend for the last several years and there’s still no change in trend. 

Though it had made several attempts in the past but in vain as it failed to surpass the critical hurdles and resumed its downtrend.

Currently, it is trading on the verge of a fresh breakdown from a consolidation range. We thus suggest initiating fresh shorts in the given range.

TVS Motor Company: Sell Oct Futures| LTP: Rs 393.15| Target: Rs 370| Stop Loss: Rs 412

Initiation range: Rs 396-399

TVS Motors has witnessed correction for the last one and a half years and retraced considerably from its top. 

Though it made an attempt to surpass hurdle of the long term moving average around Rs 440 but failed and formed a fresh shorting pivot. We advise utilising this opportunity to create fresh shorts within the mentioned levels.