‘MPC meet to set tone for market; volatility may rise by June-end due to Budget’

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The rollovers towards June series suggests that we may be entering a short term trending period. It is a matter of time that we may see some trend developing, Mustafa Nadeem, CEO, Epic Research, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts:

Q: Nifty hit a fresh record high on Monday. Strong rollovers for the June series suggest that the rally is likely to continue. What are your expectations?

A: Yes, rollovers towards June series do suggest that we may be entering a short term trending period. It is a matter of time that we may see some trend developing.

The market is now also pricing in the Q4 numbers of companies and that will be reflected in stock prices as there may be some rotation that will redefine portfolio.

Nifty, in June, could oscillate in the range of 11,800-12,200. Above 12,200, we may see further trend continuation but we should be a bit conservative here.

Q: Any events that could dictate the trend for the markets in the near term?

A: There are multiple events that will be important for the market in June. Firstly, it will be the bi-monthly RBI MPC meet that will set the tone for the market.

Inflation may be in focus during the meeting since there is a ‘near-normal’ monsoon prediction. This may push important food and overall inflation numbers marginally up. RBI will have to factor this. Plus, we are already amid a liquidity crunch with a high cost of capital for businesses. RBI will likely push for growth and a cut is expected.

After the meeting, we would also be looking at Cumulative Industrial Output and Infrastructure Output data later in the month. All these things are very important for the market and for the coming few months, these will have an impact.

Apart from this, all eyes will be on how monsoon is developing and how it would cover the key areas that are important geographically for agriculture.

We are also looking forward to the Budget session coming in July and hence the volatility may rise by the month end.

Q: Do you think we could possibly make a top and then tread in a range till Budget?

A: Valuation remains high as the growth has slowed in the last quarter and has been comparatively slowest in the last few quarters. Just around half of the Nifty constituents were able to meet the street expectations. Only 20 percent of the index constituents were able to beat the expectations.

The worrying part is that 40 percent reported below expectations Q4 numbers.

This would definitely create a concentration in the portfolio that would be now focused on financial services and select stocks from energy and consumption space.

At this point in time, we believe the only hurdle for Nifty is around 12,100±200 points. This is a good resistance technically and Nifty needs to breach it decisively to make sure there is a short covering as well. Failure to do so may see the Nifty oscillating between 11,500 and 12,200.

Q: What is your view on Modi 2.0 Cabinet?

A: The expectations are high and so the speed is needed. Rural demand needs to be created and a doubling of rural income is a good task. The MSME sector is under a liquidity crunch and with Nitin Gadkari at the helm, there is a ray of hope to the overall sector and the market has taken it positively.

With Crude in comfortable price, low Inflation and effective policies in place, Modi’s team can set the stage for growth and take India as an economy amongst the top three.

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