Lighten your positions ahead of FOMC meet; Tata Power, SBI among top 5 Budget 2022 picks: Prashant Tapse

Prashant Tapse, Vice President (Research) at Mehta Equities Ltd said that the major events which investors should keep an eye on are the FOCM meet followed by Holiday then expiry, and bigger event Union Budget 2022, hence I believe, bears will remain in the minds of traders like a tug-of-war.

In an interview with Zeebiz's Kshitij Anand, Tapse said that the Gyan mantra is to ‘lighten aggressive leveraged long positions on any excessive strength. Nifty’s make-or-break support at closing level stands near the 17567 mark. Edited excerpts:

Q) It has been a volatile week for Indian markets. Sensex, Nifty could well close lower by over 3%. What led to the price action?

A) A furious bout of selling was seen for the whole week and recovery hopes turned into ashes. Markets collapsed and momentum stocks mostly crumbled and ended with sharp losses in the week gone by.

Sentiments for hit by the only monumental catalyst -- the narrative of aggressive Federal Reserve’s tightening of its monetary policy in 2022.

The street fears that the US Federal Reserve will have to accelerate further its tightening pace. Also, rise in crude oil prices also weighed on the sentiment of Dalal Street where prices jumped to a 7-Year high amidst supply concerns and drone strikes.

Commanding attention from here-on would be the two-day FOMC meeting beginning Jan. 25th.

Q) Smallcap and midcaps also closed the week in the red – looks like the high beta rally got arrested ahead of Budget. What are your views?

A) Indian market witnessed the much-awaited correction during the last week, taking the Nifty50 down by around 3 per cent led by Rs 12,643 cr of FII selling pressure.

Following large caps, Small and Midcaps also tumbled due to huge volatility ahead of expected rising bond yields that has pressurized foreign investors to pull out funds from highly valued markets like India.

I expect the weakness in the market might continue in the near term due to the FOMC meeting due on 25th January, followed by a holiday due to Republic Day on 26th Jan and coincided with the monthly expiry of futures and options contracts the next day.

Post this, we may expect Indian markets to consolidate in a range and focus on Union Budget 2022 due on Feb 1st 2022.

There would be a booster dose of reforms to revive the economy reaching the target path towards $5 trillion sooner and re-ignite the bull spirits in the capital markets in the upcoming Budget 2022.

Q) With a week to go for the main event – what should be the strategy of investors on Nifty? It is expiry week as well.

A) The major events which investors should keep an eye on is the FOCM meet followed by Holiday then expiry and bigger event Union Budget 2022, hence I believe, bears will remain in the minds of traders like a tug-of-war.

Technically, the Gyan mantra is to ‘lighten aggressive leveraged long positions on any excessive strength. Nifty’s make-or-break support at closing level stands near the 17567 mark.

Please note that the Nifty50 would be vulnerable below the 17567 mark with aggressive downside risk at 17327 and then at 17011-17051 zone.

Please note that the Nifty50 200-Day EMA is still at the 16577 mark. On a counter-side, many technical indicators are also flashing oversold conditions so a short-covering move may not be ruled out in this expiry.

Q) Which stocks do you think are likely to remain in focus ahead of Budget? Any Budget picks which investors can watch out for and why?

A) I expect PSU, Power, Agri, Infra, BFSI, EV and Capital goods are likely sectors to be in focus ahead of Budget, while metals and auto would be poised with favorable risk-reward.

Budget picks:

Tata Power: LTP Rs 242:

Tata Power is a play on the power portability theme. A clear framework will be put in place to give consumers alternatives to choose from among more than one distribution company.

Deepak fertilizer: LTP Rs 515:

I expect this budget would focus high on agriculture to revive India’s economy

SBI: LTP Rs 502:

Banks have made a case for lowering fixed deposit (FD) tenure to three years for availing tax benefits, in line with mutual fund products like equity-linked savings scheme (ELSS)

Tata Motors: LTP Rs 502 and TVS Motors: LTP Rs 631:  

Govt to focus more on EV Ecosystem and promote the 4W and 2W industry.

Q) FIIs remain net sellers in the cash segment of India equity markets ahead of Budget? What is causing the nervousness and will there be a change in trend in the run up to Budget?

A) With major global economies signaling rate-hiking scenario we may see continued FII selling sentiments in emerging markets including India.

Nervousness in the market is cornered to FII’s behaviour with selloff amid steep valuations. I don’t see any major trend change ahead of the upcoming budget.

I expect Budget 2022 would be all-around touching all corners of the economy. Give more push towards Make in India & extend the Make for World theme to build India towards services the world.  

Q) Any top 3-5 trading ideas for the next 3-4 weeks?

Macrotech Developers (LODHA): Buy| LTP Rs 1276| ADD on Dips 1139-1151| Target Rs 1351-1417-1507.50| Stop Loss Rs 1061| Holding Period 30-45 days.

Bharti Airtel: Buy| LTP Rs 695| ADD on Dips 681 zone| Targets Rs 811-861| Stop Loss on closing basis Rs 661| Holding Period: Up to 30-45 Days.  

HDFC: Buy| LTP 2592| ADD on Dips 2520| Targets Rs 2750-2800| Stop Loss on closing basis Rs 2490| Holding Period: Up to 30-45 Days

TATA Power: Buy| LTP 242| ADD on Dips 222 zone| Targets Rs 280-300| Stop Loss on closing basis Rs 212| Holding Period: Up to 30-45 Days.  

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)