Tata Motors, SBI among top 5 Budget 2022 picks for investors: Prashanth Tapse of Mehta Equities

Prashanth Tapse, Vice President (Research) at Mehta Equities Ltd is of the view that post Budget Day markets would get a good sense of clarity on the directional view, but volatility will remain the theme in the short term.

In an interview with Zeebiz's Kshitij Anand, Tapse said the Nifty’s daily chart is suggesting that the recent market sell-off is overdone amidst oversold conditions. The key support is seen at the 16837 mark on a closing basis. Edited Excerpts -

Q) Tracking US Fed jitters Sensex, and Nifty50 fell more than 1.5% ahead of the Budget week. How do you see markets in the coming Budget week?

A) Post FOMC meeting fear our focus shifted towards the biggest and the most awaited event of the year -- which is lined up on Tuesday, 1st of February 2022 at 11 AM: Union Budget 2022-2023.

We believe that Dalal Street will continue to be in far direr straits as the Street is seen struggling with a surprisingly hawkish US Fed statement and most importantly, un-relentless FIIs selling followed by oil prices topped $87.50 a barrel, setting a fresh seven-year high, amid geopolitical tensions.

Well, more important than Budget 2022 if we dig deeper, inflation is now seen raging with India’s retail inflation rate shooting up to a five-month high in December to 5.59% and growth in factory output decelerated to a nine-month low in November at 1.4%.

In the U.S too, the key headline inflation hits 7%, the highest since 1982, while core CPI jumps to 5.5% cementing Fed’s rate hike action.

The markets finally are waking up to the realization that the biggest concern for economies across the globe is -- inflation. In-fact, to curtail inflation, the US Fed is serious about raising rates.

Q) Based on the January expiry, how do you see markets in the February series? Which are the important levels to track?

A) Technically speaking, the Nifty’s daily chart is suggesting that the recent market sell-off is overdone amidst oversold conditions. The key support is seen at the 16837 mark on a closing basis.

Only a break below 16837 will trigger declines towards 16410. So, on the downside, the benchmark Nifty needs to hold above the 16837 mark for any meaningful recovery.

Confirmation of strength only above Nifty 17777 mark before that positive hurdle stands at 17389 mark.

The Nifty options data for the February series suggests that the Nifty index is likely to be in a trading range of 16500-17500 zone, So, the 17500 mark will be Nifty’s crucial resistance zone.

Q) Should one consider buying post the Budget Day to avoid volatility and clarity?

A) Post Budget Day markets would get a good sense of clarity on the directional view, but volatility will remain the theme in the short term.

US FED statements and actions will remain key trendsetters for FII to maintain their action to reduce or increase their holdings in emerging markets.

Conservative long-term investors can use the dip as an opportunity to accumulate high-quality long-term stocks. For traders these volatile markets are always been favourite.

Q) FIIs remain net sellers for more than Rs 30,000 cr in the cash segment of Indian equity markets – what is causing the panic – is it the US Fed or Budget 2022?

A) US Fed's action remains the main culprit and the reason behind the stock markets' volatile start to the year 2022.

Accelerating inflation would force the US Federal Reserve to get even more aggressive than expectations which is pushing FII to go Bond investing to get a better risk-free return.

On the domestic front, we believe that our markets have already priced in faster tapering and one rate hike by March 2022, but volatility will remain the theme in the short term.

Q) In terms of sectors, banks, and auto managed to outperform and IT and Realty stocks tumbled. What led to the price actions? What is causing panic in IT space?

A) Based on better-than-expected earnings shown by banks led the gains. Auto also outperformed overall markets while IT & Reality tumbled a lot as investor sentiment remained subdued over a hawkish Fed stance and foreign institutional investors (FIIs) turning into major sellers as the reasons for the overall decline.

Q) Any Budget picks that investors can look at?

A) Here are some pre-budget that investors can look at -

1. Praj Industries – Ethanol Theme

2. Deepak Fertilisers – Fertiliser focused Theme

3. Tata Power – Power & EV infrastructure Theme

4. Tata Motors – Electric Vehicle push Theme

5. SBI Bank – Reducing FD tenure expectation theme

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