Markets to remain volatile as investors eye inflation, US Fed meet outcome; buy these two stocks for gains

Markets to remain volatile as investors eye inflation, US Fed meet outcome; buy these two stocks for gains

By Rahul Shah

After a rally in the last two weeks, equity benchmark Nifty fell 200  points (-1.1%) to close below 18500 levels at 18497 levels. Sentiment has been dampened after the IT major HCL Tech lower its revenue growth guidance for FY23. Moreover, traders were booking profit ahead of important US producer price index (PPI) data to be released on Friday just before the US Fed interest rate decision to be announced this week. Also, continued FIIs selling, weakness in the global market, and concern of RBI’s hawkish commentary have had a negative impact in the market. FIIs were net sellers over Rs 4300cr last week of five trading sessions. 

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It’s a challenging environment for buying stocks. This coming week investors get a one-two shot of big economic news. On Tuesday, the US Labor Department will release its November CPI inflation report and subsequent day, the Federal Reserve will announce interest rate decision. Bank of England (BoE) and ECB Meeting interest rate decision will be held on Thursday. US and European countries PMI data will be announced next week. On the domestic front, CPI and IIP data will be announced on Monday. Expect market to be sideways or choppy and investors should likely wait for the inflation report and Fed news before adding exposure. Expectation that the US Fed to hike interest rate by 50 bps after four straight 75 basis-point hikes. However, US Fed commentary will be more important for the future course direction.

US Producer Price Index (PPI) and Jobs data reported much higher than anticipated is an overhang to the market sentiment. However, US Fed’s earlier softened statement has led to the hope that US Fed might cool down its aggressive stance. Along with the hope of good growth in Rabi crop, expected hike in interest rate of 35bps by RBI and forecast unchanged for FY23 at 6.7% may support market sentiment.  Moreover, a strong victory by the ruling party in the Gujarat Assembly election and forex reserve spiking to 3-month high of $560bn will also boost the market sentiment. Infra and power stocks likely to be positive on hope of higher government spending ahead of 2023 assembly election. EV sector will be in focus on media reports that the government examining incentives to encourage local manufacture of electric vehicles (EVs) and energy storage systems (ESS).

Also Read: NSE F&O ban: BHEL, PNB and others under ban on Monday, December 12, 2022

Stock IdeasHindustan Unilever (HUL)CMP: Rs 2722| SL: Rs 2675| Target: Rs 2830

Hindustan Unilever Ltd is continuously making higher highs- higher lows on weekly scale and formed a strong bullish candle on daily chart. It is on the verge of giving range breakout on daily scale and all set to test fresh life time territories. Buying is visible across FMCG space and small follow up can take it towards higher levels. RSI on the daily and weekly scale is in the bullish zone which will support the up move. Considering the current chart structure, we advise traders to buy the stock for an up move towards 2830 with stop loss of 2675.

Adani EnterprisesCMP: Rs 3996 | SL: Rs 3945 | Target: Rs 4200

Adani Enterprises has given a consolidation breakout of the last seven sessions and support-based buying could be seen in the counter after it took support near 3800 zones. RSI has given a positive crossover on the daily as well as weekly scale which will move the stock to higher zones. Considering the current chart structure, we advise traders to buy the stock for an up move towards 4200 with stop loss of 3945.

(Rahul Shah is the Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution,Motilal Oswal Financial Services. The views expressed are the author’s own. Please consult your financial advisor before investing)