Chinese liquidity push, manufacturing PMI help Nifty bounce back

Indian market recouped losses to climb back over crucial support levels on Monday. The Niftty50 bounced back after breaching a 200-days moving average (DMA) on the downside while the S&P BSE Sensex rose over 100 points.

Let’s look at the final tally on D-Street – the S&P BSE Sensex rose 136 points to 39,872 while the Nifty50 rose 46 points to close at 11,707.

Sectorally, action was seen in consumer discretionary, realty, auto, and metal index while profit-taking was seen in the IT index.

Mixed performance was seen in the broader market with the S&P BSE Midcap index rallying over 1 percent while the S&P BSE Smallcap index underperformed as it closed flat but with a positive bias.

Experts are of the view that the market has factored in most of the negatives from the Budget and it is a good opportunity for long-term investors to dip into stocks as most of them are available at a double-digit discount from their respective highs.

China’s central bank said it will inject 1.2 trillion yuan ($ 174 billion) worth of liquidity into the market via reverse repo operations is a welcome step. But, rising concerns regarding Coronavirus will cause volatility in markets, suggest experts.

“We believe absence of any major announcements in the budget may weigh on the investor sentiments in the short-term and we may continue to witness volatility,” Ajit Mishra, VP – Research, Religare Broking Ltd told Moneycontrol.

“On the global front too, while liquidity boost of $ 173 bn by China’s central bank is a good sign, rising concerns regarding coronavirus may continue to cause uncertainty in the markets,” he said.

The country’s manufacturing sector activity climbed to a near 8-year high in January, driven by a sharp rise in new business orders amid a rebound in demand conditions that led to a rise in production and hiring activity, a monthly survey said on February 3.

“With valuations on the higher side, the on-going results reported has been mostly inline with estimates. Manufacturing PMI shows notable rebound providing a breather that economy will stabilize as mentioned in the budget,” Vinod Nair, Head of Research at Geojit Financial Services told Moneycontrol.

Stocks & sectors:

Sectorally, the S&P BSE Consumer Discretionary rose 1.8 percent, followed by the Realty index which gained 1.4 percent, and the Auto index closed 1.3 percent higher. Profit taking was seen in IT that was down 1.8 percent.

Volume spike of 100-400% was seen in stocks like Escorts, Pidilite Industries, Biocon, Nestle India, and Tech Mahindra

Long Buildup – Escorts, Bajaj Auto, Nestle India, DLF

Short Buildup – Century Textiles, Indiabulls Housing Finance, Hero MotoCorp, DLF

As many as 80 stocks on the BSE hit a fresh 52-week high that include names like s Nestle India, Dixon Technologies, Hawkins Cookers, Bajaj Auto, HUL, PVR, Divis Laboratories, and Asian Paints.

Stocks in news:

ITC: Share price of ITC fell over 4 percent on February 3 after the Budget proposed to raise excise duty on tobacco and cigarettes. It recorded its biggest one-day decline on February 1 since July 2017.

Hindustan Unilever: Shares of Hindustan Unilever gained almost 5 percent on February 3 after it reported better-than-expected earnings during December quarter.

Asian Paints surges over 6% as crude slips a 1-year low. The stock also touched its fresh 52-week and was the top Sensex and Nifty gainer.

PVR: PVR share price gained 3 percent on February 3 after rating upgrade by CRISIL. CRISIL has upgraded its rating on the non-convertible debentures and long-term bank facilities of the company to CRISIL AA/Stable from CRISIL AA-/Stable.

Godrej Properties: Godrej Properties share price surged over 8 percent on February 3 after the company reported 9.2 percent jump in its December quarter (Q3FY20) consolidated net profit at Rs 45.5 crore against Rs 41.6 crore in December 2018.

Technical View:

Nifty forms a bullish candle on the daily charts

On expected lines, index bounced back after breaching 200-DMA placed at 11,653

Though it will be too early to conclude that bottom is in place at Monday’s low of 11614, some consolidation with positive bias can’t be ruled out in next couple of trading sessions, suggest experts.

In case if bulls succeed in defending the low of 11614 levels then a best case target of 11934 can’t be ruled out on Nifty in next couple of sessions.

Bulls may abort this pull back attempt if Nifty fails to sustain above its 200-Day moving average on closing basis and weakness shall resume with ultimate targets placed around 11200 levels.

For time being traders are advised to focus on stock specific opportunities by remaining neutral on index. Fresh shorting opportunity shall arise on a close below 11600 levels.

Three levels: 11614, 11749, 11900Get access to India’s fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code “GETPRO”. Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.

  • Click here for complete Budget 2020 coverage
  • Catch the Budget 2020 LIVE action as it happens
  • Check out our Income Tax Calculator to find how Budget 2020 impacts your wallet