FII inflows may return as India offers growth and policy stability: Rajesh Palviya

Rajesh Palviya, Axis Securities, says FII needs to participate in the market where stability is there, so India is the choice for them once clarity on the tariff front will emerge in the coming future. So, FII may come back to India because here they will get stability in terms of growth. Corporate earnings are also not that much negative. So, it is again decent kind of corporate earnings and the government is taking all proactive actions whenever required. So, if they want to deploy where the economy is in the upward trajectory, so India is the only spot where they can participate.

ET Now: What are the levels that you are spotting for our markets headed into next week because we have a truncated week and it is not only one, but we are off two trading days. We only have a three-day working week next week. Do you think that is going to shelter us enough from the kind of volatility that is expected to take place now that China has also hit back at the US in terms of tariff? Do you believe that our markets taking close is going to be rather better for us compared to how the global markets are going to be faring on the back of this tariff war? And when we do open up on Tuesday, given up all the pent-up action that we will be seeing from the long weekend, what are the levels you are spotting?

Rajesh Palviya: So, despite of a news flow from the global front, our market managed to give recovery from the lower level. Almost we have tested the level of 21,700 zone and we have retested this 100-week moving average on a weekly chart and able to defend that 100-week moving average. So, we have slipped below to this 100-week moving average only at the time of COVID and post that, whenever the Nifty tested this level, we have seen very strong recovery from those levels. So, same has happened again in the current week also. And on a weekly basis, we are able to defend that level which was at around 21,700-21,800 zone. So, these levels are very important. Now we are very far from those levels. Almost we are now negotiating with the immediate call concentration area of 22,800-23,000 level. If at all we cross this 23,000 level, we may see another round of rally to continue further in the coming week. So, China and US, this tariff war will keep on continuing. Every day we are going to have new news flow. But our broader market has shown a strong recovery and the oversold sectors are also participating in this rally. So, we believe that this momentum can extend further. So, at this juncture, 22,600 needs to keep as a stop loss to hold long position and we believe that maybe next week we can cross 23,000 level and possible rally can extend to (9:35) 25,000 also. Bank Nifty is looking very strong. Bank Nifty is now trading above 200 day moving average. So, whole banking and financial sector is in a different mood. And the way this sector has shown resilience in this kind of volatility, we may see extension of rally in the Bank Nifty and possible rally can extend to 51,700, even 52,000 kind of level also. So, in Bank Nifty also we are holding bullish view at this moment, keep your stop loss around 50,600 to hold long position in Bank Nifty also.

ET Now: I saw a very interesting post that you uploaded on LinkedIn just last evening wherein it says that in the last out of the 22 years, it has only been eight times that IT sector has posted yearly negative returns. I believe we are in for the ninth time this year given how the tariffs globally are playing out and because IT is such an external-facing sector for us, how do you think it is going to pan out for IT and also, what are you making of the entire overall quarter four print, where do you believe we can see good numbers this time?

Rajesh Palviya: So, looking at the IT index structure, it is trading below to all its long-term moving averages. So, structure is definitely on the weaker side and concerns are still there for IT sector as US recession issue could trigger further more sell-off. But looking at the recovery in the broader market and largecap IT stocks are showing signs bit of buying interest at the lower side. So, we may see some consolidation from current level in IT index as well as in the IT stocks for some time. If any furthermore fear escalates in terms of recession or in terms of global uncertainties, then we may see another hit in IT stocks. But for some couple of weeks, some pullback action could be there in IT stocks. 31,600, 31,700 are the important level for Nifty IT index. If it breaks that level, then we may see some more major sell-off in IT stocks or IT index. Till the time these levels are held by this Nifty IT index, some pullback of 2% to 3% or another 4% up move we may witness in IT stocks as we are almost corrected 33% from the recent high of IT index. And the similar behaviour we have witnessed in year 2022 and the same kind of chart structure again replicating in the current calendar year. So, 31,600 needs to keep as a stop loss. Again, post earning of TCS also, we have seen muted behaviour. So, once this quarterly earning happens, if stocks are able to digest all the supply pressure in a range of 1-2%, so one can take a contra bet in IT stocks with stop loss of 31,600 as a Nifty IT stop loss and if it is defended, some rally can be expected in coming weeks for IT stocks.

ET Now: I am just looking at the FII data on the month to date basis, year to date basis. While there have been massive sells, DIIs have not only matched that sell with a buy amount, but they have also outperformed how much the FIIs have sold in terms of how much the DIIs have bought. Do you believe that this kind of correction that we have seen recently, have we bottomed out for good? Do you believe that this DII buying that we are seeing in the market could also be closely followed now by FIIs making a comeback to India because if you take a look at the AMFI data that we have seen today, equity AUMs and the way that they have gone up despite this correction, it shows that at least on the retail front or the DII front, the dip is being bought. Do you believe FIIs would do the same any time soon?

Rajesh Palviya: FII needs to participate in the market where stability is there, so India is the choice for them once clarity on the tariff front will emerge in the coming future. So, FII may come back to India because here they will get stability in terms of growth. Corporate earnings are also not that much negative. So, it is again decent kind of corporate earnings and the government is taking all proactive actions whenever required. So, if they want to deploy where the economy is in the upward trajectory, so India is the only spot where they can participate. So, yes, the way domestic flows are buying all the sell by the FIIs, the kind of confidence which domestic players are having on the India growth trajectory, in the near future yes, FIIs flows will also turn out on the positive side and if that happens, then we may see very sharp up move in the market and then possibly we could cross 24,000 level also. But it again depends on when they will come back, but looking at the flows, in coming month probably they can convert their selling into the buying side and that then we may see a good rally in the markets.

ET Now: The another big trigger for the India growth story that is turning out right now is the oil prices. What a cool off we have seen in the oil prices globally and we all know that how big a booster or rather a trigger it could be for India as an economy and as for the markets as well. But at this point in time, help us understand that are you looking at some of the crude derivatives or crude linked sectors where maybe it is a time to build some good long positions since you are also positive on the markets overall. Some of the case in point could be OMCs, the tyre companies, the paint companies, anything that is structurally on the technical front looking good.

Rajesh Palviya: So, definitely oil marketing companies are showing good traction. Hind Petro is looking very promising. Stock is now trading above 200-day moving average. Flag pattern breakout is already there on the daily chart. So, yes, oil marketing company can be looked at this juncture and we may see a good rally in this stock. So, Hind Petro is our first choice and then BPCL, both stocks can be looked at. As you mentioned about the paint company, here Pidilite is looking attractive as well as Berger Paint. These two stocks are looking attractive from this segment and these two stocks can do well as technical structure for both the stocks are looking promising for near term to short term perspective. So, here also one can focus to play on the fall of this crude.

ET Now: Help us with your stock ideas.

Rajesh Palviya: The two stock ideas, first one is PNB Housing Finance, since last in terms of buying. There is a long build-up in data. The way stock has moved up in the last couple of weeks and breakout is already there on the weekly chart, so we believe that here we could see extension of rally, possible target towards 1025 we may see in the coming week with stop loss of 960. Another stock is Grasim. Falling trendline breakout has been witnessed on the weekly chart and the stock has also witnessed a long build-up on the derivative data. We believe that here also we could see good traction towards 2710. So, Grasim can be looked at for buying side and keep your stop loss around 2625.