Nifty50 below 18K! Time to be cautious, but not fearful ahead of US Fed meeting: Gaurav Dua

In an interview with ETMarkets, Gaurav Dua - SVP, Head - Capital Market Strategy – Sharekhan by BNP Paribas, said: “The consensus is already building a rate hike of 75 bps points followed by two more hikes of 50 bps points over the next few months” Edited excerpts:

A volatile week for Indian markets where bears took control and pushed the benchmark indices lower. What led to the price action?
It was a week after the release of data on inflation in the US, Europe as well as India. Also, large economically sensitive corporates like FedEx gave quite bleak guidance on trade activity globally.

This has led to volatility in equity markets globally. All major sentiment indicators also point to immensely pessimistic positioning by most large institutional investors lately.

For India in particular, the growing risk aversion globally has finally caught up. There is profit booking at a higher level.

What should be investors' strategy ahead of the US Fed meeting? Time to hedge?
It is time to be cautious but not fearful. Already the positions are light, and the mood is full of pessimism with a record high level of cash in institutions globally.

The consensus is already building a rate hike of 75 bps points followed by two more hikes of 50 bps points over the next few months.

So, there is little probability of any disappointment or shock that could send markets reeling down. However, in these kinds of conditions, the damage can be severe in broader markets especially speculative and momentum stocks.

Sectorally, power and metal saw buying action. What led to the price action?
There is buying interest in autos, power, and banks lately. These sectors have underperformed for the past few years and are a play on the multi-year economic revival growth outlook for India. Thus, the returns could be better for these sectors now.

What is powering the rally in Tata Investment which has rallied by about 50% till Thursday? What should investors do – buy now or book profits?
We do not track Tata Investment particularly but there was buying interest in many holding companies in the past couple of weeks including Bajaj Holdings, Maharashtra scooters, Tata Investment, Grasim etc. due to steep discount to its sum-of-the-parts valuations. Thus, holding company stocks attract investor attention lately.

Your 3-4 trading ideas for the next 3-4 weeks?
Here is a list of top trading ideas -

Bharat Dynamics: Buy | LTP Rs 921 | Stop Loss Rs 880 | Target Rs 960-1,010 | Upside 4%
This week, the stock has broken out from a multi-week consolidation and has resumed the larger uptrend.

Strong volumes were seen in the last session, which is a positive sign for the counter. The daily momentum indicator has also started a new cycle on the upside

Thermax: Buy | LTP Rs 2,570 | Stop Loss Rs 2,465 | Target Rs 2,660-2,760| Upside 3.5%
In the last session, the stock has broken out from a triangular pattern on the daily chart. Also, it has formed a bullish Belt Hold candle on the daily chart.

Thus, follow-through buying is expected in the next week.

Amara Raja Batteries FUT: Sell | LTP Rs 510 | Stop Loss Rs 530 | Target Rs 490-464 | Downside 4%
In this week, the stock stumbled near multiple technical parameters like the 40-week exponential moving average, weekly upper Bollinger Band & the 200 DMA.

From there, it has fallen below its crucial short-term moving averages. The short-term momentum indicators have also turned bearish.