Pre Budget rally has begun in sugar, fertilizers and metal stocks: Rameshver Dongre

“We can say that there is a pre-budget rally, especially in the economic-centric stocks like sugar stocks, Fertilizer stocks and Metals where we saw good momentum,” says Rameshver Dongre, Research Analyst - Equity Research at CapitalVia Global Research Ltd.

In an interview with ETMarkets, Dongre said: “Domestic equity indices have bounced back sharply from its recent low, and now it may be on track to set new records if the finance minister meets expectations of the investors like to cut the long-term capital gain tax on equity, reduce GST,” Edited excerpts:

Q) A little bit of volatility, but the bulls managed to put handsome gains on the board in the last week of 2022. What led to the price action?
A) The overall trend of the market is bullish. This week, the Nifty and Bankifty both opened on a flat note and managed to close above 18150 and 43,000 levels.
We are seeing an increasing level of spending on infrastructure, railways, and defence by the government of India. Recently, positive news for the metal, fertilizer, and sugar sectors lead positively to the price action in the last week of the Year.

Q) Based on the December series expiry and rollover position for the January series – where do you see Nifty50 hovering in the new series?
A) December series expiry observed volatile trading. In the trajectory of negative news related to Covid-19 cases and interest rate hikes.
But, in December month 70% of Nifty futures contracts rolled over for the next Month January, on Thursday, as per the exchange data.
According to rollover data, traders bet on the bullish side. So, before the Union Budget, positive movements are expected in the market.

Q) In terms of sectors, metals bounced back sharply in the week gone by – what led to the price action, and will the momentum continue?
A) The overall trend of the Nifty Metal Index is bullish on the long-term chart after a correction index has taken the support of 6200 and resumed the uptrend.
In the year-end Review-2022 Ministry Of Steel has taken recent initiatives for the growth of the steel sector; mentioned here Production Linked Incentive (PLI) Scheme, Steel Prices, Decarbonization in the steel sector led to the price action in the metal Index and after crossing important resistance of 6600 it touched 6804.60 high this week.

Now, its major resistance is marked at 6835, and once it crosses this level, then 7040 and then 7130 levels can be seen.

Q) Small & Midcap stocks also outperformed in the week gone by – can we say that the pre-budget rally, especially in the economic-centric stocks, has begun? How should one play this theme in January?
A) Small and Midcap stocks also outperformed in the week gone by. Yes, we can say there is a pre-budget rally, especially in the economic-centric stocks like Sugar stocks, Fertilizer stocks, and Metals where we saw good momentum.

This week, after a correction, we saw a good recovery in the Nifty PSU Banks and Nifty Oil and Gas Index, and in January these sectors can also participate in the list of outperforming sectors.

Q) What are the expectations from the investors' community from the finance minister for Budget 2023?
A) Domestic equity indices have bounced back sharply from their recent low, and now it may be on track to set new records if the finance minister meets the expectations of the investors, like cutting the long-term capital gain tax on equity and reducing GST. The government also needs to ensure incentives and motivations that would support the realty, infra, and energy sectors.

Q) Your 3-5 trading ideas for the January series?
A) Here is a list of top trading ideas for the January series -

Bata India: LTP Rs 1650 | Buy above Rs 1670 | Stop Loss Rs 1599| Target Rs 1790-1860 | Upside 7%
The overall trend looks bullish for Bata India and after a correction, we observed RSI is in a positive divergence. The stock is also experiencing buying demand in the range of 1600-1640.

One should buy Bata India on the breakout above Rs 1670 with a stop loss of 1599, and near-term targets are placed around the 1790 and 1860 levels.

LODHA: LTP Rs 1091 | Buy in the range of Rs1040-1060 | Stop Loss: Rs 899 | Target: Rs 1240-1320 | Upside: 17%
The major trend of the stock is bullish on the weekly chart. After ideal correction, it has given a trendline resistance breakout on the higher side and is also maintaining above the 50 & 200-Days EMA.

Investors should maintain a bullish view of it as long as it sustains above the 899 level and on the higher side Rs 1240 and then 1320 levels can be seen.

HPCL: LTP Rs 235 | Buy in the range of Rs 225-230 | Stop Loss: Rs 209 | Target: Rs 256-290 | Upside: 14%
HPCL's recent trend is bearish on the daily chart, but on the weekly charts, we can see RSI is strengthening and observed positive divergence.

Technically, on the chart, it has already given a breakout from a trendline and came to retest the support zone. From this range of 225-230, it is expected to resume its uptrend and can continue up to 256 and 290 levels. Our bullish view will be valid as long it sustains above the 209 level.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)