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  • Jimeet Modi

    CEO, Samco Securities & StockNote
    The founder & CEO of SAMCO Securities, StockNote and the Indian Trading League Company, Modi believes that price is the most important factor in investing. He is credited with developing the AIRM (TM), an approach to screening stocks and businesses in a scientific manner. His role model is Warren Buffett.

Buy on dips! Nifty structures are suddenly suggesting a bullish bias

Instead, there seems to be some relief on the trade war front, as the US President has reportedly agreed on a phase one deal with China. Postponement of new tariffs on Chinese goods has also provided a sigh of relief, not only for the Chinese economy, but for many others across the globe.

In the bay as well, IPOs seem to be the mood of the season, as investors picked up Ujjivan Small Finance Bank in hoards. All these factors kept the Indian market afloat, as the undertone seems strong on the back of steady flow from domestic institutional investors, who are not willing to liquidate their holdings.

The government, too, is stepping out of its comfort zone and firing on all cylinders to push the growth rate. Recently, it made further amendments to the Insolvency and Bankruptcy Code by providing immunity on offences committed by previous managements or promoters, if any. Given the underlying slowdown in the economy, such government dispositions would be sending out the right signals, which could boost the economy.

Event of the week

In the recent US Fed rate-setting meeting, Chairman Jerome Powell said there is good visibility for the US economy over the next one year. A status quo on rate revision implies possible sustained expansion of economic activity, which will further boost demand. As the CRB Commodity Index trades at its 10-year low, it has very high chances of rising in the future, as demand is likely to pick up.

Base metals and, to some extent, steel stocks should start delivering handsome returns to the shareholders.

Technical Outlook

Nifty50 continues are likely to show bullishness as it heads towards the 12,100 level. It has formed a double bottom within 3-4 weeks, which indicates a bullish bias in the medium term. It bounced back after taking support at 11,800, thereby showing strength. On the weekly chart, a Hammer pattern has emerged, which indicates further upside, but profit booking is likely to emerge at 12,150 level. Traders should buy on dips with weekly lows as stop losses.

Nifty 50

Expectation for the week

After Boris Johnson won the UK election by a bigger majority, the market will keenly await the date on Brexit, which is most likely to happen by January 31 now. Fortunes of many Indian companies with exposure to the EU markets will now rest on this deal.

Additionally, the GST Council meeting next week will also keep Dalal Street under pressure, as there are expectations of possible tax hikes on certain goods and services. If tax rates rise, the market may witness corrections from current levels. Investors can invest in cyclical, commodity-related stocks with a focus on metal stocks.

Nifty closed the week 1.4 per cent higher at 12,086.
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