The bulls are back! Buy on dips and pick quality stocks to ride the rally
The government, indeed, conducted a surgical strike on the bears on Friday.
When such gloom doom scenario surfaces across all communication mediums, it means the capitulation is over and any good news will kickstart the bull market. The government, indeed, conducted a surgical strike on the bears on Friday, taking the market higher by a massive 5.3 per cent. In one stroke, the government made companies richer by Rs 1,45,000 crore per annum by reducing the effective tax rate on companies to 25 per cent from 33 per cent. Salute to the bold move by the government in the form of ordinance.
September quarter numbers will see massive upgrades in earnings with a minimum of 10-15 per cent increase in profits due to the tax cut. Valuations of all companies have now become more reasonable and competitive with the rest of the world compared with other emerging markets. This will hopefully bring the FPIs back to India. The Modi Government 2.0 has indeed made retail investors laugh as they continued to pour Rs 8000 crore in the form of SIPs, but the FPIs have done the opposite.
Event of the Week
An attack on the oil-producing facilities in Saudi Arabia, although rattled the world, fizzled out eventually, but the most important indicator was the flash by gold, which did not move up and sustain the price rise. It shows that the world is not risk averse and investments will not flow into gold, but will readily come into equity markets.
This global risk-seeking sentiment will help India quickly recover losses and reach new highs before Christmas.
Nifty50 has made a ‘Wide Ranging Day’ bullish pattern, which is a powerful indicator of trend reversal. The market has also reversed from its previous support level at 10,650, completing an important downcycle. The market will continue to move higher with intermittent deep corrections, which should not shake up the confidence of long traders. The 11,000-11,100 range is a good range to go long. ‘Buy on decline’ should be the strategy for traders and short selling should be avoided.
Expectation for the week:
The market will take a breather after the massive runup on Friday by correcting some bit. It is important to see when FPIs resume their buying spree and how they take the tax cut.
‘Buy on dips’ should be the strategy for all investors and quality stocks should be bought now. Private sector banks, consumer durables and FMCG should be the sectors to allocate money aggressively while at the same time money should also be allocated to smallcap and midcap funds to generate higher risk-adjusted returns. Do not delay but invest before September 30 to ride the ensuing bull wave by entering at the nascent stage.
Nifty50 closed the week 5.3 per cent higher at 11,274.