Weekly outlook: These stocks are top picks as markets watch RBI policy, FPI

Markets settled on a flat note last week, followed by sell-offs in banking, consumer discretionary, metals, IT and auto stocks. Midcap and Smallcaps also witnessed a selling bias at the end of the week. Investors are trading cautiously ahead of RBI’s impending monetary policy, selling pressure from FPIs, sluggish GDP growth and global signals. Markets are once again gearing up for another volatile week, with RBI’s policy in the limelight amid the deteriorating state of inflation. Experts predict a 25 basis point to 50 basis point rate hike by RBI, following the trend of the US Fed. Also, banks’ reactions to their loans and deposits amid the change in RBI’s repo rate will be closely watched.

On Friday, Sensex settled at 55,769.23 lower at 48.88 points or 0.09%. Nifty 50 finished at 16,584.30 below 43.70 points or 0.26%. Overall, markets were largely flat in the week leading up to June 3. However, some losses were offset by strong performance in heavyweight Reliance Industries (RIL).

RIL shares closed at 2779.50 each up 2.02% on BSE. RIL, the most highly valued company on BSE, had a market capitalization of 18.80.350.47 crore at the closing price. In the week, RIL shares rose nearly 8% on the exchange.

Vinod Nair, Head of Research at Geojit Financial Services, said: “After opening on Monday, domestic indices struggled but managed to hold on to gains. Two factors driving the rebound were a decline in FII sales thanks to good gains in the US and maintaining domestic inflows High-frequency data such as GST collection and PMI showed a good start to FY23 Higher crude oil prices, GDP data and FII sales, and upcoming central bank meetings were “other factors propelled the market during the week. GDP data released this week was in line with expectations of slower growth as consumer spending and investment were hurt by rising inflation.”

Nair added: “The continued rise in the price of crude oil due to the EU’s decision to partially ban Russian oil has hampered the global market. However, the lack of confidence in the domestic market resulted in a sell-off towards the closing hours of the week driven by concerns about central bank policy.”

India’s gross domestic product (GDP) growth slows to 4.1% for the fourth quarter (January – March 2022) of FY22), hit by Omicron-led restrictions in January, global supply shortages and higher input costs. India’s GDP growth is the lowest for the year, compared with growth rates of 5.4% in the third quarter, 8.5% in the second quarter and 20.3% in the first quarter of FY22.

What to expect this week:

Yesha Shah, Head of Equity Research, Samco Securities, said: “Inflation is a key factor and will be the focus of all discussions in the coming week as inflation statistics from China and the United States will be released. Another important event for domestic markets will be the outcome of the RBI MPC meeting Market participants will try to read between the lines of the RBI’s monetary policy and given rising inflation fears, the street expects a repo rate hike of 35-50bp this time around. “

Nair added: “The RBI is expected to raise interest rates by 25 basis points to 35 basis points and the Fed by 50 basis points, but central banks’ thoughts on growth and inflation will be a major determinant of the market trend. banks decide on strict policy tightening, market mood could swing bearish.”

For June 6-10, ICICI Securities’ weekly note said Nifty would challenge 16800 after the RBI policy result by 16800 and gradually move to 17200 by the month of June 2022. Analysts here added, “We believe that after six sessions, a rally of 1000 points, a healthy retracement towards 16500-16400 should be used as an incremental buying opportunity with a focus on BFSI, IT, auto and capital goods.”

Which stocks to invest in?

In large caps, ICICI Securities said they prefer SBI, HDFC, Coal India, TCS, Tata Motors, ITC, L&T and Titan. While in mid-caps, the analysts prefer Bank of Baroda, Ashok Leyland, Automotive Axles, KPIT Technologies, Concor, Trent, BEL, Elgi Equipments, Zee Entertainment and SRF.

Shah added: “Given these major events, investors are currently being advised to use hasty responses to, at best, quality stocks in resilient sectors and diversify.”

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