Keep an eye on dollar index; top 40 stocks which are showing relative strength vs benchmark

The US markets touched their all-time highs and closed with positive momentum last week. The US Federal Reserve paused hiking interest rates and is cautiously optimistic about the economy.

The US Fed Rates are at 5-5.25%. Inflation is also around 3.2%, which is comforting and probably the reason why the Fed has paused hikes. Interest rates are back to 2007 levels.

Liquidity conditions are tight and all leading indicators like Copper Prices, Crude Prices are beginning to show signs of revival and might trend upwards suggesting a further revival in the economy.

Some layoffs are happening in the services sector which is a cause of concern.

The Dollar Index (DXY) is trading at 102.6 level after hitting 107 on the upside. That establishes a range between 100-107 with the current price being right in the middle. Any fall below 100 might trigger a sustainable rally in emerging markets.

Any rise above 107 level might see all round selling in risk assets. Gold corrected to USD 2004 after hitting all time high of USD 2148 level.

As all timeframes are indicating bullish momentum in Gold showed some reversal after correction in the last week, the stance remains positive and it might soon touch $2500/once levels.

Silver also reversed after giving a healthy correction in the last week and should be accumulated at this level as Silver might outperform Gold in the short term.

So, things are very moderately positive so far as international markets are concerned.

Indian Markets:
Coming back to Indian Markets, the Nifty50 closed at 21456(All time High) last week and India VIX at around 13.12 is suggesting a benign environment. Nifty 50 Daily, Weekly, and Monthly charts suggest a positive trend.

Momentum on daily, weekly, and monthly charts are in the bullish range and therefore Nifty may further move up in the times to come.

We achieved the first target of 21000 last week and the next target (22500) could be achieved by the Election in May 2024, 12 months trailing EPS is Rs 936 and the projected EPS of around Rs 1139 in FY 2024-25 is pointing towards 21800 levels presuming PE levels of 22, suggesting a pre-election rally.

The rise may be straight up or after a decent retracement from the current level depending on various events that may play out in the coming quarters.

On retracement the Nifty should not break 18800 levels on the downside or else all the hypothesis will be revisited.

Bank Nifty also showed positive momentum in the last week and closed at ATH of 48143.55. RBI also suggested a bullish stance in the last monetary policy while the rates remained unchanged. Bank Nifty might take a lead in the leg of the market rise and is likely to hit 52000 levels.

With state results of MP, Rajasthan & Chhattisgarh giving clear mandate to BJP indicates that people have voted for good governance, decisive leadership & stability in both state and general Election 2024.

On further analyzing the sectors of NSE, we found the following sectors to be strong. Also, the stocks showing relative strength to their respective benchmarks are mentioned below.

1. Nifty CPSE: NLC India, NTPC, SJVN, Cochin Shipyard, Coal India, BEL
2. Nifty Infra: NTPC, Tata Power, L&T, Hind Petro , Adani Port
3. Nifty PSU Bank: Union Bank , PNB , Bank Baroda, Canara Bank
4. Nifty Realty: Phoenix, Shobha, Lodha, DLF, Swan Energy
5. Nifty Auto: TVS Motors, Bajaj Auto, Bharat Forge, Hero MotoCorp
6. Nifty IT: Coforge, LTTS, LTIM , HCL Tech, Persistant
7. Nifty PSE: PFC, REC Ltd, BEL, BHEL
8. Nifty Commodity: IOC, NTPC, Tata Power, Jindal Steel
9. Nifty Energy: NTPC , Tata Power , Powergrid , BPCL , IOC
10. Nifty Metal: Hind Copper, SAIL, NMDC, NALCO

Pick of the Week: Coforge, HCL Tech

(The author is the Founder and Managing Partner, Compounding Wealth Advisors LLP, Smallcase Manager)

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