22 stocks in Sensex pack delivered negative returns last week. What should investors do this week?

Benchmark indices lost over 2% last week despite mild recovery towards the fag-end, weighed down by weak global sentiments and fears of banking contagion in the US.

As many as 22 stocks in the 30-share Sensex pack delivered negative returns with IndusInd Bank being the top loser, followed by Tata Consultancy Services. IndusInd Bank lost nearly 11% and TCS was down 5%.

Both TCS and IndusInd bank were under pressure due to issues related to the management. In the case of IndusInd Bank, the Reserve Bank of India (RBI) gave approval for re-appointment of its MD and CEO Sumant Kathpalia only for two years as against three years proposed by the Bank.

TCS was hit by one of the major exits in recent times with its MD and CEO Rajesh Gopinathan stepping down in a surprise move. The company has appointed Krithivasan as the CEO-designate.

Analysts say these issues for both the companies are only short-term pulls and there would not be much overhang in the long run.

“IndusInd Bank has recovered from its past challenges and has been progressing well on guided lines. We believe the focus would now shift back to business performance from hereon and re-rating would depend upon sustained earnings progression on guided lines,” said Sharekhan in a report. The brokerage has a buy rating on the stock with a target price of Rs 1,400 as it feels the valuations are cheap.

For TCS, almost all the analysts are in consensus that there won’t be much drama around the transition in leadership and it is expected to be smooth. “Krithi has spent 38 years at TCS across different roles and is known as a dedicated company man who should keep strategies largely unchanged,” said JP Morgan.”Planned resignation of CEO comes as a surprise and may create a short-term overhang. However, expect transition to be smooth & well managed, as seen in the past,” Morgan Stanely said.

Apart from the above two stocks, index heavyweights Infosys, Tata Motors, Reliance Industries and Mahindra & Mahindra too were relegated at the bottom in the past week losing up to 4.5%.

What should investors do next week?
All eyes will be on the US Fed this week as it faces an unenviable task to tame sticky inflation without adding turmoil to the financial sector after Silicon Valley Bank’s rapid collapse.

While Fed Chair Jerome Powell earlier signaled willingness to speed up interest rate hikes if needed, most analysts expect a small rise of 25 basis points as the most likely outcome on Wednesday at the end of the Fed’s two-day meeting.

“Easing US inflation provided confidence that the Fed would not opt for a harsh rate hike of 50 bps and might even consider taking a break during the March meeting,” said Vinod Nair, Head of Research at Geojit Financial services.

Despite a short term pullback, analysts advise investors to be cautious going ahead

“Going ahead we expect a short term pullback in the market as lower US PPI inflation and slower US retail sales data has led to the hope of a lower 25 bps rate hike in the Fed policy meeting next week. However the market structure is still weak and hence traders should take a cautious stance at higher levels,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

Foreign portfolio investors have been taking shelter in safe havens such as gold and dollar consistently so far this year. They have net sold about Rs 23,283 crore in 2023. Vinod Nair said that FPIs are unlikely to turn net buyers in the near-term.

Technically, Nifty has formed a Doji pattern followed by a recovery candle on the daily chart, which indicates the possibility of a bullish reversal.

“On the higher end, immediate resistance is placed at 17250, where the bears might try to return to the market. However, if bulls take the Nifty above 17250, the index may move towards 17500–17600. On the lower end, support remains intact at 16950,” said Rupak De, Senior Technical Analyst at LKP Securities.

(With data inputs from Ritesh Presswala)

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

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