Street signs: Nifty's 20-DEMA, capital goods stocks gain, and more

Nifty’s 20-DEMA: A Sisyphean challenge

The benchmark Nifty50 managed to squeeze out gains last week to close at 17,957. The index struggled to cross its 20-day exponential moving average (DEMA) for more than a month. Currently, the Nifty’s 20-DEMA is around 18,080. If the index manages to surpass this key hurdle, it may see further upward movement, observe analysts. “The immediate support is placed in the range of 17,750-17,800 – a make-or-break level. On the flip side, the 20-DEMA resistance is seen at around 18,080. Anything above it will lead to a trending move towards 18,200/18,325/18,450 in the short term,” says Ruchit Jain, lead research analyst, 5Paisa.

Capital goods stocks ride on capex leg-up

Stocks in the engineering and capital goods space are seen gaining traction ahead of the Union Budget amid optimism around increased government spending. Some companies in this space include Larsen & Toubro, Siemens, Bharat Heavy Electricals, Thermax, and Techno Electric & Engineering Company. Analysts believe the revenue growth momentum in engineering and capital goods companies will continue, led by robust order backlog, improving supply chain, and overall pick-up in execution. The profitability is likely to improve, with lower commodity prices and price hikes announced by companies in the recent past, say analysts. “We expect the momentum to continue on the back of government thrust on infrastructure development and increase in private capital expenditure,” reads a note by ICICI Securities. 

Waiting for signs of IPO winter thawing out

After two blockbuster months, the listing market will likely remain tepid for a few weeks amid market volatility and some reluctance on the part of issuers ahead of the Union Budget. The S&P BSE Sensex declined 3.6 per cent in December. The possibility of high-interest rates staying longer has led to heightened volatility. Many initial public offerings that hit the market in recent weeks had to trim their issue size. “A lot of institutional investors were on leave in the first week of January. Our sales teams will talk to investors and reconfirm their demands. The filings and preparations will be done accordingly. Those could take another five to 10 days. Companies will only go ahead with their issues if they are absolutely confident about demand. Else, they will launch after February 1,” says an investment banker.