How Tata group firms and Tech Mahindra stand to benefit from growing European markets

European stock markets have touched 52-week highs, while US markets are managing to rebound from the support area. On the other hand, there is a mixed trend in the Asian stock markets.

Opening with its zero covid policy after almost 3 years, China has indicated its return in the race for economic revival. The Hang Seng index has seen its best quarter since Q42020 with a gain of 14%.

indian stock marketAfter outperforming global peers in 2022, struggling to rally higher in 2023 in tandem with global markets.

If you haven’t seen my video onwhat does the market think?”, which focuses on global market trends, watch it here: What do you think the market is? Sunday Brunch with the Stock Market,

We are not discussing the market outlook in this note, but the companies that could benefit from the European markets as they are trading at 52-week highs.

Well, there are many companies in India that export their products or provide services to European markets and earn income in Euros.

An uptrend in European indices means revival in the European economy which will have a positive impact on these Indian companies.

The three large-cap companies that I believe can benefit from a rally in the European market are Tata Consultancy Services (TCS), Tech Mahindra and Tata Motors.

Considering revenues from European countries, TCS accounts for 32% of its revenue from Europe as of FY2012 data, Tech Mahindra accounts for 26% as of FY22, and Tata Motors accounts for 24% for the same period.

Along with these three stocks, there is also one sector which I will mention in the latter part of the article.

Before moving on to the stock charts, let us look at the charts of the European markets.

The first chart is the FTSE100, the United Kingdom’s benchmark equity index.

FTSE100 UK

The index has hit a new 52-week high above 7,700 and is in an uptrend.

On the monthly chart, the index has broken out of the trend line following the decline. 55 months Signaling the beginning of a new trend.

I’m emphasizing 55 because it’s a Fibonacci number. Trendline breakout with Fibonacci time cycles reinforces conviction on the technical setup.

Post Q1:2022, the index has consolidated in a narrow range between 6,600-7,600. The consolidation breakout along with the trendline breakout adds fuel to the rally.

UK market is getting ready to enter five figure league and even German market is following bullish trend from UK index.

Dax Germany

DAX, the German index, broke through the previous high of 14,709 on the above weekly chart.

The breakout after last week’s rally and the bullish momentum this week indicates that the bulls are in control of the trend.

The index has formed a higher low at the 200EMA (Exponential Moving Average) which confirms the strength in the bullish trend.

Additionally, a Golden cross is visible on the daily chart.

A golden cross is a bullish signal when the 50-day moving average crosses above the 200-day moving average.

With the weekly breakout above the resistance zone and the daily signal a golden cross following a reversal from the 200EMA, the bullish outlook on the German index is confirmed.

Let’s move on to the third European index, the CAC40 of France.

CAC40 France

On the CAC40, the technical setup is similar to the weekly chart of the DAX.

Multiple breakouts from the previous resistance of 6,830 after reversals from the 200EMA (orange) and 50EMA (blue) signal that the trend is bullish.

Hence, all the three indices which are followed extensively in Europe indicate a bullish outlook on the charts.

A bullish equity index means better economic sentiment in the continent, and is positive for companies exporting from India.

I repeat, the revenue from European countries for the three companies discussed in this note are TCS (32%), Tech Mahindra (26%), and Tata Motors (24%).

Let us compare the performance of FTSE100 with that of TCS, Tech Mahindra, and Tata Motors.

FTSE100 Vs TCS, Tech Mahindra and Tata Motors

A comparison of the trend on the above weekly line chart shows that these Indian stocks have a positive correlation with the FTSE100.

FTSE100 (blue), TCS (dark orange line), Tata Motors (green), and Tech Mahindra (light orange) are moving in a similar direction.

Although there is not a 100% positive correlation between the FTSE100 and these stocks, if you look at the trend on the weekly chart above, the stocks tend to follow the FTSE100 in the long run.

The trend of these three stocks may depend on the Indian stock markets as well, but in the long run they tend to capture the trend of the European markets.

The percentage returns may not be exactly the same, but they have roughly a 30-35% correlation with the FTSE100.

before discussing the charts of some IT stocks like TCS and Tech MahindraReaders should also note that the Indian IT sector has a high positive correlation with Nasdaq as well.

tcs daily chart

Tata Consultancy Services (TCS) in the IT pack with a weight of 28% in the Nifty IT index and 4% in the Nifty 50 has the potential to drive the Indian stock markets.

stock is formed spring According to the Wyckoff theory, it made a low of Rs 2,918 and is in an uptrend.

According to Wyckoff theory, the spring is the lowest point in the trend, and it marks the bottom.

Recent low of Rs 3,100 Aleboneless POintment of sThe upport (LPS) pattern indicates the major support area.

The structure remains bullish till the price overcomes the spring level of Rs 2,900.

tech mahindra weekly chart

Tech Mahindra, the next IT stock on our list is consolidating between two major bands on the weekly chart.

After declining from its all-time high of Rs 1,769, the stock is trading between 50WEMA.Wekly IExponent MOwing aAverage) has been kept at Rs 1,097 and 200WEMA at Rs 953.

On the weekly chart the 50WEMA dictates the medium term trend while the 200WEMA is the long term trend.

The trend of a stock between the two averages indicates the indecision of traders and investors. A break and close above the 50WEMA could confirm a bullish breakout.

Investors should keep this stock in their watchlist. Any breakout would be the time to act on it.

tata motors weekly chart

Tata Motors’ post-pandemic rally, in sync with the markets, brought the company back into focus. These days the company is in discussion about the launch of its new electric vehicle car at Auto Expo 2023.

it’s also buzzing because the company has IPOs are coming as Tata Technologies and Tata Electronics.

Not only did the rally stall on the post-pandemic move, but it remained higher even after the bullish breakout (horizontal blue trendline).

Since the last quarter of 2021, the stock is consolidating above the breakout (blue line) with support around Rs 350-360, but it is consolidating as one. triangle technical pattern,

The triangle is an indecisive pattern and suggests a wait-and-see approach before a breakout. Breakout levels are placed at Rs 480 on the upper band and Rs 340 on the lower band.

Interestingly, the price is trading or hovering around the 50WEMA, while the slope of the 200WEMA is moving up, indicating a bullish trend.

Considering the trending move with the FTSE100, the breakout is likely to be on the bullish side, but this zone suggests a no-trading zone.

Along with these three stocks that we discussed here, there could be many other companies that are traded in the European markets and could possibly see an uptick in their sales. One area that comes to my mind and export to European market is textile sector,

Textile companies such as KPR Mills, Himatsingka Seed, PDS International, Gokaldas Exports, Welspun, Trident, Jindal Worldwide, and a few other textile companies have business revenue from Europe.

If the European market comes back on track, then we can look at these textile stocks as good investment options.

Please note, these are not recommendations, and the risk of global markets should be taken into account before you consider investing in them.

I’ll be sharing more about their trend on my Telegram group. If you are interested in being a part of my charting journey as I share how to make money from profitable trade setups, Join my telegram channel – fast profit daily,

Disclaimer: This article is for information purposes only. This is not a stock recommendation and should not be treated as such.

This article is syndicated equitymaster.com