4628 crucial levels on Nifty now: Modern Shares

Q: IT has been the stand out support for the Nifty over the last couple of months. How does the sector look now after the recent retracement and what’s your favourite stock here?

Pillai: Coincidently IT, FMCG and pharmaceuticals- these three sectors broke out when the market was breaking down in the month of January and they continue to hold on to their gain and extend gains. So by default, this sector becomes a buy on every fall. Most of the frontliners have come up to their major target but on the fall one can surely buy into. One can look at TCS between Rs 975-935 for a target stretching up to Rs 1,020 to Rs 1,100. The sector looks like a good buy on the fall.

Q: Oil as well has been in the news and interestingly your pick over there is Indian Oil Corporation (IOC) and not Cairn India or Essar Oil? Tell us why you like IOC’s chart?

Pillai: As a house we have been maintaining that oil Public Sector Undertaking (PSU) seems to have majorly bottomed out. But they have not been supported fundamentally by the rise in crude oil price but even then, they are not going to a new low. So the stocks are very resilient at the bottom. So I typically feel if one can pick up IOC between Rs 433-410; one can take a call up to Rs 463. Maybe with the petrol price hike, one will see a spike and then one will hit the target and it may come down. But it continues to be a buy sector for us, oil PSUs.

We feel typically that between USD 135-145, crude oil may top out and that’s when Cairn will also start falling. So to that extent we are bullish on oil PSUs as of now.    

Q: What is happening with real estate, are those charts breaking down again and is anything looking relatively strong there?

Manghnani: Clearly, it is the weakest sector and no doubt probably the most interest rate sensitive sector and with the high inflation numbers; no surprise that this sector is being beaten down - probably you will get trading bounces.

The sector is way oversold. So you may get trading bounces. But way oversold does not mean bottoming out. It could be even further price erosion or just time sort of bottoming out process. So I think that will take a while but you could play for a trading bounces.

DLF is at new lows, Unitech is at new lows, Sobha is at new lows; I have gone and picked HDIL. One reason is because it is not just broken down like the rest of the sector. So I think anywhere between Rs 675 right up to around Rs 632 sort of levels HDIL can be bought for a trading move back to about Rs 717-725 levels keeping a stoploss below Rs 630. But again I think this whole sector is just going to give you trading bounces, they are going to be very shallow bounces not sort of break out moves. So one should be careful and when one is trading this sector and buying because of oversold, should keep strict stoplosses because I do not think the worst is over.

Q: What about the banking space. What are you seeing there and anything that you would still take a long position on?

Manghnani: Again similar to realty. But may be not as oversold as realty; a very weak sector and the problem there is stocks like ICICI Bank are coming back to retest their March lows closer to Rs 720. But the big problem has to be State Bank of India; the fact that it broke below its March low of Rs 1,580 which was around the rights issue price. One saw what happened to the stock after that and that’s pretty much happening across the market its just not in banking; in any of the weak sectors when a stock is breaking below their March or January lows its tanking after that and SBI has collapsed another Rs 200. So that’s what bringing down specially the rest of the PSU banks.

I have gone for an oversold stock but still more downside. It retested its March lows yesterday was IDFC around Rs 135 was the March lows. I think if the stock can fall further anyway in the range from Rs 136 deeper fall and giving it up to Rs 116 purely from an oversold sort of scenario and it is one of the favourites among lot of the institutions also so one may get institutional base buying at lower levels. So anywhere between Rs 136 to Rs 116 can accumulate for an upward bounce back to Rs 151 to Rs 163 levels. But take time accumulating this sector.