In an interview to CNBC-TV18 Anu Jain of IIFL Private Wealth Management said, Indian indices are overbought. She is looking at a Nifty target of around 6083, but adds that crossing this level will be difficult. "Some kind of traction is required from Bank Nifty to support these levels. If Bank Nifty scales up to 11780, hold those levels then probably there will be scope for Nifty to move higher," she says.
From the IT pack, Infosys and HCL Technologies are overbought, she told CNBC-TV18. Infy will see a correction of about Rs 40-50 before it crosses to Rs 2840. Despite being overbought, HCL Tech still looks good. Tata Consultancy Services (TCS) looks sharper at Rs 1609. She feels it would find a lot of support at Rs 1590 and it is giving a far bigger target for about Rs 1770 odd over a longer period of time. Tech Mahindra too seems to be looking good, she says.
Below is the verbatim transcript of Anu Jain’s interview on CNBC-TV18
Q: How is it looking for the Nifty, good to go after last week or would you play for a breather here?
A: The indices are overbought. Given that it is at the upper end of the Fibonacci Fan so if we were looking at a target you are close to 6083. About 50-60 points, crossing 6083 is going to be as tough as it was to cross those levels of 5920-5950, you will probably need something like a gap up to cross that and hold that. So 6020-6025 if we can hold for a couple of days then probably more strength will build up. We have seen the technology and the pharma sector outperform considerably over the last two weeks and having said that both are over bought.
So you would need some kind of traction coming from Bank Nifty to support at these levels. Currently it is moving in that 11440-11780, it has not been able to cross those levels at all. So as usual the person who is going to decide or the sector which is going to decide is banking. So if we do see the Bank Nifty can scale up to 11780, hold those levels then probably there is a scope for Nifty moving higher. But as of now it is a 50-50 chance that it can break down also. So it is a very undecided move as of now. I wouldn’t say that you can take a real bet that you can move strongly on the upside or the downside. You have support on the Nifty at 5860-5880 so it can go back there to test, but individual stocks which would be good to play on the positive and the negative side.
Q: You have an interesting pair strategy between Reliance Industries and Oil and Natural Gas Corporation (ONGC)?
A: Overall these sectors are giving a very joint move together. So if you are looking at pharmaceutical, most of them, even if you look at the weaker ones like Cipla and GSK Pharma which doesn’t move, have shown that they are going to start moving.
Now in oil and gas we have had weakness obviously in the oil marketing companies (OMCs) and ONGC but Reliance has been good, Indraprastha Gas (IGL) has been good. Now Reliance is moving towards a breakout. On the technical charts Rs 902-905 seems to be a resistance. The 52-week high of the chart is about Rs 955. The way it has moved especially throughout the day on Friday, it shows that Rs 860-865 is going to be a level which is going to be very difficult to break. Given that it has moved already about 2-2.5 percent on Friday I think any dip is an accumulation area looks like it may get some resistance at Rs 905 but overall it is moving towards Rs 920-925 zone then you will see a down move. So that is a positive bias over a one month, you are going to see 7-9 percent move coming into the counter.
On the other hand, ONGC which has been in the Rs 300 zone, that is the reason the 10-20 day moving averages are scaling out. However, now it is showing weakness. So for it to cross Rs 307, it is going to be equally difficult. So with a stop loss panned around those levels one can short every rise in that counter. So within the same sector you are getting one long, one short with a conviction level which is pretty high.
Q: What do you see on some of these IT charts because it looked like delivery based buying on many faces like Infosys, HCL Technologies, Wipro, technically are they looking like they are moving higher?
A: Yes technically they are moving higher but they are all overbought. So whether it is Infosys which can give you a correction of about Rs 40-50 before it crosses to Rs 2840 that is a resistance that is also where it was because then the next targets would be closer to Rs 2980-3020 kind of levels.
Tata Consultancy Services (TCS) is looking in fact sharper at Rs 1609, looks like Rs 1590 would be a place where it would get a lot of support and it is giving a far bigger target for about Rs 1770 odd over a longer period of time. So that is looking good.
In the midcaps, Tech Mahindra is looking good, it has also broken out on that day. HCL Tech is definitely overbought but that is also looking good. So all the majors are looking good. Wipro has got a slightly negative bias because of the way it closed on Friday but if these three stay positive or consolidate that could be the next move towards Rs 400. So definitely the sector itself is very strong, having consolidated for so long, probably two quarters, now needs a pause definitely and if there was immediate move I think that would probably come in Tech Mahindra before the others.
Q: Below what level would you start to worry that this pullback to 6000 plus is coming to an end, it is not just a short-term pullback?
A: I would basically look out more on the Bank Nifty levels very honestly than on the Nifty levels because everything else has moved and is showing strength. So if Bank Nifty shows this resistance around this 11780 levels or 11720 levels, if we see say ICICI Bank which is at support moving down, State Bank of India moving down and we know that this sector is not going to support. So a 140 point move down to the Nifty to take a short call would be late.
So closer to 6000-5980-5970 if it is breaking along with Bank Nifty breaking this then to take in profits where you have profits and then sit light and watch the markets would be the strategy because then it could go back, test 5860, again be in that very volatile zone of one day up, one day down. So it would make sense to stay out.
Q: Not a good idea either to take a positional call on the index for this series?
A: We have seen the whole way that it has panned out over the last 10-12 days, it is one day up, one day down then you get a gap up which is not playable. So I don't think taking a call on the Nifty itself is a strong idea. You have got individual stocks which are giving you far more clarity so why would one take it on the Nifty. Intraday it makes far more sense to play it out or through the Options route when you are very sure but as of now to take a long view of about 15 days on the Nifty, I am not convinced we should do that.
Q: Anything from the midcaps that is beginning to show you a clean uptrend?
A: There have been stocks which have been doing very well in the midcap, so I don't know if we can really after this move call United Spirits a midcap. But the fact still remains that the way it is panning out after the deals closed also, it is very consistently over the Rs 2600 levels, has panned over Rs 2700. So if it is not breaking Rs 2580 which looks to be now a very strong area, I think over a month and half you are going to see another 7-8 percent move coming on the charts. The indication is that it is probably going to make higher tops and higher bottoms. So it is a volatile stock but that is one place where the conviction level is pretty high.