In an interview to CNBC-TV18 technical analyst, Sudarshan Sukhani, s2analytics.com shared his outlook on stocks and market.
Below is a verbatim transcript of the interview:
Q: The last week (second week of April 2013) went by with the Nifty just scraping through the 5,500 level. Do you see the downtrend resume next week?
A: I do not know. We are going to let the market tell us. Luckily, we now have visible patterns and the pattern is that Nifty is in a clear, well defined trading range for the last six trading days, almost 10 calendar days. That range is clear – 5,600 on the upside and roughly 5,500 on the downside.
Trading inside a range is never a good idea. Now we know that we are in a range so we will just keep quiet. If the Nifty cracks and goes below 5,500 then all bets are off. This was a consolidation and we are going down towards 5,100.
In case the Nifty inches upwards, crosses 5,600 then we are in the midst of a corrective rally. We can go to 5,700, even 5,800. So, the markets perhaps next week will tell us where it wants to go.
Q: How would you approach the entire technology pack now? With Infosys down 20 percent, is there any strategy there or would you advocate some strategy in names like Tata Consultancy Services (TCS) and HCL Technologies ahead of their numbers?
A: For Infosys, there is no strategy now. It is far too gone to consider buying and certainly it is not a short selling candidate any more. Today was a very unusual day for Infosys, for any largecap stock. We have to let Infosys be and let itself find out what market think of it. That will take months.
However, there is a strategy for Wipro, HCL Technologies, for TCS as well as for a number of good quality midcap stocks, Geometric, Hexaware Technologies. I am assuming that the small dips that we are seeing are essentially that dips. So, we would like to buy these dips once earnings are out of the way. We want to buy the dips only after TCS announces earnings and so on. There is no sense in standing in front one day before the earnings and buying that. The trade should be to buy it. For intraday traders, you can buy irrespective of earnings.
Q: On specific strategies, would you have any buy calls as we head into the next week?
A: There are a number of stocks that are giving basing formations, bottoming out patterns. So, they are buying opportunities.
First of them is Hindustan Petroleum Corporation Limited (HPCL) - Bharat Petroleum Corporation Limited (BPCL) also. HPCL is giving us a slightly better chart. It was a decline. After a decline, we saw a trading range. That was essentially a small base.
On Friday, HPCL broke out of that base on the upside. That is a good pattern to be in. I would be a buyer in HPCL as well as in its associate company, BPCL, except that HPCL as of now has a better chart.
Similar patterns are available in Dr Reddys Laboratories. Dr Reddys Laboratories of course was on a rally, there was no decline there. After a rally, it has been consolidating for four-five days - that consolidation seems to be over because on Friday it began another momentum driven upmove. So Dr Reddys Laboratories is a buying opportunity.
There are opportunities. If the markets are choppy, we should focus on buying and selling of stocks rather than the index.
Q: You have a couple of sell calls on your list. Can you take us through that?
A: We have already discussed on different shows the fact that metals and banks are selling ideas if the Nifty cracks. So I will not discuss them.
There are some midcap stocks in the futures and options (F&O) segment, which are worth selling. First of them is Welspun Corp. Welspun Corp has fallen from Rs 100 to Rs 50, halved in the last four months. The downtrend continues. Here is a stock that has something wrong going on for it. One or two day pullbacks and then the downtrend has resumed. On Friday, the stock has made new lows. This momentum on the downside will continue. So consider selling Welspun Corp.
The other one that I would suggest is an erstwhile favourite - Aditya Birla Nuvo. The stock has done all the wrong things. It rallied, the rally flopped, the lower highs, lower lows are being made as a steady pattern. While the Nifty went through some upmoves, Aditya Birla Nuvo did not go up at all. There is a strong resistance and the resistances are holding as new lows are made. So there will be midcaps where selling is justified and these are two that I have discussed.