The market is set for a much deeper correction, believes Sudarshan Sukhani of s2analytics.com. He told CNBC-TV18 that the first target for this down trend is 5780-5800.
Choppy market have given opportunities for both, buying and selling. Among the largecaps, Sukhani recommends buying Infosys and selling Petronet and Union Bank. In the midcaps he has only one recommendation to buy Apollo tyres.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: Is there a chance of the market going well below these 5800-5700 levels in the weeks to come in the run up to the Budget?
A: We have been expecting a decline and talking about it and being on the short side. So yes, most people understand that the market will also go down and there is no sense in fighting the trend. The trend is still down.
Now, it is always possible for this market to stage a relief rally. That could be sudden just as we saw on Friday, there was a very quick half an hour rally. That could extend in the read that we are talking about. I would consider that to be a relief rally and eventually, we should be selling into that rally.
The first target for this down trend is 5780-5800. The markets are setting themselves up for a much deeper correction. Both the Nifty and the Bank Nifty have confirmed bearish patterns that say an intermediate top is in place and markets are looking at much lower levels. So, 5800 eventually may not hold. Now, it is difficult to say whether that happens before the Budget or after.
Q: What are the stocks that you would be either buying or selling in the following week?
A: Choppy markets have given opportunities for buying and selling both. After the big upmove on the back of results, Infosys has been in a trading range, thus looking to buy it. IT stocks are doing well, that is primarily the four majors. I would expect Infosys to breakout on the upside from its trading range. So Infosys is a buying opportunity with maintaining a stop loss. Keep this as a trading call, but it could workout nicely even if the Nifty will have one good day.
Similarly, I will be looking to buy Apollo Tyres, a midcap stock. It has done all the right things, gone through a deep correction making higher highs, higher lows. It is now in a consolidation, preparing to breakout. So, there will be some stocks which will outperform the market. It is wise to focus only on them rather than to search for falling knives. So Apollo Tyres is another buying opportunity.
In the short sell, one of the nice things about today or about this market is that the midcaps have been beaten down so badly that they cannot be shorted anymore, unless they go up. So, that is one big relief that we cannot sell most of them. However, there are some selling opportunities still.
We have Petronet LNG in a downtrend. It saw a three day rally. So, we would like to sell into small strength. Petronet and Union Bank are short sells. Union Bank was battered after bad results. It saw a consolidation, a small two day rally and that rally is good enough to be sold into.
The idea is to sell weak stocks which have seen small rallies and buy the strong ones. That will be the way to approach the market next week.