Sudarshan Sukhani of s2analytics.com presents a bullish outlook towards the market next week. The short-term trend is on the upside and trading should happen on the long side, he says.
Currently support has been created at 5,750 levels. The trend may move that forward in the next week, Sukhani told CNBC-TV18. However, he also expects the correction which has started in the market to continue and break the support levels. "I see strong chances of that 5500-5600 support breaking. The only question is, will we see a rally before we break and will the market deceive all of us that is something quite possible" he adds.
He advises investors to watch out for the banking pack to perform like the pharma and IT stocks. He is bullish on HDFC, HDFC Bank and IDFC on the back of positive trends. He advises on selling short on Dish TV and IRB Infrastructure as he feels that the stocks have fallen beyond expectations.
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Below is the edited transcript of his interview to CNBC-TV18.
Q: In the week gone by, the Nifty and the Sensex saw a 0.5 a percent gain. It is on top of the three percent gain in the previous week. By and large the construct has been positive. Will you carry forth that positive sentiment into next week as well?
A: The positive sentiment persists. This is a short-term trend on the upside. It can continue longer than we imagined or dissipate immediately. The trend is intact so trading should be done on the long side.
After 3 percent gains, a 0.5 percent gain is acceptable. Markets will become choppy after big gains. Much more important is the sharp correction that went to 5,750 and the recovery. At least for the time being, a support has been created at 5,750. The Nifty is trading well above it.
If that support breaks, clearly the trend comes to an end maybe those support levels will also move up as time goes by next week and then we keep on talking about it. But for Monday, and as the week starts, we should be having a bullish bias.
Q: The sectoral trends of last week showed that the markets mood was a little more defensive. We saw a lot of FMCG stocks like ITC, Hindustan Unilever (HUL) notch up gains. There were pharma names like Ranbaxy and Lupin that were up about 7-10 percent. Will this construct remain where the market may move higher? Will still be banking on some of these defensive pockets?
A: I would not consider defensives or otherwise. Some of the stocks you named are very strong momentum drivers. So it is probably a matter of chance. Banks did not perform as expected and they were underperformers.
That is the only difference; otherwise most stocks will go up when the Nifty goes up. Next week, expect the banks to play catch up and the pharma and the IT space to also maintain its performance or even outperform.
A: HDFC and IDFC are both bullish in different forms. HDFC Bank has moved into a trading range, built a fairly bullish pattern, a bullish head and shoulder and is willing to get out of it hopefully next week.
That tells us that if HDFC is a heavyweight. If the HDFC is making bullish patterns, perhaps the Nifty is also on its way to the upside. Apart from HDFC, which has a target price of Rs 690-700 on the upside, we have IDFC. IDFC doesn't have the same momentum as HDFC Bank has.
It is bottoming out. But then we are buying almost at the lows of what was a big down trending move. IDFC gives the sense that it is building a small base and is now rallying from that base. We are looking at a target of Rs 135-140 for it. So, both financials have attractive chart patterns of different types for buying.
Q: Given the volatility in the last week, would you have any sell calls for the next week. Although you do believe that the trend could be on the upside, I am sure the market will have a mind of its own.
A: Apart from the market having a mind of its own, market may inch upwards and a number of weak stocks could continue coming down. We saw it this week also. I have a lot of selling ideas and one of them is Dish TV. It has almost collapsed. It has broken down from all kind of support levels and keeps on coming down.
As we speak on last week Dish TV broke its last support levels. There is a free fall here. I don’t know what is going on but Dish TV is a short sell. The second short sell is IRB Infrastructure. I had thought that IRB Infrastructure downtrend should get arrested somewhere around Rs 100. However, that hasn’t happened.
It has broken that level also. Here is a stock that is going in a free fall. Rather than question why it is doing so, traders could well position themselves on the short side in both of these two stocks.
Q: What about the downside for this market now? We have by and large been holding on to that 5600-5650 level. Do you see any chance of that breaking or is that a firm support for now?
A: I see strong chances of that 5500-5600 support breaking. The only question is will we see a rally before we break and will the market deceive all of us that is something quite possible.
However, beyond that, at some point of time I would expect that the correction that we had started is not over. The downtrend that we started 5,500 should break.