In an interview to CNBC-TV18, Sudarshan Sukhani, s2analytics.com shared his reading and outlook on market and specific stocks.
Below is the verbatim transcript of Sukhani's interview with CNBC-TV18.
Q: More to go for this pullback or you are getting a bit cautious on the Nifty at current levels?
A: This is one of those periods when the market is not giving any sign and the charts are quiet. The only sign we have is momentum and momentum is on the side of the bulls. However, is there more to go. I cannot say because there are no signs of exhaustion. So, till something happens to the contrary, I am assuming that there is more to go.
We will not look at numbers and resistance. This rally has broken a lot of these resistance levels. So, I will not say it will stop here. We will follow this uptrend while it lasts.
Q: You have chosen to buy Reliance Capital today?
A: Yes. Reliance Capital had a large range move yesterday. That large range move suggests that there is strong momentum. It was way out of the ordinary. So, today we do not want to rush and buy, in fact that applies to most of our buying ideas today. However, during an intraday dip or an intraday consolidation in Reliance, day traders should be looking to buy it. This big move doesn't get exhausted in one day. It continues at least for sometime and then it gives sign of exhaustion. Therefore, Reliance Capital is just starting that big move and we should be in it on the long side.
Q: Why have you chosen Aurobindo Pharma in our buy list?
A: Aurobindo Pharma has gone through a sharp correction, built a base and has now broken out. So, we are looking at stocks that have the potential to move up even if the Nifty goes into a hurdle or goes into a trading range. Aurobindo Pharma had doubled itself so the trend in Aurobindo is up. We are trying to catch the uptrend, a renewal of that upmove.
Disclosure: Sudarshan Sukhani has no holdings in the stocks discussed.
Q: You have UltraTech Cement as well in your long list this morning?
A: Cement is building a base and UltraTech Cement is on the verge of breaking out of it. It is a sector specific call and in that sector UltraTech Cement is probably the best chart. However, cement is suggesting that it is willing to go higher even if the Nifty starts getting choppy. UltraTech Cement's bullish head and shoulder is now breaking on the upside so today we could see a breakout and even if we do not do it in the morning, I would be a buyer on any intraday consolidation. It is a nice chart and could do its own thing without the Nifty.
Q: How would you trade Century Textiles and Industries?
A: A small tepid advance in Century Textiles. This stock is in a downtrend and that advance immediately faced resistance. It wasn't even worth mentioning. However, Century is facing resistance so we are selling into some kind of a minor rally in Century and that seems to be a sensible idea. It is in a downtrend and there is no sign in this momentum driven rally. We saw a lot of stocks turn up sharply. Century failed even to do that. So, the downtrend remains.
Q: Auto stocks participated in the momentum, you choose Maruti Suzuki for the day?
A: Yes. I have been upbeat on Maruti. Auto stocks are now showing strong momentum. Tata Motors is doing that and even Mahindra and Mahindra (M&M) is doing that in spite of the news; adverse or good or bad whatever. However, today's choice for Maruti is becasue it is breaking out of a trading range, it did that yesterday and there seems to be a lot of potential for follow-through today. Therefore, I am assuming that some kind of a buying opportunity, a buying window today should see the trader make reasonable gains on the upside. None of these need to be bought immediately at the opening but after first one or two hours when the market stabilises, all these buying ideas should work out.
Q: You have a sell on Shriram Transport Finance Corporation for the day?
A: Shriram Transport has come in our sell list earlier also. The stock has already topped out, a very clear and visible distribution pattern has been made and it is embarked on down move. This down move will not stop and it is not stopping. The Nifty's rally has not prevented it from going lower. Therefore, a very classic distribution, a downtrend has started, a marked down process, keep on selling it whenever one can. A small rally suggests that one can go short in it.
Q: What is looking more likely for the market in the short-term? The point that you were suggesting that it now faces a bit of exhaustion and gets into a trading range or do you think because of the ferocity of the fall the pullback could have more legs to it?
A: We will find out in a day or two. I wish I could answer that question because that is something that all traders want to know because we had a remarkable pullback. Was this just a two days pullback or is there more to it. We will find out perhaps this week. If there is more to it then one of the next three-four days in this week should see a similar rally on the upside. Therefore, as of now I am assuming that the choppiness in the market is just a pausing point after that rally and it is almost equally likely that we can make another move on the upside towards 6,000 or even more than 6,000. The chances are 50 percent. So, we will just let the market tell us.
However, the point I am making is that it is easier to track the Bank Nifty. The Bank Nifty has been underperforming. So, if the banks starts outperforming in the next couple of days, intraday then that will give a sense that the Nifty is well on course to cross 6,000 otherwise we are going to face exhaustion and next week could be different.
Q: What kind of opening gambit would you put on the Nifty this morning?
A: If the Nifty opens within yesterday's range where the SGX suggests it will then the key here is to wait patiently for the market to spend its decline or its minor downtrend and then buy the Nifty. It is too early to call an end to this momentum driven rally. That may come about but today we should be buyers. Wait and look to buy on dip or on minor consolidations.
Q: What kind of level would confirm that the Bank Nifty is beginning to gain ground again or what kind of level would be a prime indicator that the market could recover some more?
A: One of the ways we will track the Bank Nifty is to see if the Bank Nifty gains ground today even if the Nifty remains choppy. For numbers, we are looking at 12,000. If the Bank Nifty were to cross 12,000; it is at 11,700 odd now. So, beyond 12,000 it starts giving confirmation of a new upmove. There are two methods; we will be tracking both of them. Is there momentum here in the Bank Nifty and is it crossing a threshold.
Q: How would you approach a big bank like State Bank of India (SBI) for the day?
A: I would be a buyer. In this market one should not be looking at short selling opportunities generally, not in the large bluechips. So, for SBI the trade should be, if the market dips in the first half, wait patiently, if one finds support then go long in it.
Q: Yesterday the star pocket was real estate and we saw so many of these broader market names rally about 8-10 percent. How would approach Unitech today?
A: I would avoid it completely. The entire real estate pack is upbeat but I would focus my trading only on two stocks; Indiabulls Real Estate and DLF and the reasons are very simple; it is far better to stick with quality.
Q: IFCI is good for more or you wouldn't step into this long trade?
A: I wouldn't step into this long trade. This is going to come down. I think that is a given certainty. The only question is when.
Q: How do you approach Gitanjali Gems where through the course of last fortnight or so the stock has halved?
A: If somebody owns Gitanjali Gems, it is a pity because this was not something on the charts either. This kind of sharp decline is completely news driven. There is nothing one can do and if the circuits were finally open, I do not think it is a good idea to exit it also. It is far better to wait for future market action. It's quite possible that a base can start getting built in the 200 area or wherever the circuit opens.
Q: Tech Mahindra has been moving strength to strength. Would you support that today?
A: I would and I am gratified because we have been suggesting buying in it and it has come in our morning list again and again. Even now after yesterday's correction and maybe today it could correct a bit more, Tech Mahindra remains a buying opportunity, it made a first bullish pattern. It is in the process of making a second, not confirmed but we are buying on a dip. I would be a buyer.
Q: We were talking in June about the medium-term prognosis for market. Has that changed or is this essentially a pullback in what is still a medium-term bear market kind of setup for us?
A: This is an important question. I do not think the downtrend prognosis has changed. Corrections and corrective rallies and if we were in an uptrend then corrective downtrends, this is primarily a correction. A correction takes so many forms and shapes that we cannot have a tailor made correction. This has started a dramatic pullback maybe we will see more but even if we cross 6,000 or 6,100, I would still assume that the downtrend -- and there is a big reason; bull markets do not start with a V-shape recovery; one day down, one day up with a gap. They build basis inevitably. So, this is not a bull market. It is a correction in an ongoing downtrend, certainly a sharp and strong correction.
Q: How is this tying in with the currency? You were talking earlier about how you have exited some of long dollar positions. Do you see some more relief for the rupee over the next few weeks?
A: I expect not much more relief in terms of points. I assume the rupee is now going to get choppy and probably move in a trading range. That is the only relief. I do not see the rupee going back to 57/USD. However, the market can do anything, but on my chart that appears unlikely.