Sudarshan Sukhani of s2analytics.com is uncertain of the market will witness a correction. Sukhani advises investors to consider this uncertanity and go short on rate-sensitives. His top picks for next week include Ranbaxy and Coal India.
Below is an edited transcript of the analysis on CNBCTV-18
Q: Would you concur with the view that after the ferocious run in the market, some correction perhaps is on the cards? And to what level do you think the correction could extend to next week?
A: I cannot say with certainty that a correction is on the cards because corrections never come on demand. However it is easier to say that after a sustained upmove, the market is facing significant resistance at the 5,900-5,950 level. If this resistance holds, then it could correct.
The market could go up to 6,000 and then correct from there or from 6,100. A single-day's run is not enough to estimate the onset of a correction because there is not enough evidence yet.
Q: Next week, all eyes will be on Reserve Bank of India's (RBI) monetary policy and lot of traders will try to find opportunities in rate sensitives. Would you advise bets on any rate-sensitives next week?
A: Broadly, the Bank Nifty has run up far more than most other stocks or sectors have. But outperforming sectors will also take a pause. All the good news anticipated has been discounted by the banks- largely by private sector banks and by the Bank Nifty itself. For next week's trade, I advise traders to go short on rate sensitives rather than to try and buy on dips.
Q: What are your buy and sell calls for next week?
A: Though the markets could be choppy, that does not mean they will immediately fall. There will be opportunities on both sides. I would advise a 'buy' call on Ranbaxy Laboratories as it is bottoming out and it is a process that can be bought into.
The second stock to buy is Coal India Ltd (CIL) which seems to have completed a correction. It has started to inch upwards from the base and strong support level of Rs 290-295. It is a blue-chip stock, offers high-quality buying opportunities and presents relatively smaller risks. Investors could also focus on non-banking stocks this week.
On the sell side, my favourite has been Jindal Steel. The stock has relentlessly plummeted. From Rs 700-800 onwards, the stock has never stopped to fall. When it touched a trading range, there was hope that the stock would turn around from this level. But that trading range was simply a pause and the stock broke down further. This indicates there is further downside in the stock. So, short-selling this one is probably a good idea.
Rate sensitives need to be looked at from a shorting point of view. Dena Bank is a short-selling idea which rallied and faced significant resistance at Rs 97-98 to only start coming down. Investors could look forward to take advantage of any small or sharp correction afforded by the market. Investors could look to short-sell Dena Bank.