SENSEX NIFTY
Sep 10, 2009, 06.50 PM IST | Source: CNBC-TV18

Bullish on auto ancillaries, stay away from sugar: Sukhani

Sukhani cautions investors against sugar but recommends investing in auto ancillaries.

Sudarshan Sukhani, Technical Trends

Sudarshan Sukhani, Technical Trends said that the market has already rallied 7% in five-days and “this is about all the Nifty can achieve.” He said that the market will face a lot of resistance at higher levels.

Expressing his view on Reliance , Sukhani said that he did not expect the stock to outperform the Nifty anymore. He further said that ICICI Bank  was likely to underperform, adding that it was a beaten down stock.  

Sukhani cautions investors against sugar but recommends investing in auto ancillaries.

Here is a verbatim transcript of the exclusive interview with Sudarshan Sukhani on CNBC-TV18. Also watch the accompanying video.

Q: What do you think is going to happen on the charts? Just as we look at the momentum right now and then I’ll get you get into some specific sectors but on the Nifty where do you think is the next big resistance if there is any in this market right now?

A: We will have to divide what the Nifty is doing into two parts – the short-term outlook, the next few days, one-week or one-and-half-week and the slightly longer-term. In the short-term we are topping out today. Now that’s sort of a very bold call to make because the Nifty could go up another 50 points, we have rallied 7% in five-days and this is about all the Nifty can achieve. This has been its historical track record. It then goes into a consolidation, it also corrects, average 150-200 points.

Q: With all due respect – we have seen that the markets as they reach higher peaks actually do 1,000 points on the Sensex faster than ever which means the last 18,000-19,000 or 20,000 when it came last time came very fast. Why do you think that phenomenon is not going to play out because the market’s mood seems to be there and if it was going to play out that way which particular sectors – is it going to be real estate or sugar or steel? What's going to take it there?

A: In my view that happens when the markets reach new highs and there is nothing – no resistance to top it. We haven’t reached that point. Once we cross 6,400 in the Nifty and it is quite possible, we’ll also go into that stage again when we go 6,700 - 6,800 -7,000 - 7,200 in a swift move. We won’t even know what happened. But at this point market has memories – there are resistance levels at every higher number. So that’s very unlikely now.

Q: Let’s talk about Reliance. Was it just two-day outperformance and is the stock going back to its underperformance zone or do you think Reliance has given clear signals that over the next few days it could outperform?

A: It had given clear signals when it was at Rs1,900 that it is making a range and it is looking for a good 200 point move. That’s happened. Now I don’t know underperformance but I don’t think Reliance is going to outperform the Nifty anymore. If the Nifty goes through a consolidation, a correction, then Reliance will do the same. But it is not underperforming anymore.

Q: What about ICICI Bank?

A: I remain sort of downbeat on the bank – ICICI Bank – irrespective of what it does. HDFC Bank, PNB, Bank of Baroda and Bank of India and Canara Bank are far better opportunities. ICICI will underperform.

Q: What's going to happen to real estate stocks? On the charts do you think there is a significant upside in real estate or it isn’t showing up right now and if it is – what stocks do you like in real estate?

A: Actually it is showing up. There is a caveat because it doesn’t mean they’ll start going up from today onwards or rather they will keep relentlessly going up. All stocks will correct including the Nifty, including real estate which will correct much more simply because they are high beta stocks. But with that caveat I think they still remain buy on dips opportunities. The charts suggest higher levels ahead. I would go for DLF, HDIL and surprisingly Unitech which was not an earlier favourite and now is. If you want to go out of the F&O – have a look at Shobha Developers.

Q: Just three sectors where we started to see a huge momentum but they’ve gotten into a U-kind of a curve. Let us take a look at sugar, auto ancillaries and also steel. What do you make out of this – is there enough momentum in auto ancillaries, sugar and in steel?

A: I wouldn’t say sugar at all you should stay away from sugar. We have probably seen a short-term intermediate top in that sector. Auto ancillaries – yes, they are better placed as compared to the auto stocks. Two stocks that I can talk about is Amtek and Banco India.

Metals, again gives an impression that some kind of a blowout is happening in the midcap metals – I wouldn’t touch them.

 

Disclosure:

I may have recommended stocks. I have positions in the Nifty all the time.

 

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