See Nifty at 6120; bet on IT, banks, oil & gas: Violet Arch

Mithil Pradhan of Violet Arch Capital Advisors sees the Nifty heading towards its all-time high. "There is lot of upside momentum. The rally will continue from here and at least 6,120 should be achieved before any bigger correction can be seen immediately," he said in an interview to CNBC-TV18.

One should play the rally and the upside using a stock specific approach. "I would stick to stocks which are showing a positive relative strength like Kotak , ICICI Bank , Axis Bank or Tata Motors , which has shown superior relative strength, he suggested.

On sectors, Pradhan is bullish on IT, oil and gas and banking. "The Bank Nifty will soon see its all time high. The oil and gas index has given a breakout above that 9,000 level. I see about 10,800 level in the next one or two months," he elaborated.

Below is an edited transcript of Mithil Pradhan's interview on CNBC-TV18

Q: How do you see the Nifty after Friday’s pullback?

A: At least in the short-term I do not see a problem, because the carnage was more or less in the weaker stocks like the infra or the realty stocks. From a technical viewpoint, Nifty carries a make or break level at around 6001-6019 which will be followed up by 5950 on the downside. When we bottomed out on Friday, there was a diagonal pattern at around 6000 area, so that suggests that immediately we can move to about 6120 levels.

I am not concerned about the short-term, because the momentum is up. There is no clear resistance at least at this point of time, but one thing we need to realise as investors or traders, Nifty is approaching the all-time highs and so is Bank Nifty. We are about 4-5 percent away from the all-time highs. Same goes for Dow Jones or S&P 500. S&P 500 is creating a diagonal pattern which gets terminated at around 1510-1525 and diagonal is a topping pattern. So, if we see some weakness from that level the reaction will be seen all over the world. Same goes for Hang Seng.

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We are very near to 24000 levels which has been a resistance in the past and most importantly Shanghai Index which is near the make or break level of 2297-2359. Once Shanghai moves above this level, only then the intermediate bull trend in Chinese stock market will begin. All these factors suggest that at this point of time, I will play the rally, I will play the upsides, but I would stick to stocks which are showing a positive relative strength. Like private banks including Kotak, ICICI or Axis or maybe Tata Motors which has shown superior relative strength.

In sectors, I will stick to IT and oil and gas apart from banking. Oil and gas index has given a breakout above at 9000 level. I see about 10800 level in the next one or two months. Reliance Industries or Oil and Natural Gas Corporation ( ONGC ) are showing good chart patterns on their daily charts. There is lot of upside momentum, but at the same time I will be non-leveraged, because we are approaching a major top which looks like a triple top at least at this point in time.