Nifty to touch 5850; Re may strengthen to 53.67/$: Darashaw

The Indian market had a stable start to April after losing almost 10 percent since February. Regan Homavazir of Darashaw expects the Nifty to touch atleast 5,850, where it will have to be assessed whether 6,000 is a possibility.

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In an interview to CNBC-TV18, Homavazir says, "We are looking at the index as a bottoming out exercise. In this exercise, the index has corrected significantly and we do not expect it to go below 5,550 in any case at the moment. We are expecting 5,850 to come in this pullback before any downsides ensue again."
Talking about the rupee, Homavazir feels the Indian currency is likely to strengthen, with a pullback to 53.67. Below is the verbatim transcript of Regan Homavazir’s interview on CNBC-TV18 Q: We have seen an attempt at a pullback over the last couple of days but this morning is weakening again, what are your expectations from the index?
A: As far as the index is concerned, it has been falling since February and we have lost near 10 percent on the index. In this pullback, we are expecting the index to touch at least 5,850 where it will have to be assessed whether 6,000 is a possibility.
We are looking at the index as a bottoming out exercise. In this exercise, the index has corrected significantly and we do not expect it to go below 5,550 in any case at the moment. We are expecting 5,850 to come in this pullback before any downsides ensue again. Q: What if we do not get to 5,850, a break below what level would force you to take stock of the situation again?
A: You will have to take stock of the situation when you start going below 5,660. So that is where the problem starts and then the 5,550 will look more certain than it is today. Q: What about the rupee? What do you see on the charts there?
A: We are looking at rupee to strengthen and expect it to pullback to 53.67. Q: There seems to be a lot of volatility in auto sector now, what do you see on the charts of the frontline auto names?
A: As far as the autos are concerned, there is a mix bag. If we look at Hero Motocorp, it has become a long-term short.
Now, a pullback is warranted considering the steepness of the fall that it had. At about Rs 1,650 onwards, you will have to start lightening up any long positions and start looking at it going short. Downsides in Hero Motocorp are limited to Rs 1,300 currently, but below that it could become a triple digit stock.
As far as Maruti Suzuki India is concerned, it is one stock that has met its worst case scenario. It is at a scenario where it should be bought. It is a stock that needs to be invested in at the current price and you will have to start looking at the stock trading at about Rs 1,550 and upwards. So, Maruti Suzuki India is one among the stocks that one could switch their entire Hero Motocorp position or Tata Motors position.
The next stock in the list would be Mahindra and Mahindra (M&M). It is a relatively stronger stock. So, M&M and Maruti Suzuki India could be ranked together. Q: What about IT? We will see some earnings coming in next week onwards, do the chart there still looks strong?
A: The chart looks fine. We had recommended HCL Technologies at Rs 500 with a target of Rs 800 that has panned out. However, at Rs 800 HCL Technologies is a sell and today Wipro looks interesting. We are not expecting downsides on Wipro. The worst downside is about Rs 410. We are expecting it to go to about Rs 600.
As far as Tata Consultancy Services (TCS) and Infosys is concerned, they are likely to be market performers and there is nothing more to that. Q: What would you do with ICICI Bank now?
A: ICICI Bank is a buy. The worse case scenario in ICICI Bank is about Rs 970. So, ICICI Bank looks promising.
The bankex is trading at a very significant support. It appears that the bankex itself is showing an opportunity of over 11-12 percent in which case, ICICI Bank, State Bank of India (SBI), HDFC Bank are going to be large beneficiaries of that upmove. So, we are expecting ICICI Bank, SBI and HDFC Bank to stabilise here.
If we look at non-banking but finance related companies, we are very bullish on Reliance Capital. We do not see significant downsides emerging there. On the contrary, we are looking at Rs 480 coming on Reliance Capital. It is basing out at the moment. So, Reliance Capital is one stock that we will look at.
If you want to look at something in the second-rung banking sector, it would be a Karur Vysya Bank. The bank has met its worst case scenario and we do not expect downsides there. We are expecting the stock price to inch higher. Our initial targets are about Rs 580 and our longer-term targets stand at around Rs 800.