How you can make most of recent market rally

The BSE Sensex and Nifty recovered from earlier falls to post their biggest weekly gains of the year as Larsen & Toubro surged on expectations it would benefit from potential rate cuts and the government's push to boost infrastructure.

Both indexes have gained every day this week to mark their longest winning streak since January, as banks have surged on strong hopes the Reserve Bank of India will cut interest rates this month in a bid to boost faltering domestic growth.

Infrastructure stocks have also been big gainers this week, helping push broader indexes to their highest closes since May 7, after the government promised this week to kickstart projects, starting with roads and airports.

The twin hopes of government action and monetary stimulus have raised the hopes of investors, who have gone from selling on rallies to buying on declines after a tough month of May in which stocks slumped and the rupee fell to a record low against the dollar.

So, how should you play the market now and which stocks/sectors are a safe bet?

This weeks moneycontrol.com's initiative, 'Know Your Investment' with Chandan Thaparia, Derivatives Analyst, Anand Rathi brings you answers to the queries you asked us on our Facebook page.  

Here are the questions and Thaparia'sanswers

Ali Asgar Afp: Which stock should I buy for the long-term?

Taparia: Raymond. It has seen better rollover in past 3-4 derivatives settlement. Fresh built up of long position is seen in the stock at every decline. If it sustains above 375 levels then it may head towards 400 to 420 levels too.

IBREALEST: It can be purchased for next quarter as it looks attractive in terms of risk reward ratio. If it sustains 55 levels then it can go to 65-70 levels. To play safe, Option traders can trade in slightly out of the money strike option.

Taparia: One can buy Abirlanuvo, which is trading near its monthly support of 725 levels. Stock has nature of trading in between 700 to 1000 levels. Now it is near to the lower band of the trading range so can be traded for target of 900-950 levels.

Nethra Mahesh: What is your target on the Bank Nifty for this month?

Taparia: In the month of May, Banknifty future had steeply fallen towards 9000 levels as it broken psychological 10000 marks. It recovered well in this month and now again hovering at around 10000 levels. If it manages to hold 9750 then this index can head towards 10,400 levels.

Dr. Jayesh Gaygol: What is your view on IFCI?

Taparia: Some momentum may be seen in the stock, which are in line with market relief rally. Keep the strict stop loss of 33 for the upside target of 42-43 levels. We are not so optimistic about the growth in the stock.

Kousik Ghosh: Is it the right time to buy Jindal Steel and Reliance Industries?

Taparia: Jindal Steel: It faces fresh selling at every bounce back. If it comes to 480 levels then short position can be made for the down side move towards 420-400 levels.

Reliance Ind: Reliance ind had taken immediate strong support at around 675 levels. But we are not expecting any big move in the stock as it faces sustained selling pressure at every bounce. If it sustains above 720 levels then positive move may continue towards 770 levels.

Shakti Singh: What's your view on Adani Enterprises?

Taparia: Adanient has been falling down since past four consecutive quarters. It had corrected sharply by 70% in past four quarters from 765 to 225 levels with huge built up short position and now not even ready to give bounce back with market rally. Avoid this beaten down stock till it doesn’t cross and decisively sustains above 270 levels.

Vinayak Shastri: What about Housing Development and Infrastructure (HDIL)?

Taparia: After a consolidation of past five weeks, it has made a stable base at around 60 levels and rallied towards 72-73 levels. It looks attractive at these levels in terms of risk reward ratio, but better to trade the stock at a decline which lands up at around 60 levels for the upside target of 80-85 levels.

Vaibhav Sharma: What is your long-term target for IDFC?

Taparia: We advise to trade, if Mr. Vaibhav wants to trade for a short term perspective. He can buy at around 130 for the immediate target of 140 levels. But take care in the stock as rally fizzles out very fast.

Kumar Vikas: What is your view on Suzlon Energy?

Taparia: Earlier it used to be a public fancy stock but many investor or traders got stuck in the stock at higher levels.

It goes lower day by day and now trading near its life time low of 17 levels. It is highly oversold but not ready to bounce back. Better to avoid the stock till it doesn’t show any sign of consolidation or base formation. Heavy call writing happens in the stock which drags it to lower levels.

Jayanthi Menon: Is Alstom Projects a good buy?

Taparia: APIL is not doing well since past five months. Buy the stock if it sustains above 370 levels, above that it can see some momentum towards 410-415 levels. But below 330 a high caution is advised, as in that case it may go below 300 levels.

Indrajit Ghosh: What is your long-term view on Lanco Infratech and IVRCL?

Taparia: In line with other realty and infra stocks, LITL and IVRCLINFRA are also highly beaten down stocks. Some momentum is observed in these stocks with rising trading and delivery volumes.

LITL can be buy with the stop loss of Rs. 10 for the upside target of 17-18 levels.

Ivrclinfra had fallen down sharply from 75 to 39 levels in past eight weeks. The way it has formed base around 40 levels, indicates that stock can bounce back to 50% of its past correction and reach to 54-55 levels.

CA Aman Sethia: What is your call on ITC?

Taparia: ITC is stuck in a trading range of 220 to 250 levels. It seems that people are now shifting from defensive to aggressive counter as they are highly beaten down. We are expecting that the stock would be in a narrow range for next couple of weeks. Profit booking is advised at around 245-250 levels.

Bilal Ahmad: What about Tata Motors?

Taparia: May 2012 Derivatives settlement was a worst month for the Auto stocks. In this month Tatamotor was the worst performer even in Nifty 50 stock which was corrected by 24%. If it sustains above 240 levels then a short covering move may be seen towards 255 levels but that would be an exit opportunity  for those who have been stuck in the jam. Whereas on downside, if it fails to hold 232 levels then it can drift down below 220-210 levels.