Violet Arch Capital advises to buy on dips; suggests stocks

The Indian market has been rangebound and volatile in December. The Nifty is facing resistance around the 5,950 mark

In an interview to CNBC-TV18, Mithil Pradhan of Violet Arch Capital Advisors says the chances of an upside are much higher compared to the chances of a downside. "I recommend buying on declines." He is very bullish on public sector undertaking (PSU) banks and housing finance companies. "If you talk about Allahabad Bank, Andhra Bank and any PSU bank, all these are about to give about 30-40 percent kind of appreciation from here," he elaborates. According to him, it is a great opportunity for buying telecom stocks. "Bharti Airtel remains one of my top picks at this point of time," he asserts. In the metal space, he likes Tata Steel and JSW Steel. "JSW Steel will attract a lot of upsides in the short-term as well as in the medium-term. Tata Steel would remain one of my picks for buying on declines," he adds. Houseviews: Trading tips for 4 buzzing stocks Below is the edited transcript of his interview on CNBC-TV18. Q: What are you expecting to see at the start of the new series? What strategy would you recommend right now? A: My experience says that the last few days of the year, even if it’s a new expiry, do not turnout to be exciting. We need to look at the first week of January, especially around January 6-8. A lot of things are playing out in the global scenario. US Dow Jones and Nasdaq have completed a major pattern, when US Dow Jones bottomed out at 12,300. I remain very hopeful for a new high in Dow Jones in the first quarter of the next calendar year. European markets have already taken out the 2012 highs. In Asia, Hang Seng is one of the best markets at this point of time, rallying pretty parabolically. Japan has just broken out of a double top pattern, the pattern completed around 10,200. Shanghai has completed a wedge pattern at the bottom and has already rallied about 8-9 percent. I see another 4-5 percent kind of a rally. If you look at the dollar index, which topped out around 83-84 levels, has been trending down. I do not see it moving above 80 level in the immediate short-term. My objective would be 77-78 zone. If you look at all these inter market technical indicators or the global equity markets, I do feel that chances of an upside are much higher compared to the chances of a downside. I had a target of 5,880, when Nifty bottomed out around 4,800-4,900 levels. After this target of 5,880 has been achieved, I am in a loss of targets. I cannot say how much the Nifty can go from current levels. But I do say that the probability of upside are higher. I do recommend buying on declines. Q: Despite the scepticism, the star of the series gone by is the Bank Nifty. It is up 4 percent. What kind of formations are you seeing on the Bank Nifty? How are you trading that? A: I think the best part of the rally in Bank Nifty is completely over at this point of time, though I do not rule out further rallies from here. In the last few days, especially in December, the market is just going sideways. There are two ways to look at this. First way, this is a consolidation and some might want to call it a reversal. Consolidations, usually, breakout on the upside. This is absolutely flat consolidation where the market is going nowhere, it is just buying time. I do not have specific levels for Bank Nifty. But then I would like to use Nifty levels out here. The make or break level for Nifty at this point of time is 5,658-5,708. So, any decline of 150 points, I would say 3 percent decline in the market today, is buying opportunity. Financials as a matter of fact is the strongest space in the market today. While the initial rally in Bank Nifty was held by ICICI Bank or Axis Bank or the private banking majors, I think public sector undertaking (PSU) banks have all broken their medium-term make or break levels. If you talk about Allahabad Bank, Andhra Bank and any PSU bank, all these are about to give about 30-40 percent kind of appreciation from here. I have been looking at other financial stocks, let’s say housing financial stocks, infact they are also showing great patterns on their daily or weekly, some of them are showing on the monthly charts. So, while I do not remain hopeful for a large rally in Bank Nifty per se, I think so the other end of the market like PSU banks, housing finance companies are actually going to do pretty well from here. _PAGEBREAK_ Q: How would you approach Bharti Airtel? A: Bharti Airtel, technically, has made a triple top around Rs 250-260 area. That is one good thing that I would like to see in a stock. Secondly, it has moved above the make or break level, around Rs 310 levels. After moving above this level, it has managed to stay above this level for the last few days. Since the medium-term make or break level has been taken out, there is a good chance that Bharti Airtel will try and reach about Rs 400 levels. Last two times, when it bottomed out around Rs 250, it always went to about Rs 400-420 levels. So, this is a great opportunity for buying telecom stocks. I have been maintaining that there will be some sector rotation. The stocks, which have performed well over the past two-three months, might like to take a pause. Strength might come into something like Bharti Airtel. It remains one of my top picks at this point of time. Q: What about the metal space? A: Metal is a lagging stock group. The best performance in this particular sector will happen towards the fag end, once the overall market has moved up. From an index perspective, it has again moved above the make or break level, though I would like it to stay above that particular level for a while. Two stocks, which I would like to point out in the metal space, are Tata Steel and JSW Steel. JSW Steel has bottomed out even from a medium to long-term perspective. The kind of patterns that JSW Steel is forming, though it might be a little late today, but JSW Steel will attract a lot of upsides in the short-term as well as in the medium-term. Tata Steel is more interesting. The stock has created a three-drive pattern around the Rs 350 area, suggesting that the overall bottoming out process is completed for the medium-term. It has moved above our channel, which is a sort of a breakout that a lot of momentum technical analyst would look at. I think it will surely try and achieve Rs 500-520 kind of area. Tata Steel would remain one of my picks for buying on declines.