"Certainly, ABB India and Siemens are portfolio stocks. Both the stocks are in a structural uptrend. Investors may continue to stay invested in these stocks," Milan Vaishnav, CMT, MSTA, and founder of Gemstone Equity Research & Advisory Services, told Moneycontrol in an interview.
Among sectors, he expects the Nifty Pharma index to stay strong over the coming months.
Further, despite a strong performance by the Nifty Auto, he sees some loss of internal strength in the index. "I expect this index to take a breather and see some corrective retracement," said Vaishnav, who has spent nearly two decades in the capital markets.
Edited excerpts from the interaction follow:
Do you think the downside is limited in the Nifty now, especially after reading the charts?
I will not say we are completely out of the woods as yet. In fact, the current retracement is the first sign of a disruption of the primary trend. As of now, the high of 22,794 has become the intermediate top and unless this is taken out, we will find the markets vunlerable to profit taking bouts at higher levels.
There are a few important things that we need to keep in mind. The current retracement has tested the 20-week moving average (MA), which is placed at 22,098. On the daily chart, the 100-DMA stands at 22,000. This makes the 22,000-22,100 zone a very important support area for the Index. If the Nifty slips below this zone, then this violation could mean some more weakness for the markets in general.
There is one caveat, though, on or around the general election outcome. We may see some wildly volatile moves and this may cause the markets to disrespect technical levels on either side.
What is your trading strategy for the Nifty and Bank Nifty?
The trading strategy would be simple. I will buy each on downsides with a hope of a technical rebound, so long as the Nifty defends and stays above the 22,000 level and the Bank Nifty stays above 47,000. If these levels are violated, then it would open up some more room for short opportunities.
Do you think ABB India and Siemens are portfolio stocks?
Yes, certainly they are. Both the stocks are in a structural uptrend. Investors may continue to stay invested in these stocks. However, one needs to keep one principle in mind: at any given point in time, at least 70 percent of the profits must stay protected in the event of any downside moves.
So, in the case of both ABB and Siemens, investors should keep trailing their stop-losses higher with the uptrend and place it in such a way that if they are triggered, the investors are left with at least 70 percent of the peak profit protected.
Do you think the Nifty Pharma index is the star performer in the current financial year?
Yes, I expect the index to stay strong over the coming months. By and large, I expect the markets in general to have a risk-off approach or at least a cautious approach. This may see traditionally defensive pockets like the Nifty Pharma doing better along with FMCG, IT, etc.
Will the Nifty Auto maintain its higher highs, higher lows formation this year?
The Nifty Auto has been trending higher. Despite this strong performance, I see some loss of internal strength in the Index. This is also reflected in the RSI (relative strength index) showing a negative divergence against the price. I expect this index to take a breather and see some corrective retracement.
Your top two bets for the rest of May?
As I just mentioned, I would be little defensive and may look for stocks with improving relative strength and low beta. So, I would be going for Lupin and Tata Consultancy Services (TCS).
Lupin has been in a sideways trajectory for over three months now and looks ready for a breakout. While stying inside the leading quadrant of the RRG (Relative Rotation Graphs), the RS (relative strength) line has also crossed above the 50-period MA (moving average) while moving higher. OBV (on-balance volume) hovering around its highs shows good volume participation and accumulation in the stock. I expect Lupin to test Rs 1,800 levels over the coming weeks.
TCS remains in a structural uptrend. On the higher timeframe charts, it has attempted a multi-month breakout. However, it retraced while suffering a full throwback. Currently, the stock is attempting to resume its upmove. It currently enjoys a strong relative strength against the broader markets. OBV has marked a new high while the stock is away from its high point. This also hints at strong accumulation in the stock supported by volumes. The possibility of the stock testing the level of Rs 4,200 cannot be ruled out over the coming weeks.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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