We continue to remain positive with higher target of 11,850-12,000 levels over the next two months but as the up move is being very sharp so some consolidation at current level cannot be ruled out.
Nifty had a sharp breakout from its eight-week range with upswing in the past five trading sessions on back of stimulus from government in form of tax brackets and positive global markets.
Interest rate sensitive sectors like Auto, Realty and private banks had a strong pull back with gains of 6 percent average and would continue to gain as the domestic credit policy is being lined up in the first week of October.
The manufacturing theme has also being well played out with sharp gains in capital goods, metals and energy sectors bucking the trend to gain by 9 percent, 5.7 percent and 5.5 percent respectively for month-to-date.
Defensive sectors like IT and Pharma have witnessed some pullback from lower levels.
We continue to remain positive with higher target of 11,850-12,000 levels over the next two months. But, as the up move is being very sharp, some consolidation at current level cannot be ruled out.
Bank Nifty could retest its 52-week high as the set up looks very strong with supports placed at 29,500 levels. The second quarter results will start from the middle of October which will provide further clarity in terms of movement in individual sectors and stocks.
Among sectors, we remain positive on autos, banks and pharma while consumer sector could witness some profit booking after a sharp up move from current level.
Among stocks, we will buy Hero MotoCorp and L&T Finance and would sell Marico.
Below are the top three stocks which can return 9-17 percent:
Hero MotoCorp: Buy | CMP: Rs 2,743 | Target: Rs 3,075 | Stop loss: Rs 2,525 Return: 12 percent
The stock has made a higher bottom on its monthly charts with strong positive price action over the past few weeks. The recent decline from the highs provides an opportunity to go longs as multiple averages on the downside would protect the fall.
The bullish cross-over in RSI and Stochastic on monthly charts are signalling turnaround and resume its northward journey to test the long term 55-month average. A long position can be initiated for the target of Rs 3,075 with a stop loss of Rs 2,525.
L&T Finance Holdings: Buy | CMP: Rs 95 | Target: Rs 112| Stop loss: Rs 85 | Return: 17 percent
The stock has formed a bullish reversal pattern on monthly charts at 76.4 percent Fibonacci Retracement level of prior up-move (48-213) signalling near-term turnaround. Reversal in the key technical indicators-RSI and Stochastic from their oversold zone are also coinciding with our view.
Long positions can be initiated for the target of Rs 110 with a stop loss of Rs 85.
Marico: Sell | CMP: Rs 387 | Target: Rs 355 | Stop loss: Rs 405 | Return: 9 percent
The stock has formed a reversal with double tops near to Rs 400 levels and witnessed a sharp selloff from the high in the past one month. Lower top on RSI gives an confirmation of the reversal and breakdown of its short term averages coinciding with our negative view.
Short positions can be initiated for the target of Rs 355 with a stop loss of Rs 405.
The author is Senior Research Analyst, Reliance Securities.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.