Consumer durables stocks like Amber Enterprises and Dixon Technology posted strong gains in the recent months. Investors are optimistic that these companies are likely to get benefit from the upcoming opportunities in electronic manufacturing in the country, Sumeet Bagadia, Executive Director at Choice Broking, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:
Q) Bulls remained in control of D-Street in the week gone by. What led to the rally or the optimism?
A) The market rally over the last few weeks was driven by high liquidity and optimism over the coronavirus vaccine development. Cyclical sectors like banks, auto, and metal performed well as investors are assessing recovery in the economic activity.
However, the banking sector lost some steam in the last week after RBI’s financial stability report pointed out a grim asset quality outlook for FY21.
Major contributors to the market rally were auto, IT, and metal stocks. Auto stocks continue to remain in positive territory amid reviving demand after the unlocking of economies, while metal stocks rose due to an increase in metal prices as countries across the globe have started opening their economies.
IT stocks also sustained rally driven by the strong quarterly performance of IT companies and positive management commentary of a strong revival in business during the second half of fiscal.
Another defensive sector pharma also performed strongly due to better company performance in Q1 and revived outlook. Overall, sector contribution to the market rally was broader, however index heavyweight Reliance Industries has remained key support to the market rally.
Q) Sectorally, Metal & Consumer Durables hogged the limelight in the week gone by. What is driving the rally in these sectors?
A) Metal stocks have remained on investors’ buying radar over the past few weeks. Investors are optimistic about the metal companies’ outlook.
Demand has gradually started to inch up allowing companies to raise prices following the increase in global prices. Increase in prices along with sustained cost cut measures introduced during Q1 to impact EBIDTA margin positively in the coming quarters.
Low cooking coal and iron ore prices also supported metal companies positively. Metal companies are expected to post strong margin recovery in the Q2FY21 and stock prices are factoring these optimisms.
Consumer durables stocks like Amber Enterprises and Dixon Technology posted a strong gain in recent months. Investors are optimistic that these companies are likely to get benefit from the upcoming opportunities in electronic manufacturing in the country.
Q) Any particular data point which investors should watch out for in the coming week? What are the important levels to track on Nifty50?
A) The important level to track for Nifty is 10900 on a lower side while 11300 on an upper side. Either side breakout will decide the particular direction.
However, mostly upside is expected as the index has been trading in an upward rising channel formation as well as above its 21-Days Moving Average. If the index gives a breakout above 11300 then 11600 would be there in upcoming trading sessions.
Q) India crosses Rs 20 lakh COVID cases, Gold above Rs 56,000, Nifty back above 11,200. How can investors make sense of this sea-saw puzzle?
A) Overall, sentiment has changed in recent days from where this pandemic situation started. Now, most investors are looking a positive side only because most stocks have witnessed heavy correction in March month and from there.
Investors’ sentiment is also getting changed and now seeing a specific direction in the market. Even during the recent days, we have also witnessed some good news related to Vaccine for COVID-19 which might come in the market by Nov-20 or 1st Month of 21 which are giving a time being a relief.
Q) Small & Midcaps continue with their outperformance in the week gone by. What is fuelling rally in the broader market space – is it undervaluation, flush of money, or investors just chasing growth?
A) Small and mid-cap stocks have been remained under pressure over the two years due to downgrade in investors' sentiments driven by the economic slowdown and IL&FS crises.
Broader indices had already contracted significantly before the spread of the pandemic. Meanwhile, the latest COVID-led correction has made small and mid-cap stock valuation more attractive.
Overall, attractive valuation and cheap liquidity are driving small & mid-cap stocks. However, our advice to investors is to remain selective in this pocket and invest in fundamentally strong stocks.
Q) Any technical trading ideas that investors can execute for a period of 3-4 weeks?
A) Here is a list of top three stocks that could give 8-16% return in the next 3-4 weeks:
Bajaj Finance: Buy| LTP: Rs 3466| Stop Loss: Rs 3150| Target: Rs 3780-4050| Upside 16%
Recently, the stock has given a breakout from its range-bound movement with above-average volume. The stock has sustained above the 50% retracement of its recent fall which suggests further upside movement in the counter.
Even volume is rising since the last few days with a rise in price that shows a good upside movement.
Muthoot Finance: Buy| LTP: Rs 1216| Stop Loss: Rs 1170| Target: Rs 1315| Upside 8%
On the daily chart, the stock has been trading with its upward rising trend line which suggests a further upside movement in the counter.
Moreover, the stock has taken the support of the 61.80% retracement of its recent up-move which shows a bounce back movement in the counter.
The stock has formed a Bullish Harami Candlestick formation which suggests a bullish move in the counter.
Century Textiles: Buy| LTP: Rs 323| Stop Loss: Rs 300| Target: Rs 370| Upside 14%
On the daily chart, the stock has given a breakout from its range-bound movement with above-average volume which suggests a spurt in the counter.
Moreover, the stock has given a breakout from its Triangle formation as well as which again indicates a good movement in the counter.
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.
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