Till the time Nifty stays below 15,000, we expect the consolidation to continue. It could hover in the range of 14,400-15,000. Meanwhile, while the action continues to be in the broader market - mid and smallcap stocks, Ashish Chaturmohta, Head of Derivatives and Technical Analysis, Sanctum Wealth Management said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) A volatile week but bulls remained in control of D-Street pushing Nifty50 above 14,800 levels. What led to the price action?
A) ‘Markets always discount the future. We had a massive fall in March 2020, but till that point, India didn't witness any large wave of COVID-19 cases nor had the lockdown begun, but markets discounted all of that before it began.
In the second wave, too, we had seen correction from 15,430 (Made peak post Budget announcement) to 14,250 levels, whereas Dow Jones is hitting an all-time high.
The cases have been rising with Maharashtra recording the highest number of cases followed by Karnataka, Kerala, and Delhi, etc.
It is important to note that recoveries need to be more than the rising new cases and recent recoveries are on the rise, resulting in a positive sign.
Q) How do you see markets in the coming week? Which are the important levels that one should track going forward taking a view of the FII and DII activity.
A) FII's have been sellers for quite some time and DII's have been buying on and off. DII’s activity is directly proportional to new money inflow into their respective funds, which has shown some improvement in SIP's etc. in the recent months.
There have been FII’s sellers in the emerging market for quite some time now. Till the market stays below 15,000, expect the consolidation to continue between the 15,000-14,400 zone, while the action continues in the broader markets i.e. mid and small-cap stocks.
Q) Sectorally, the metal index outperformed for yet another month while Consumer durable was the laggard. What led to the price action?
A) China's promise to reach carbon neutrality by 2060, has resulted in cutting down China's production (China is the world's largest producer as well as the consumer of steel) creating a demand-supply mismatch which rises international steel prices.
Optionality for Indian producers to participate in a more lucrative export market, and with China cutting production, there will be a global demand. Domestic demand by the public and private sector, to push and keep the economy running.
Coming to the consumer durables part, they are firstly non-essential, hence states witnessing lockdown will have an impact on sales of consumer durable.
Secondly, consumer durable like AC, refrigerator, coolers, have maximum sales in March-June of every year and any disruption can lead to a full flattish year for them. Hence, the underperformance.
Q) After a flat April, ‘Sell in May Go Away’ echoes in the mind of investors. History suggests that bulls have mostly remained in control. Do you think May of 2021 will be different?
A) Markets is coming off 10 weeks sideways to negative correction and has seen a bounce back from strong support areas. As of now, international equities and the month of May is holding good.
The Nifty50 is likely to remain rangebound but the broader market is seeing action. Rally across small and mid-caps is seen and is expected to continue.
Q) 13 stocks on BSE hit a fresh All Time High that includes names like Apollo Hosp, Adani Transport, JSW Energy, Prince Pipes, and Tata Steel. Do you think these could be the momentum bets at least in the short term?
A) Healthcare sector is the backbone for us in these uncertain times and going forward their importance will increase. Hence stocks like Apollo Hospitals, Max healthcare, etc would continue to do well.
Coming to stocks like Adani port, it is expected that India's exports will grow multi-fold in the next few years and ports would play an important role, hence this sector would continue to do well.
As mentioned earlier, higher steel prices would continue following demand in domestic as well Exports would see continued momentum.
Coming to the pipes sector, due to COVID-19 there has been shift from unorganized to organized sector giving big business to branded players like Prince Pipes, hence the future seems to be bright for them as well.
Q) You top 3-5 trading ideas for the next 3-4 weeks:
A) Here is a list of trading ideas for the next few weeks:
BPCL: Buy| LTP: Rs 443| Target: Rs 550| Stop Loss: Rs 410| Upside 24%
Recently, the GOI, allowed bidders access to the financial data of Bharat Petroleum Corp. as the government moves ahead with plans to sell its entire stake in the country’s second-biggest state refinery.
This marks the seriousness of the government to speed up the divestment process. Technically, the stock has seen consolidation below 480 and formed ascending triangle pattern on the weekly charts, and hence it is likely to see a breakout on the upside for 550 while support is seen at 410.
Sun Pharma: Buy| LTP: Rs 679| Target: Rs 760| Stop Loss: Rs 640| Upside 12%
Sun Pharma is the fourth largest specialty generic pharmaceutical company in the world with global revenues of ~US$ 3.5 billion (Sun Pharma + Taro).
Supported by more than 40 manufacturing facilities, and ~36,000 employees, it caters to more than 100 countries across the globe.
After multiple years of decline in the stock, it is showing signs of a reversal. Pricewise, the stock is seeing a bottoming pattern on the long-term chart.
High volumes are indicating accumulation in the stock at lower levels. The next level for the stock is seen at 760 while support is seen at 640.
MphasiS: Buy| LTP: Rs 1845| Target: Rs 2050| Stop Loss: Rs 1790| Upside 11%
Mphasis said that it expects to create close to 1,000 UK jobs to begin with; invest over GBP 25 million upfront towards establishing the centre, and provide up-skill and training in both digital transformation as well as domain expertise in the UK banking and insurance segments.
This highlights the growth potential of the company going ahead. Technically, for the last 4 months stock has been consolidating at all-time high levels with positive bias.
If the stock sustains above the support level of 1,790, and is expected to rally towards 2050 in the coming few weeks.
Intellect Design Arena: Buy| LTP: Rs 795| Target: Rs 950| Stop Loss: Rs 750| Upside 19%
Intellect is IT Product Company in the banking industry which has recently won quite a few transformational deals leading to its re-rating.
Technically, the stock is in a strong uptrend forming a higher top and higher bottom on the daily chart. After consolidating at an all-time high level for the past 4 weeks, it has seen a fresh breakout towards 950 levels, while the support is seen at 750.
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