Gaurav Bissa, Vice President-Equity Advisory, InCred Equities, expects the equity benchmark Nifty to scale new highs in June, as it has been forming higher highs and higher lows on the daily as well as weekly timeframes.
Bissa, who has spent more than 14 years in the market with a focus on chart patterns, continues to be bullish on Nifty Bank, FMCG, IT and auto indices. Dips, if at all, will unlikely be severe, he tells Moneycontrol in an interview. Edited excerpts:
What is your take on the rollover data and what is your strategy for the June series?
The Nifty has started the June series with 71 percent rolls as compared to the six-month average of 75 percent, implying shorts have been reduced for the second consecutive expiry. In absolute terms, the Nifty will start the expiry with 9.23 million shares compared to its six-month average of 11.32 million shares, suggesting the scope for fresh longs that can be built in June series.
Do you think the Nifty can hit its record high in June, especially after the current consolidation?
The Nifty has been forming higher highs and higher lows on daily and weekly timeframes, which suggests that the Nifty is on its way towards fresh lifetime high levels. Also, major sectors like Nifty Bank, Nifty FMCG, Nifty IT and Nifty Auto remain buoyant, suggesting the dips are unlikely to be severe.
And the fact that FIIs (foreign institutional investors) have been consistent buyers suggests these dips will likely be bought into.
What is the Nifty auto chart, which has already rallied 6 percent this month, telling you?
Nifty Auto made a retest of a 4-year Cup and Handle pattern breakout on weekly charts and witnessed a bounce. The index also came out of a nine-month breakout. The structure remains positive and any dip is likely to be bought into. The index has immediate support at 13,500 levels.
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The Nifty midcap 100 index also gained momentum in May. Do you see the momentum continuing next month as well?
The Nifty midcap100 index witnessed a strong upside in the last few weeks after triggering a bullish Wolfe wave pattern. The index is currently trading above its 18-month Cup and Handle pattern. A monthly close above 33,000-33,100 zone will confirm this breakout, which can catapult the index by 3-5 percent in June.
What are your three preferred bets for the June series?
National Aluminium Company: Buy | LTP: Rs 84.6 | Stop-Loss: Rs 81 | Target: Rs 92 | Return: 8.7 percent
The stock has witnessed short covering which resulted in the price not crossing below the crucial support level of Rs 78. The stock seems to be coming out of consolidation now which can push it towards Rs 90 levels.
REC: Buy | LTP: Rs 133.45 | Stop-Loss: Rs 127 | Target: Rs 140 | Return: 5 percent
The stock witnessed strong long positions which got carried into the June series with rolls seen at 93 percent. The stock has sustained above the four-year breakout pattern which can push the stock higher in the coming weeks.
Persistent Systems: Buy | LTP: Rs 5,088.95 | Stop-Loss: Rs 4,800 | Target: Rs 5,550 | Return: 9 percent
Persistent has added strong long positions as evident in its rollover data, which stands at 92 percent as against a three-month average of 85 percent. The stock is on the verge of witnessing an 18-month breakout, which can push it higher by 10 percent in the coming weeks.
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What are the key factors to look at in the options data to decide the market trend?
The best way to read the options data is through the options chain and the Implied Volatility (IV) through the chain. Usually, the IV if plotted through the strikes will make a smile but if unusual Open Interest (OI) is added this will show a positive or a negative skew. This gives a good indication of how the option will behave going forward and also a direction for the index/stock.
Your take on Ceat and Cholamandalam Financial Holdings, which has gained more than 35 percent in May?
Ceat has witnessed a strong upside in the last month. The stock is currently trading above the six-year breakout which will be confirmed on a monthly close above Rs 2,060. RSI (relative strength index) on the monthly charts is currently trading at 67 levels and once it crosses Rs 70, a strong push can be seen in the stock towards Rs 2,300 levels.
Cholamandalam Financial Holdings has witnessed a five-year breakout with prices comfortably trading above the breakout level. A monthly close above Rs 760 will confirm this breakout which can push the stock towards Rs 950 levels.
The stock has witnessed a bullish MACD (moving average convergence divergence) on the monthly charts which supports the postulate of further upside in the coming weeks.
Disclaimer: The views and investment tips expressed by 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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