MC Interview | Start accumulating IT stocks over next 1-2 quarters: Himanshu Gupta, VP, Globe Capital

Yes, Nifty has done well in the October series and has managed to give a weekly close above 17,500, which was an immediate area of supply. Going ahead, the next important resistance levels for Nifty are the 17,750 and 17,900 zones. As per me, this will be the real test for the bulls, as a close above this zone will confirm that the index is ready to surpass not only 18,000, but also make a strong case for it to test previous all-time highs above 18,500-18,600 levels.

So the answer to the question is that let’s not eye bigger moves here right now, but keep a watch on the said resistance zones and take it one step at a time.

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Banks have seen a healthy run-up in October. Do you see the rally continuing in the coming months too?

Banks have shown good relative strength over the last few weeks and the index has recouped most of the losses witnessed in September. Results have also been very strong from both private and public sector banks, which has boosted the confidence of investors.

Even the charts of most large banks like Axis Bank, ICICI Bank, and State Bank of India (SBI) are very strong, although under-performance from heavy-weight HDFC Bank has taken a toll on the index.

On the technical front, while the Bank Nifty is sustaining above its short- and medium-term moving averages, once it settles back above the 41,000-41,200 mark, we can see a further upside towards 41,800 and 42,500 levels in the very-near term, and 43,500 by year-end can also not be ruled out.

IT was another sector that lifted the market this month. Do you think the sector has enough strength to move north?

In fact, IT has been the missing force for almost an entire year after its stellar performance over the preceding few years. The IT index has declined more than 25 percent from the 2021 highs of 39,000. It has attempted a recovery from 26,500-odd levels twice — that could be the potential bottom. It has managed to post a positive close for four consecutive weeks.

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Looking at the major components within the index, a further move towards 29,500, followed by 30,500 looks likely in the short term. For a long term investor, IT is definitely a space to start accumulating over the next 1-2 quarters, within which we expect a long-term bottom for this sector is likely to be formed.

What are the rupee charts telling you, as it has maintained the upper Bollinger Band since this March on the monthly as well as weekly charts?

Despite an overbought situation on the dollar-rupee chart, the setup lacks any convincing weakening or reversal signals as of now. A fresh high towards 83.3 during the week was thankfully arrested and the weekly close came below 83 levels.

For the near-term outlook, it looks reasonable to assume that if 83.3 is taken out, some consolidation towards the 81-80 zone may be expected. On the other hand, a break above 83.3 any time over coming weeks will open the target of 86-88 as well.

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The Nifty CPSE index gained more than 5 percent this month. Do you expect the rally to continue?

The CPSE (Central Public Sector Enterprise) index has been hovering below its all-time highs of 2,800-odd levels. However, the long-term charts are showing negative divergence, which means that the index might take some more time to make it to the new highs, or even if it makes an up-move because of broader forces, the rally might lack strength.

What stocks do you recommend this Diwali, and why?

Our top picks are from the capital goods, manufacturing, defence, financial, and IT sectors.

Large-cap IT stocks like Infosys and TCS look attractive after a price and time correction. Also they are trading near long-term support zones, which make them good long-term buys. KPIT Technologies is another stock we like in the auto-tech space.

Capital goods and manufacturing have been the flavour of the season for a while now, but there’s been a decade-long underperformance in this space, and the trend has just recently shown a long-term breakout. ABB, Siemens, SKF are our top picks in this space. We like Hindustan Aeronautics and Bharat Dynamics in the defence sector, given the strong charts and order books on the fundamental front.

In the financial sector, SBI, ICICI Bank, Canara Bank, and Poonawalla Fincorp are on our radar. Most of them have made new highs backed by strong numbers, and the long term charts are suggesting the out-performance will continue.

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