Pharma stocks have witnessed a brief halt/pullback towards short term moving averages, however, the trend is still positive. Some of the players have started their next up leg, Umesh Mehta, Head of Research, Samco Group, said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:
Q) The market remained volatile throughout the week with 10,800-10,900 levels acting as a major resistance. What led to the price action on D-Street?
A) The markets moved in a rangebound manner with intermittent hiccups due to spurt in daily COVID-19 cases. But, hopes of a vaccine from the pharma sector capped the momentum.
The sentiment swing in the market was also because of humungous expectation from RIL’s 43rd AGM but the delay in Saudi Aramco’s deal made the street sceptical.
Further, IT sector results were certainly a market booster this week with Infosys and HCL Technologies coming out with better than expected earnings performance and revenue guidance of 0-2 percent being the cherry on the cake in the midst of the pandemic uncertainty. All these factors caused the see-saw in bourses this week.
Q) What are the major levels which one can watch out for in the coming week?
A) The Nifty50 is expected to face resistance at levels of 10,950 which can be a crucial hurdle with limited upside. The immediate support on the downside is now placed at 10,570 and a break of the same may lead to a retest of 9,900 levels.
Q) What do you make of the recent results which have come out from the IT space? Majority of the stocks hit a fresh 52-week high in the week gone by. What should investors do if they want to invest in the IT space?
A) IT players witnessed an exceptionally good set of numbers which surprised the street as most expected this quarter to be a washout.
Operating margin expansion was aided by a reduction in travel expense, forex gains, cuts in SG&A costs and other operational efficiencies due to the lockdown.
For Infosys, revenues from segments like financial services, healthcare and lifescience segment saw healthy traction and retail segment was hit hardest.
Given the healthy deal pipeline of IT players and ingrained WFH culture, executing future projects should not be a barrier. New deals though will slowly pick up pace but demand will reach pre-COVID levels once the situation normalises.
Although the growth expectation is still in line with the past trajectory the trigger from so-called possible further cost reduction has re-rated IT stocks in India.
Given the recent run-up in IT stocks, it would be advised to investors to wait for a 10-12 percent correction and then rely on a basket approach to invest in this space.
Q) Twitter Bitcoin hack is something which came out of the blue. A similar scam happens when retail investors, especially the new-age ones, get charmed by the SMS or email promising to give superior returns. Are there any red flags which you want to highlight for traders?
A) One important thing traders and the investing community should remember is that there is no free lunch in life or in the stock market.
Traders are advised to maintain discipline and stick to their effective strategy and plan without rushing for easy money.
Keeping a stop loss is imperative to be in the game of markets which would aid traders to quickly learn from their mistakes. Behavioural biases should not overpower the trading strategy in any way.
Q) Top 3-5 trading ideas which traders can initiate in the coming week with a time horizon of 3-4 weeks?
A) Pharma stocks have witnessed a brief halt/pullback towards short term moving averages, however, the trend is still positive. Some of the players have started their next up leg.
Lupin: Buy | Target Rs 980 | Stop Loss: Rs 850
Lupin seems to have found cushion at Rs 850 levels and now seems to be getting ready for more upside. Lupin is a buy at levels of Rs 890-893 with a target price of 980 with stop loss 850.
Ajanta Pharma: Buy | Target Rs 1,600 | Stop Loss: Rs 1,370
Ajanta Pharma has also seen a price rejection on the downside near crucial moving averages on the weekly chart. The stock has strong definitive support at Rs 1,330.
The recent surge in price hints towards a fresh move in the stock. Ajanta Pharma is a BUY at Rs 1,440 levels with a target price of Rs 1,600 and a stop loss of Rs 1,370.
Piramal Enterprises: Sell | Target Rs 1,050 | Stop Loss: Rs 1,485
Piramal Enterprises is in a downtrend, however, recently the stock has rallied and become overbought finding resistance around previous support of Rs 1,420-1,460.
The resistance is getting confirmed by a rebound and a big bearish candle on weekly timeframe. Piramal Enterprises is a SELL at Rs 1,360-1,368 levels with a target price of Rs 1m050 and a stop loss of Rs 1,485.
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