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Realty check: Indiabulls Real Estate and Sobha could rally another 8-10%, says Rajesh Palviya of Axis Securities

Godrej Properties, DLF, Prestige, and Indiabulls Real Estate are looking good. The chart pattern indicates that we can expect the momentum to continue and further higher levels are likely for real estate stocks, says Palviya.

July 19, 2021 / 10:59 AM IST
 
 
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Rajesh Palviya, VP-Technical and Derivative Research, Axis Securities, is bullish on the real estate sector, with the BSE realty index hitting a 10-year high of 3,198.39 on July 16, gaining 9 percent for the week.

He says low prices and attractive interest rates have been driving record registrations in metro cities. In an interview to Moneycontrol’s Kshitij Anand, Palviya says the sector is likely to see more traction in 2021. Edited excerpts:

Despite volatility, bulls managed to hold on to gains in the week gone by to push the Nifty above 15,900. What led to the price action?

Dovish remarks of Federal Reserve Chairman Jerome Powell in his testimony, despite a surge in inflation and soft bond yield in the US in recent days, offered comfort to global equities, including India.

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The market strength was well supported by IT, metal, and pharma stocks. The healthy set of earning numbers from IT majors lifted sentiments.

Corporate earnings and rise in COVID cases would be in the focus in the near term. The index formed a small bullish candle on the daily scale and made higher high and low for the fourth straight session, indicating sustained strength.

We are inches away from hitting 16,000, which has acted as a stiff resistance for the Nifty. What should traders and investors do–add more long positions after the breakout or book profits?

On the weekly chart, the index has formed a small Bullish candle carrying a lower shadow, indicating buying support at lower levels. Since the past five to six weeks, the index has been consolidating within a broad range of 15,900-15,500, representing a short-term sideways trend.

The Nifty managed to close above 15,900 in the week gone by. The chart pattern suggests that if the Nifty sustains above 15,900 levels, it will witness buying which will lead the index towards 16,100-16,300 levels.

However, if the index breaks below the 15,800 level, it will witness selling which will take the index towards 15,700-15,600. The Nifty50 is trading above the 20 and 50-day SMAs (simple moving averages), which are important short-term moving averages, indicating a positive bias in the short term.

The Nifty50 continues to remain in an uptrend in the medium term, so buying-on-dips continues to be our preferred strategy.

Also read: Realty index at 10-year high: 7 stocks are still 10-80% lower than record highs – time to buy them?

In line with benchmark indices, small and midcaps indices also touched fresh record highs. What is driving price action in the broader markets?

The market continues to see a robust performance from the small and midcap stocks as these indices once again delivered a healthy performance during the month.

Small and midcap indices delivered 6 percent and 4 percent returns, respectively. Value investment style outperformed the growth and quality investment style by a significant margin while beating the largecap Nifty index by a healthy margin as well.

We believe these themes will continue to deliver strong returns over the medium term. Volatility continues to reduce, indicating the continuance of a strong bull market.

While the markets seemed volatile on a few occasions during the month, the spook index (India VIX) continued to trend downwards. India VIX has trended down to 14 now, which is significantly lower than the long-term average of 22.

Lower VIX is a significant positive for small and mid-cap stocks, which have continued to deliver strong returns during the month. We believe VIX may go up during the Q1FY22 results but do not expect a meaningful rise in the index, which means a sharp market correction is unlikely.

Sectorally, the realty index surged during the week. What is leading to the price action and which stocks are looking attractive? Is this the time to invest in the sector or should we wait for a dip?

The real estate sector is witnessing record registrations in the metro cities. Demand has picked up as real estate prices are low and interest rates are very attractive. The sector is likely to see more traction in 2021.

We like Godrej Properties, DLF, Prestige, and Indiabulls Real Estate from the real estate space. Looking at the chart pattern, we expect the momentum to continue and we can see further higher levels for real estate stocks.

The Nifty realty index managed to give a breakout of its previous swing high of 2018 and has sustained above all its long-term moving averages, indicating that we can see another 8-10 percent up move in the near term in the realty index.

Indiabulls Real Estate and Sobha managed to give a breakout of their previous high of the year 2019. Strong volume indicates we may expect another 8-10 percent upside momentum in the near term for both the stocks.

We expect 160-165 target for Indiabulls Real Estate in the near term, and one can keep a stop loss of 138, while Sobha can scale up towards 730-740 level in the near term and one can keep a stop loss of 620.

TCS, Infosys and Wipro have come out with their results. Which one is looking better on the charts?

Large IT companies continued with the growth momentum in Q4FY21 led by strong deal closures and the in-line performance on the margins front. The sector is in a re-rating cycle and this trend is likely to persist over the medium term.

The information technology space is marked by companies having strong balance sheets and playing on the current trend of digitisation. Even at current levels, the IT sector valuations are reasonable. Thus, we recommend an overweight stance on the sector.

Infosys and Wipro look positive in the near-term setup. Infosys managed to make a fresh all-time high in the month of June and gained around 8 percent.

In the last three weeks, the stock is in consolidation mode and we expect if Infosys manages to give a breakout above 1,580 level, it may scale up towards 1,660-1,680 in short term, however, 1,520-1,480 are likely to act as strong support in the near term.

Wipro has gained around 9 percent in the last week and managed to close at an all-time high trajectory. The chart pattern suggests that we can see another 5-8 percent up move in stock towards 630-660 in near term basis, while 550-535 may act as good support on the lower side.

Your top three-five  trading ideas for the next three-four weeks?

Here is a list of trading ideas for the short term -

Lupin: Buy| LTP: Rs 1180| Buy at Rs 1179| Target: Rs 1240| Stop Loss: Rs 1132| Upside

For the last five consecutive weeks, the stock has managed to sustain above its earlier breakout zone of 1,120-1,130. With the current weekly close, the stock has surpassed its previous three weeks' high’s which signals increased strength.

On the weekly chart, the stock continues to scale upward, forming higher tops and bottoms which is a bullish sign.

The weekly momentum indicator Stochastic has turned bullish along with positive crossover, which supports increased momentum.

Prestige Estates Projects: Buy| LTP: Rs 329| Target: Rs 360-380| Stop Loss: Rs 300| Upside 9-15 percent

On the weekly chart, the stock has witnessed a “consolidation range” (320-260) breakout around 320 levels, which signals the resumption of the uptrend.

Huge volumes on the breakout signal increased participation near the breakout zone. The stock is in a strong uptrend as it continues to form a series of higher tops and higher bottom formations across all the time frames.

The daily and weekly strength indicator RSI is placed above the 50-mark, which supports rising strength.  The above analysis indicates an upside of 360-380 levels.

BATA India: Buy| LTP: Rs 1615| Buy range 1618-1595| Target: Rs 1685-1730| Stop Loss: Rs 1560| Upside 4-7 percent

On the weekly chart, the stock has bounced back from its 38.2 percent Fibonacci Retracement support of 1,561 levels indicating a strong comeback of bulls.

This buying momentum also emerged from its 50-day SMA support zone, which reconfirms bullish sentiments, rising volumes around multiple support zone signals increased participation on the correction.

The daily and weekly strength indicator RSI is in a bullish mode, which supports rising strength as well as momentum. The above analysis indicates an upside of 1685-1730 levels.

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.

 

Kshitij Anand is the Editor Markets at Moneycontrol.

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