We expect markets to remain choppy throughout the week. Most of the price based evidence is pointing towards a broad range action within 11250-11750 with 11550 as its breakeven zone.
Select mid & smallcap stocks can provide the necessary alpha in the short-term. In case 11,250 is breached, the downside remains open towards the 11,000-10 900 zone which can be participated via banking names which have been underperforming, Sacchitanand Uttekar, DVP – Technical (Equity), Tradebulls Securities, said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:Q) Last week was a volatile one for the Indian markets as Nifty retested support at 11,200 and then bounced back. What led to the price action on D-Street?
A) Despite volatility in indices across the globe, rising tensions with China globally as well as on LAC throughout the week, our markets displayed strong resilience.
Declining crude, domestic deals, and some key announcements & developments related to telecom AGR verdict & relief on NPAs interest issues provided some relief to the market.
Nifty ended last week on a positive note with gains of nearly 1.15 percent.
The necessary rebound data from 11,200 looks more towards covering of shorts while the lack of convincing longs keeps the optimism under check.
Banks, on the other hand, have been on the losing end along with some of the non-banking PSUs & telecom service provider Bharti which saw a decline of nearly 6 percent.
Q) What is your call on markets for this week? Which are the important technical levels to track?
A) We expect markets to remain choppy throughout the week. Most of the price based evidence is pointing towards a broad range action within 11,250-11,750, with 11,550 as its breakeven zone.
On the daily scale, the rebound has been primarily led by select largecaps, short covering in most pockets, and lack of fresh convincing long positions, while on the flip side, the already underperforming banking & financial sectors is approaching its make or break levels.
Hence, it is better to retain focus on selective midcap & smallcap stocks which could provide the necessary alpha in the short term. In case 11,250 is breached, the downside remains open towards the 11,000-10 900 zone which can be participated via banking names which have been underperforming.
Q) Smallcap stocks got some momentum going while midcaps recorded some profit-taking in the week gone by. What is your view on the broader markets?
A) The recent shift in price and volume behaviour in most of these pockets looks more to do with the announcement by Sebi which tweaked the portfolio allocation rules for multicap equity mutual fund schemes on Friday.
The multicap funds will now be allowed to invest a minimum of 75 percent of total assets in equities with 25 percent each in largecap, midcap, and smallcap companies respectively.
As there was no such allocation restriction and fund managers could invest across the market cap as per their own choice. This announcement could attract a considerable amount of volatility due to the reshuffling of positions from largecaps to smallcap pockets.
This reallocation move could attract an internal rotation of more than Rs 30,000 crore from largecaps towards the broader market.
Since a lot of multicap funds already have a substantial base of largecap stocks, we expect a significant amount of money flowing into mid and smallcap pockets which could further boost their individual price-performance irrespective of their recent gains.
Q) Sectorally, the action was seen in energy, oil as well as IT index while on the downside telecom and realty took a hit. What led to the price action in different sectors?
A) The supremacy of Reliance Industries was evident during the week gone by as declining crude coupled with stake sale news added fuel to its already strong up move.
Declining crude oil prices have also eased margin pressure on oil refineries and on some of the OMCs too.
Other direct dependents on declining oil beneficiaries like paints & tyres etc contributed as a whole for the uptick in energy & oil sectors which pushed them both into their green zone this week.
Some of the other energy companies like Adani Green posting better than expected results also led other energy companies into positive territory.
The uncertain environment for banking & financials due to the extension of its interim order verdict on relief of NPA had shifted the focus of many participants towards defensive stocks.
IT companies are expected to deliver better than expected results as most IT companies have adapted to WFH culture and are shredding some of their operational costs.
Pandemic has provided yet another opportunity to IT companies as they get to venture into new business verticals as there has been a phenomenal growth in new non-tech-savvy consumers into the digital space and further progress on financial inclusion. Digital payments itself have multi-folded and clients have also adopted technology at a faster pace than earlier.
Supreme Court AGR dues case has kept the telecom sector busy. It was gaining on the expectation that the Supreme Court might take the government’s proposal of paying AGR dues in 20 years. But, the court gave 10 years to pay AGR related dues which immediately resulted in profit-booking within the telecom sector.For the realty sector, rising cases of COVID-19 is hitting its demand for residential and commercial spaces. With banks reluctant to lend, it will be a challenge for realty to finance their projects. So we expect the pressure to remain persistent for most of the Realty focused pockets.
Q) Any 3-5 trading ideas for the next 3-4 weeks?
A) Here are 4 stocks which traders can look at it:
Hatsun Agro saw a good follow-through movement post its breakout from its 30-month consolidation.
Even on the daily as well as weekly scale, the formations look like a rounding bottom/saucer formation with price targets close to Rs 880 & Rs 1,050 zone respectively. Which could be participated with a stop below Rs 765 from here on.
A pinbar candlestick formation on its daily scale marked the completion of its pullback move. The existing pattern target of a cup & handle formation are placed around Rs 950 which coincides with its life high level of Rs 949.
With the sector now buzzing, and a pullback in place, declines if any would make the setup more lucrative for adding fresh longs.
For trading longs, a stop loss could be placed below Rs 730 while aggressive longs could be added above Rs 855 for a pattern target of Rs 950
IGL formed yet another bullish hammer on its weekly scale which reconfirms the strength of the support that is been placed around Rs 380 zone.
With its weekly RSI displaying renewed strength, IGL could see a fresh breakout from its ongoing declining channel formation.
Fresh longs could be considered with a stop below Rs 380. A breach beyond the ongoing channels resistance zone could open up a move towards Rs 420 zone.
Consolidation now looks mature for Dr Lal Pathlabs with a positive sector outlook and the occurrence of consecutive hammer formation on its weekly scale.
Even on the daily scale, the RSI has jumped up above 51 with a bullish belt hold formation on the final day of the week.We expect the stock to outperform in the coming 2-3 months. Hence it can also be a portfolio add from hereon. Trading longs could participate with a stop below Rs 1,760 with a review zone around the Rs 2,050 level.
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