Downside seems to be capped for small and mid-caps after recent correction as the pendulum has swung too far and therefore, at least a mean-reverting bounceback is expected that can lead the indices to rise around 10-15 percent in the next two quarters, Umesh Mehta, Head of Research, Samco Securities Ltd, said in an interview with Moneycontrol’s Kshitij Anand.
Q: The Nifty broke below crucial support levels in the week gone by. Do you think we could see a dead cat bounce in this week?
A: Yes, heavy selling was witnessed in the week gone by, however, a ‘dead cat bounce’ which could be a 50 percent retracement to the levels of 10,870 is expected in the coming weeks.
Too much pessimism has created a short-term emotional bottom for the time being but if and when 10,600 is broken, Nifty50 will fall violently.
Hence, traders can go short on the rise and take aggressive short positions when Nifty decisively falls below 10,600.
Q: What is your call on small and midcaps that are facing the heat?
A: Small and mid-cap stocks have been correcting since more than a year now and the recent decline suggests they are nearing a bottom from an intermediate time perspective.
Downside seems to be capped as the pendulum has swung too far and therefore at least a mean-reverting bounceback is expected that can lead the indices to rise around 10-15 percent in the next two quarters.
Q: What is your call on Bank Nifty and rupee?
A: Bank Nifty is expected to remain under pressure but the larger consolidation with time correction is expected. For traders, the choppiness will be a nightmare and the index should be avoided. Nonetheless, they can go long on PSU banks, given the deeply oversold levels, a rally is soon expected.
Private sector banks should be avoided from a short-term point of view. Additionally, the Indian rupee will be in a non-directional mode at least till elections.
Q. What are your top three stock recommendation with a holding period of 1 month?
A. Here are the top three stocks to bet on this week based on technical parameters and a holding period of at least 1-2 month:
NBCC: Buy| LTP: Rs 50| Could rally 20 percent in short term
A double bottom pattern has been spotted on the technical charts and massive buying emerged in the week gone by. Given the reasonable valuations of PE 24.67, when the sectoral PE is 33.65, the stock is ready for a 20 percent rally.
It has already corrected by about 65 percent from its peak in 2017 and hence is now available at attractive valuations.
Syndicate Bank: Buy| LTP: Rs 31.20| Target: Rs 40
This stock is on the last leg of its downfall and the moment general buying emerges in the market, Syndicate Bank has the potential to rise swiftly by 20 percent in the short-term.
This PSU Bank is fundamentally sound and hence, this stock would be a frontrunner in the current scenario. Ideally, the entry should be done below Rs 30 for a target of Rs 40.
Solar Industries: Buy| LTP: Rs 957.80| Target: Rs 1,094
Given the heated climate, Solar Industries is expected to get larger orders from the defence space. Additionally, the technical set up to is encouraging given the stock is hovering at double bottom levels. Traders can go long on this counter with target levels of Rs 1,094.
Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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