Podcast | Stock picks of the day: 'Expect consolidation before next leg of rally'

The major charioteer for this mesmerizing rally was none other than the heavyweight banking index. What a stellar move we witnessed throughout the week to register fresh highs in the process.

Eventually, both indices saw some mild profit booking towards the fag end of the week and it was very much evident also after seeing such relentless rally.

In our sense, the stage was set for this kind of move when Nifty convincingly surpassed 10,900 last Tuesday. What encouraged us is the outperformance of mid and small-cap basket which started a few days prior to this.

And then the major driver ‘banking’ started showing its dominance. Considering all this evidence, we were vocal about this rally getting extended towards 11300 – 11400, which was the higher end of the ‘Megaphone’ pattern.

The index has reached this junction and in fact due to strong exuberance, Nifty extended its march towards the 11,500-mark.

Now, we are at a kissing distance from this figure and it’s a matter of time, the index would actually see this number.

But, the point is, will there be some exhaustion seen or the index would continue heading towards all-time highs? Honestly speaking, we are at crucial technical ratios and considering the pace of the move, the risk-reward for fresh trader has gone for a toss now.

In our sense, some kind of consolidation would now be seen for a while before unfolding the next leg of the rally. By no means, one should go short, rather it is time to be selective when it comes to individual stocks and should be done with proper money management.

On the higher side, 11,500 followed by 11,600 would be the immediate levels to watch out for and on the downside, 11,370 and 11,300 should be seen as important supports in the forthcoming week.

Here is a list of two stocks which could give 8-12% return in the next 14-21 sessions:

Sundram Fasteners: Buy| LTP: Rs. 547.35| Target: Rs 615| Stop Loss: Rs 508| Upside 12%

In the last couple of weeks, the mid-cap, as well as the small-cap baskets, are on a roll. In fact, unlike previous months, many stocks from the ‘cash’ segments started raising their heads higher and gave some stellar moves.

It appears that they are finally out of the slumber and are gearing up for strong moves. This stock is clearly one of them. After a long consolidation of nearly five months, the stock has confirmed a breakout from multiple technical indicators.

Looking at the increase in volume activity, we expect the stock to climb in the next few weeks. Thus, we recommend buying at current levels for a target of Rs.615 and the stop loss should be fixed at Rs.508.

Karnataka Bank: Buy| LTP: Rs. 127.75| Target: Rs 138| Stop Loss: Rs 122.40| Upside 8%

The banking has been the flavor in this ongoing rally and before large-cap showing their dominance, the entire mid-cap private baking space started buzzing.

Within this pocket, ‘Karnataka Bank’ has always been our preferred pick along with ‘RBL Bank’ and ‘DCB’.

In the week gone by, we saw a massive bump up in this counter and thereby confirmed a breakout from multi-month highs.

The weekly chart looks extremely encouraging and hence, we recommend buying this stock at current levels for a target of Rs.138 over the next 14 – 21 sessions. The stop loss should be fixed at Rs.122.40.

(The author is Chief Analyst- Technical & Derivatives, Angel Broking)

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