We expect volatility to remain high this week too due to scheduled derivatives expiry on Thursday.
It was a historic week for markets as Nifty touched a new milestone of 12,000 and gained nearly 4 percent last week. Participants cheered the landslide victory of the National Democratic Alliance (NDA) in the 2019 Lok Sabha elections.
Buying was witnessed across the board and almost all the sectoral indices contributed to the rally. Meanwhile, traders ignored weak global cues and not so encouraging earnings announcements.
We expect volatility to remain high this week too due to scheduled derivatives expiry on Thursday. The week marks the beginning of the new month also and participants will react to a list of important macro data.
On the macro front, Core sector data and GDP data will be unveiled on May 31. Auto sales will also start pouring in from June 1. Apart from the local factors, US-China trade talks and movement of crude oil and currency will also be on their radar.
The Nifty may take a breather after the recent surge and consolidate in a broader range of 11,500-12,000. We feel the focus would return to quality midcap and smallcap counters, after a long spell of underperformance.
On the sectoral front, banking and auto look strong for the next week while metal and IT may continue to underperform. Traders should align their positions accordingly.
Here is a list of top three stocks which could give 6-18 percent returns in the next one month:
India Cements: Buy | LTP: Rs 112 | Target: Rs 132 | Stop-Loss: Rs 106 | Upside 18%
India Cements is trading on the verge of a breakout from a distorted inverted Head and Shoulder pattern (which acts as bullish reversal) on the weekly chart.
The recent surge in volume combined with the positioning of confirmation indicators is further adding to the positivity. We advise accumulating the stock within 112-115 zone.
RBL Bank: Buy | LTP: Rs 701 | Target: Rs 730 | Stop-Loss: Rs 680 | Upside 4%
In the recent rally, private banking counters are leading from the front. RBL Bank witnessed a fresh breakout on May 27 and also made a new record high at 701.40, after consolidating in a zone for roughly two months. We advise creating fresh longs as per the mentioned range of 692-696.
Indian Oil Corporation: Buy | LTP: Rs 163.45 | Target: Rs 172 | Stop-Loss: Rs 155 | Upside 6%
Like other oil market companies, IOC has been consolidating in a range for last two and a half months, after a strong surge.
The chart pattern indicates the possibility of a fresh breakout in the near future and the risk to reward ratio is favorable at current levels. We advise accumulating in the given range 159-161.
(The author is President - Retail Distribution, Religare Broking Ltd)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.