Weakness creeping into PSUs banks worrying: Manghnani

In an interview to CNBC-TV18, Anil Manghnani of Modern Shares and Stock Brokers shared his reading and outlook on market and specific stocks.

Below is the verbatim transcript of an interview aired on CNBC-TV18.

Q: Do you still spot any weakness on the charts of Larsen and Toubro (L&T)?

A: The way it rallied from Rs 1,500, which was a support, I would not say a retest of Rs 1,500 but at least a pullback to make a higher bottom then it would suggest maybe the stock is ready for a rally. So, I think having already rallied over Rs 100 a fall is due. So, I am looking at about Rs 1,557 to Rs 1,545 range as a pullback on the stock and then take a next call whether it is bottomed out at Rs 1,500 and it is going to move higher. So, if you look at the whole sector, it is only L&T, otherwise Bharat Heavy Electricals (BHEL) is back to Rs 220 range, Crompton Greaves, most of the other names are not doing much. So, it does not suggest that the sector is yet ready for a breakout.

Q: What do you see on the charts of the public sector undertakings (PSU) banks, not the entire fraternity, but especially the PSU bank lot, is there a lot of weakness creeping in there?

A: Yes, I guess a little worry for sure. If one look at an Axis Bank, it is at new 52-week high, look at ICICI Bank, yesterday it clocked a new high. However, PSU banks are falling through, Bank of Baroda, Punjab National Bank (PNB), Bank of India are all collapsing and even Canara Bank yesterday closed below its 50 day moving average. So, normally the first stop should be the 50 day but the way some of them are falling, it is a little worrying sign.

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There is a complete disconnect between what is happening in the private banks and the PSUs. So, I will be concerned. I think the one solace is that the Bank Nifty is holding up. It made new 52-week high, although it gave up the gains intraday but that is more in sync with what the market did. So, although Bank Nifty looks okay, I am little concerned with what is happening on the PSU side.

Q: You are buying Reliance Industries today?

A: Yes, after hitting Rs 950 it has come off quite a bit. So, it warrants a little bit of a buy, I guess from an oversold territory. The support is Rs 880 but I do not mind all the way up to about Rs 860. So, in that Rs 20 range buy it with a stop of about Rs 855 and play for a pullback Rs 910-920 range, maybe even a little bit higher.

Q: You do keep an eye out on the midcap index. What kind of trends are you picking up from the broader market both in terms of how the index has decelerated and the kind of negative market breadth we have been clocking everyday?

A: I will watch another couple of days for sure because after the pounding of the last two weeks we have had couple of good days that is last Friday and Monday this week but then again turned negative yesterday. So, I think give it a couple of days but now 8,100 on the CNX Midcap index becomes a very crucial level. It has bounced from there last week but any fall that has to hold for it to maintain the uptrend and similarly if I talk about the CNX Smallcap index that’s about 3,600.