ICICI Direct sees Nifty pullback to 5980; suggests buys

In an interview to CNBC-TV18, Amit Gupta of ICICI Direct talked about Nifty and said that Nifty future is trading almost to 100 point higher. He feels it is a good time to buy stocks as they can give investors good returns.

His advice is to go long on Federal Bank and Bajaj Auto. He also expects HDFC Bank to remain positive for a time being. Also read: Sensex slips on profit taking; broader markets outperform Below is the edited transcript of his interview to CNBC-TV18 Q: What did you see from both FII activity and in terms of expectations going into this series? What do you think the Nifty could do? A: The resistance of 5,750 which was there for the last couple of months, once it has taken out, on declines this is going to provide very good support. Having said this on the higher side Nifty may try to retrace towards 5,980. 5,980 is almost 80 percent retracement of the overall fall from 6,330 levels, similar was in 2010 high and then the lows of 4,530. So this is going to be very critical on the higher side. However, overall it seems the market has given a platform for the stocks to perform further. Stock futures open interest has zoomed up to more than 210 crore share. That gives an indication that the stock specific momentum is likely to continue. If you look at the infrastructure space it has started moving recently. That also gives us a sense that they are the laggard stock. It is a good time to buy them at least for couple of week time or possibly more and they can give us good returns. In infrastructure we have seen that IVRCL, very good delivery base started moving. I think this maybe seen in other stocks also. Overall, my sense for the market is that 5,750 will be a good support. The declines to go long and stock specific remains positive.
Q: The big pull from Friday onwards seems to be coming on the financials. Would you go long on the Bank Nifty as well in this series? A: I think Bank Nifty has definitely outperformed Nifty over a period. Look at 12,200 levels in Bank Nifty which is almost equivalent to 5,980 Nifty. Nifty is almost 100 points lower than that level. However, Bank Nifty has almost reached so the 80 percent retracements of the overall fall in Bank Nifty from 2010 highs to 4,530 equivalent levels. So, on the higher side, Nifty possibly may reach level of 5980. Then in that case Bank Nifty’s outperformance will continue and it may move towards 12,500. That is a target we can take on higher side and look at downside what is happening. 11,700-12,000 were the two very hefty call bases in the last couple of months. Once these levels are taken out we are seeing that the call writers have stuck up. This can easily be seen in the volatility also of the market. India VIX is moving up in this particular move just because the call writers are going away. So, 12,000 levels especially in Bank Nifty where we still have one of the highest call base. The future is trading almost to 100 point higher. On declines, this will provide a good support. On the higher side 12,500 one can look for the target. Q: How would you trade Federal Bank? A: My pick from the banking space right now is Federal Bank. I think Rs 450-455, for the last five-six months the stock has been facing lot of resistance. The stock started moving up in the month of October. Since then almost 26 percent of closer we have seen in the open interest and the stock yet has to move up significantly. I think in Rs 450-470 range it has been moving so fast and recently it moved up to Rs 480 levels. The declines in the stock can be utilize is to go long. Rs 470-475 again buy it and look for a target of Rs 515. On the lower side keep stop loss at Rs 455. It will be a good stop loss because around Rs 458 we have recently seen very good delivery buying coming up. So, I do not see that stock going below that level. Look for a target of beyond Rs 500. _PAGEBREAK_ Q: Do you like Bajaj Auto from auto space?
A: If you look at the FII inflows, consistently it has been coming into the auto pack. It started with the four-wheelers and we saw how Mahindra & Mahindra (M&M) and Maruti started moving up. One can keep Bajaj Auto also in place just like M&M because after four-five months of consolidation, this stock also made new high. In the last one month period when it was around Rs 1,830 the open interest was around 10 lakh shares.
When it started moving up to more than Rs 1,900, the open interest is only 10 lakh shares. I do not see people jumping into the stock to buy. So, there is lot of steam left in the stock to move up from here. I assume that on the higher side Rs 2,060-2,100 levels can be met in the stock, looking at the pattern of open interest and price. On the downside Rs 1,830 – one should keep a stop; technically 21 day moving average is also placed around Rs 1,840 below which it has not been able to sustain over the period. So, it could be a good stop loss, looking for a target of Rs 2,060. Q: Any specific heavyweights on which you have seen a big long rollover in this series, something that could help the Nifty?
A: I think it is definitely HDFC Group. The way HDFC Bank is performing and the longs which were created before, same kind of rollovers we saw in December series. There might be stock specific momentum likely to continue in the bank. On the higher side we look for a target of Rs 735 immediately before any profit booking starts. If you look at the downside then Rs 660-665 is a good support area. Above this we started seeing some delivery based buying also in the stock. So my sense is the stock may remain positive for the time being.