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Bet on Bank Nifty if it corrects further: Kunal Bothra

Well I think it is going to be very stock specific but many of these auto stocks have gone through a very strong recovery.

ET Now|
Nov 09, 2019, 02.13 PM IST
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BCCL
kunal bothra-bccl
The second would be a buy on Max Financial Services. I think that stock also did exceptionally well on Thursday and Friday of last week.
For an index trade, I believe betting on Bank Nifty could be good and especially if the index corrects by another 500 or 600 points over the next week, said Kunal Bothra, an independent analyst. Excerpts from his interview with ETNow:

ET NOW: What do you make of the last week? what happened and how is the setup looking for the next week?

I think the last week was a bit up and down for the index but there were a couple of data points which I think come out as a reflection of what transpired during the week and what could be happening say over the next week and the week after that.

So the first one is that the market internals were a bit mixed last week and that generally happens when you expect that the index to go through a bit of a consolidation. Sectors that led up the price uptick so whether it is the Nifty IT or Nifty Auto, I think these indices have taken a bit of a breather. So, when you are into that kind of a scenario where leading sectors correct and the laggard sectors tend to pick up pace, it is a sign that the index is going through a range bound action.

The other two important data points which I believe a trader has to take note of is the 12,000 strike on the options has one of the highest amounts of Call open interest, which is generally acting as a resistance for the Nifty so it is going to be a bit of a hurdle for the index to try and scale past that bit of psychological mark.

The second and the most important point that I believe is the event of a golden crossover where the 50-day moving average on the Nifty daily charts crosses the 200-day moving average on the upside. That generally has very strong positive repercussions on the indices and also leads into multi-month uptrend.

So, I believe if you try and put all these together, short term charts indicate you might go through a bit of weakness on the Nifty but the medium term chart indicates that you are in for a very strong upside on the index going forward.

ET NOW: What do you make of the Bank Nifty’s recent move? What is your sense on the broader market space?

First, on the Bank Nifty I believe that the index is trying to catch up with its underperformance with respect to Nifty. On the one hand when the Nifty is just 1-1.5 per cent from its lifetime high, Bank Nifty is still substantially lower from those levels. For an index trade I believe betting on Bank Nifty could be good and especially if the index corrects by another 500 or 600 points over the next week.

Now coming to the small and midcap space, I believe that they will also pickup pace. They are lagging significantly behind the benchmark Nifty and the large cap indices but when you have a market which is going through a full throttle upside led by largecaps, midcaps tend to play a bit of a lagging price behaviour. So, if assuming that this is a full-fledged rally on the indices then the midcaps should participate sooner or later.

ET NOW: What is your take on the auto pack as most of the companies have come out with their numbers?

Well I think it is going to be very stock specific but many of these auto stocks have gone through a very strong recovery. Now there could be two cases; one is that on the longer term charts this could be probably a dead cat bounce for many of these stocks. If the stocks stay below the resistance, for example, Maruti at Rs 7,700, Eicher Motors closer to Rs 21,500 or 22,500, then there could be a chance of sharp reversal.

ET NOW: What could also transpire is that many of these other laggards, the ones like Tata Motors, could try and play catch up at the time when the sector consolidates.

So, I believe that the rally, if any, is going to be very stock specific but I would be very bullish on the likes of Tata Motors even from current levels. I strongly believe that as a positional play or more of a medium term play, the stock can also break the 200 mark, say over the next three to six months.

ET NOW: Any ideas you have for our viewers?

The first one would be a buy on IndusInd Bank. I think the stock has managed to show some very good recovery in the last week, especially on Friday, on the back of some price and volume data. I think the stock also broke the psychological Rs 1,400 mark that was acting as a bit of a hurdle for the lender. So, I think that could be a good buy at the current levels. My target would be Rs 1,485-1,500 and stop loss would be at 1390.

The second would be a buy on Max Financial Services. I think that stock also did exceptionally well on Thursday and Friday of last week. Volumes were higher and the stock managed to give a very big breakout on the daily as well as some of the hourly charts. So I believe Max Financial Services could be a good positional buy from the current levels of Rs 480 plus. I think the stock can head towards Rs 515 so buy with a target of Rs 515 and stop loss to be kept at Rs 465.

Also Read

F&O: VIX shows bullish bias; Bank Nifty negates lower highs & lows

Inverse rotation between Nifty and Bank Nifty: Will it end private banks’ dream run?

NSE revises initial margins for Bank Nifty contracts

Sensex, Nifty rangebound; Bank Nifty hits all-time high

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