Kunal Bothra’s 3 buy calls for next week
There is a higher chance of Bank Nifty leading the breakout in Nifty for next week.
- Expect a lot of reforms over the next 2-3 months: Gurmeet Chadha
- Pranjul Bhandari makes a case for direct govt intervention in stressed NBFCs
- Be wary of domino effect of telecom mess on financial industry: Dipen Sheth, HDFC Securities
- Weakness is just temporary, economy poised to take off: Ashu Khullar, Citi India
Metals are going up, PSU banks are going up, FMCG as a sector is not doing that well. Are these the classical signs of a risk-on trade?
Kunal Bothra: Yes, these are classical signs of risk-on trade and add to that the consistent move in those largecap names which have been doing extremely well. The tendency of the short-term trader to try and latch on to stocks which are running on high beta and probably playing for a contrarian trade, is not playing this time around. It is more of the continuation we have seen in the last few months of this market rally in stocks like ICICI Bank, Axis Bank to a larger extent, Kotak Bank and HDFC Bank as well.
These stocks have been doing extremely well. All the other sectors have been playing a helping hand but not many of them have recovered or converted their short term rallies into trends. That is what separates the men from the boys in this rally and that is going to be the likely texture for the markets going forward as well.
Just one important observation, the open interest data which transpired last week still suggests that there has been more long built up on the Bank Nifty futures and that is why I am highlighting many of these private sector banks because if they continue to move up higher from where they left off on Friday, then there is a higher chance of Bank Nifty leading the breakout in Nifty for next week.
What do you make of what is happening in the telecom pack now? Bharti at the end of the week was among the top gainers in Nifty?
Absolutely and it is one of the best moves for the Bharti Airtel stock in the last so many weeks and months. It used to have more of a staggered continuation up move but what transpired on Friday was nothing more than exceptional because the stock opened slightly lower. It tested the mark of Rs 360 which was more or less a closing base support for Bharti Airtel.
I believe that the remarkable turnaround in the first half of the session itself and stock closing at the highest point of the day indicates that this stock is ready to move up higher even from current levels. The volumes moved up significantly higher for Bharti Airtel and so that is an added positive.
The other point is that it is now closer to the psychological mark of Rs 400 as well, which has been acting as a hurdle for the stock price. When a largecap stock like Bharti Airtel consolidates at the upper end of the resistances and goes through a time-based correction or more volatility, in between it is a sign that the stock is reading for a big breakout on the upside.
A continuation move above Rs 400 for Bharti Airtel would be taken as a breakout move for the stock and post that, I would expect price trends to continue. What you have seen in the last one year, even a target of Rs 440-460 will not be ruled out provided the stock sustains that breakout of Rs 400.
Another interesting space has been what is happening with the metal pack. Some of the steel companies are moving. Vedanta has been moving. What is your sense on largecap metal names?
It has been topsy-turvy for these stocks when you look at it on a collective fashion because on the one hand, midcap stocks like Jindal Steel have done exceptionally well. In the last month or one-and-a-half month, it has rallied 50-55% but the other stocks have not failed to show signs of momentum.
Hindalco was one of the stocks which also showed potential but post results, the stock has fallen back below that Rs 200 mark which was a strong psychological support. Vedanta on the other hand has been a laggard. The stock had shown signs of potential earlier but it keeps on failing time and again ad makes new swing lows. Those are the two stocks which I particularly believe would continue to be a drag on the overall metal index.
Tata Steel on the other hand keeps giving that periodic bouts of rally. In terms of a strategy, if you can get Tata Steel may be 4-5% from its recent swing highs, that will be a good entry point for playing the stock with a risk reward of 1:2. It has to be more stock specific and not a holistic view on the metal stocks.
Any picks for our viewers?
Absolutely. There are three buy calls and all three of them are varied in terms of strategy. The first is a buy on Strides Shasun. That stock looks extremely strong on the short term charts. The indicators have gotten into an extremely oversold territory. So, the chance of a strong bounce over the next one week could not be ruled out. I would suggest a buy with a target of Rs 395 and stop loss at Rs 364.
Second is Aditya Birla Fashion. It is more of a breakout candidate. The stock was consolidating since last so many weeks, trading above the 200-day moving average. The volumes and the indicators have now pepped up higher for Aditya Birla Fashion. That could lead to a strong breakout over the next one week. That is also a buy with Rs 230 approximately as a positional target and a stop loss of Rs 200.
The third would be from the largecap space. It is a buy on Kotak Bank. Many of these banking stocks, even Kotak Bank, I believe now be heading towards consolidation breakout more of a continuation breakout on the daily and the hourly charts so buy with a target of Rs 1680 and stop loss at Rs 1580.