How to position your trades if I am already carrying on my longs because in the last two days, there was enough opportunity to build long positions on the lower levels. Where should I put my stop losses and if I want to get into the market, where are the opportunities?
There is momentum on the upside, no doubt about that, and there is a risk on trade which market participants are clearly latching on to. I believe immediate resistance on the upside on the Nifty is somewhere around 21,200, that happens to be the 161.8% extended level of the recent down move that we had seen in past few trading sessions.
But once 21,200 is taken out, I am looking at a target of 21,500. That is the immediate target that I am playing with if one is looking to go long, at current levels maybe the risk on the downside will be slightly higher. Immediate supports on the downside are somewhere between 20,900 to about 20,850. An intraday dip, if it comes around, there will be a good opportunity to initiate fresh long positions in the Nifty and Bank Nifty both.
I am slightly more bullish on the Bank Nifty because of the fact that it has underperformed for the past couple of trading sessions and now it seems like it is getting ready for an outperformance and private sector banks are something that I am betting big on. Talking of the Bank Nifty, I am looking at a target of 48,200 to about 48,300 on the upside.
Even at current levels, if one wants to initiate fresh long positions in Bank Nifty, they can do so despite the fact that it has witnessed a good gap up opening in today’s session. On the downside, 47,300 to about 47,500 is a very good support zone for the Bank Nifty. The midcap and the smallcap end of the market continue to inch higher despite the fact that it is trading at overbought levels. So one needs to be a little cautious as far as the midcap and the smallcap indices and stocks go because there could be a bit of profit booking that can kick in here, even though the price is yet to correct.
The RSI and other indicators are sitting at overbought levels, but the price is yet to correct. I would want to stick to largecaps at this moment and I can look at private sector largecap banks too and definitely at IT.
Talk about some potential trades in interest rate beneficiaries or rates edging lower beneficiaries. Though I am very surprised at the way the entire IT sector is getting re-rated because the large ones are growing but midcaps are making up for the growth which the larger ones are missing out on. Where would you place your bets within IT?
I would stick to the midcap end of the IT which has actually been outperforming the largecap IT space. One should look at largecap IT names now because it is a matter of time before they can start to outperform. If I have to pick a couple of largecap IT names, it will be TCS and Infosys from the largecap space because I still believe there is decent room on the upside in both stocks. You can easily make at least 5% to 10%. If you hold on to them for at least a month or a quarter, both of them should start to outperform from here on. TCS has done decently well for itself. I believe now Infosys should also chip in and start to outperform. If I have to pick a midcap IT name, then Coforge will definitely top the list despite the fact that the stock is up 6% in trade today but it is on the verge of breaking out into an all-time high territory.
Once the stock breaks out into an all-time high territory from technical angle, it continues to go up higher from that level as well. So, Coforge from the midcap IT name will top the list and Infosys and TCS are the two stocks from the largecap IT name that I will bet on.
What are the stocks that are coming on your radar, your top recommendations?
I have got a couple of buy recommendations and both from the financial space because the way the financials, the NBFC space is moving, I believe there is decent money-making opportunity there. The first is Mahindra & Mahindra Finance. The stock has broken out from a good consolidation phase and it is backed by extremely healthy volumes. So, at current levels, one should look to go long on Mahindra & Mahindra Finance, look for a target of 315 on the upside, with a stop loss at 264 on the downside.
The second stock is Piramal Enterprise, PEL. Again, as we speak, the stock is making new high but again at current levels, one can look to go long for a target of Rs 985 and if 985 is taken out, this stock can test levels of Rs 995 as well with a stop loss at 920 offers good risk-to-reward ratio in PEL as well. So, both the stocks are buys – Mahindra & Mahindra Finance and PEL. I believe you can make decent money in both these names.