Dalal Street Voice: Amid uncertainty on D-Street, buying interest seen to shift to IT, pharma & FMCG: Mehul Kothari of AnandRathi

Interest has shifted to the defensives as markets are uncertain and we witnessed buying in IT, PHARMA and FMCG pack, Mehul Kothari, AVP – Technical Research at AnandRathi – said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts:  

Q) Indian markets closed on a muted note for the week ended December 24. What are your views on markets for the last week of December?  

A) The closing for the last session of the week was a bit muted but the price action was quite loud. We witnessed too many swings during the session.

In fact, the week that went by was quite exhilarating as it began with a crack of around 600 points in the Nifty50 on Monday’s session. This was followed by a recovery in the next four sessions.

Firstly, bears displayed their strength  with the bulls retaliating back, later. For the coming week, we don’t expect any major fireworks on the street since the overall sentiment has been dented.

We expect the Nifty50 to remain in a range of 17500 – 16500 levels and a prudent strategy to trade this market can be to buy near support and sell near resistance.

Q) What has spoiled the mood of markets, this Christmas?

A) Several factors have affected our domestic markets over the last one month, leading to such kind of nervousness on the street.

The first and most obvious reason was the resurgence of COVID with its new variant OMRICON. Then the continuous outflow of foreign funds from the Indian cash market, that irked investors.

In addition, the Federal Open Market Committee (FOMC) announced that it will ramp up the speed at which it pares its bond purchases, putting the nation’s central bank on course to eliminate the emergency quantitative easing (QE) program a few months earlier than expected.

All the above factors added further panic in the markets.

Q) Has the market texture changed from buy on dips to sell on rallies as bounce back fails to sustain?

A) It depends on the time frame which suits different categories of participants. The larger degree chart still remains bullish with a time frame of a few months and thus for investors it is still buy on dips.

However, for short-term traders, it is sell near resistance and buy near support since we are witnessing lower top and lower bottom formation on the weekly chart.

This short-term structure will remain intact till the time Nifty50 stays below 17600. If it closes above 17600 there would be confirmation of a bottom.

Q) In terms of sectors IT, Pharma, and FMCG attracted some buying while banking stocks remained on seller list for the week. What led to the price action?

A) Since markets are uncertain, buying interest has been shifted to the defensives and thus we witnessed buying in IT, PHARMA, and FMCG pack.

On the other hand, banking remained under pressure being a cyclical and heavily held sector by the FIIs.

Q) What should investors do with Banking stocks what levels must be watched next week?

A) Nifty Bank has breached its 200-DEMA and 200-DSMA during the recent correction. Thus, till the time it stays below the same, it might not attract fresh buying interest.

A level  of is 35,500 is to be watched and once that is taken out then, it can be assumed that the bottom is achieved.

However, in case of further selling, we expect the index to settle near the 34000 – 33500 mark which is a support zone on the weekly scale.

Investors can hold their exiting positions in banking stock and they should start adding once the index starts trading above the 35500 mark.

Q) What are your top 3-5 stocks for the January series with 3-4 weeks of outlook?

A) Here is a list of top trading ideas -

Britannia Industries: Buy on Dips| LTP Rs 3543 |Stop Loss Rs 3,380| Target Rs 3800| Upside 7%

Till the time there is uncertainty in the market, defensive play can be a better option. Britannia is hovering near its 200-Days SMA support and also that support coincides with the ICHIMOKU cloud on the weekly scale.

Thus, the downside from here seems to be marginal. Traders can buy the stock on dips between 3550 – 3500 with a stop loss of 3380 for an upside target of 3800 in the next 3 – 4 weeks

ITC: Buy on Dips| LTP Rs 218| Stop Loss Rs 195| Target Rs 255| Upside 16%

ITC too is a slow-mover but a heavy defensive pick for the current times. The stock has been in a corrective mode for quite some time and has confirmed a reversal from its 200 DEMA and 200 DSMA.

The risk-to-reward ratio looks lucrative to go long. Traders can buy the stock on dips between 218 - 210 with a stop loss of 195 for an upside target of 255 in the 3 – 4 weeks.

Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.