Further 5-7% correction in realty, bank and auto stocks, a possibility: Yuvraj Thakker of BP Wealth

We believe investors should stay light in realty, bank and auto stocks as there is further room for 5-7% correction, Yuvraj A. Thakker, Managing Director, BP Wealth said in an interview with Zeebiz’s Kshitij Anand.

Edited excerpts:

Q) The Indian market closed with losses of about 3% for the week ended 17 December. What led to the price action on D-Street?

A) The Indian market closed with over 1.5% decline on Friday (closing near days low). The majority of triggers for heavy selling is due to FII selling.

We have seen major selling in banking, and auto stocks like Kotak Mahindra Bank, SBI, Maruti Suzuki, and Bajaj Auto.

All the stocks were down by over 2 per cent each. IT stocks have supported the market, and stocks like Infosys and Wipro were up by 3 per cent and 4 per cent, respectively.     

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Q) What are the important levels that one should watch out for in Nifty and NiftyBank?

A) The Nifty50 has an important support zone placed around 16,800-16,900 levels which coincides with 38.2% Fibonacci retracement of its whole advance from 14,150 to 18,604.

Till the Nifty index defends the support zone, it is likely to oscillate in the range of 16,800-17,500 levels. The selling pressure is likely to accelerate if the index breaches this support zone that would open the way for 16300-16400 on the downside.

NiftyBank witnessed a sharp selloff this week and closed below the important support of 36,100. Going ahead, it has important support placed around 34700-34800 which coincides with 50 WEMA and 61.8% Fibonacci Retracement level of its whole advance from 30400 to 41830.

While on the higher side important resistance is seen at 36200-36800-37450.
   
Q) Sectorally, IT stocks managed to attract some buying interest while realty, banks & auto witnessed selling pressure. What should be the investor's strategy for the coming week?

A) We believe investors should stay light in Realty, Banks, and Auto stocks as there is further room for 5-7% correction.

Investors should look to build some position in Nifty IT stocks like Wipro, Infosys, Birlasoft and Persistent Systems as we expect the Nifty IT index to show strength and perform well in the next few weeks.

Q) Where is the smart money moving?

A) As per our observation, we believe smart money has been moving into Capital Goods, IT and Power sector.
 
Q) FIIs have already pulled out more than Rs 24000 cr from the cash segment of Indian equity markets. It looks like they have already started to take out money from EMs including India amid a potential rate hike in 2022. What are your views?

A) The Indian stock market is witnessing a battle between FIIs and retail investors. FIIs representing ‘smart money’ have pulled out more than Rs 24,000 crore from the cash segment of Indian equity markets, which is being bought up by the retail investors at every dip.

High market-cap-to-GDP of approx. 112% (vs the long-term average of 79%), and one-year forward PE of 20.6x (vs the 10-year average of 19.1x) are some signs of the high valuations of the Indian market.

Also, India has outperformed other emerging markets which has led to the sell-off by FIIs. Lastly, with the rising inflation globally, Fed Chairman Jerome Powell recently said that they will speed up the taper of its asset-purchase program and may see as many as three rate hikes in 2022. On the other hand, RBI is not showing any signs of being too concerned.

Q) What is your call on the small & midcap space? Do you think that pressure could remain on the small and midcap space if the churn continues ?

A) We believe only quality stocks will stay strong and perform well while one should strictly avoid fundamentally weak companies.  

Q) Please suggest 3-5 trading ideas for the next 3-4 weeks.

A) Following are the stocks which look attractive technically and likely to attract bullish momentum in the coming 3-4 weeks

Persistent System: Buy| LTP Rs 4640| Stop Loss: Rs 4400| Target Rs 5000-5200.

Kajaria Ceramics: Buy| LTP Rs 1239| Stop Loss: Rs 1164| Target Rs 1400

Sun Pharmaceutical: Buy| LTP Rs 769| Stop Loss: Rs 730| Target Rs 840.

Larsen & Toubro: Buy| LTP Rs 1847| Stop Loss: Rs 1730| Target Rs 2050

(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.)