ITC, Tech Mahindra top buys for March series while investors can go short on Bajaj Finance: Mehul Kothari of Anand Rathi

Mehul Kothari AVP – Technical Research, Anand Rathi Shares & Stock Brokers said that a breach of 16000 on the downside with VIX near 29 could bring in a faster fall towards the mentioned targets of 15,400 – 15,000.

In an interview with Zeebiz's Kshitij Anand, Kothari highlights that history suggests that major bottoms are being made when the VIX is above 30 mark; hence, if at all this move comes then that could be the time for bulls to come back. Edited excerpts:

Q) Benchmark indices shed by about 3% in the week gone by. What led to the price action on D-Street?

A) The month of February 2022 was a frightening one for the world and all the equity markets. A month before now, who would have thought that the world equity markets would succumb to one of the major geopolitical issues.

The invasion of Ukraine by Russia brought the bears into action where we witnessed constant selloff in the equity markets and a strong surge in the commodity markets.

The Brent crude rallied to $120 from the close of $90 (January 2022) and that brought tremendous pressure on our equity markets.

The Nifty50 index tumbled to breach the support placed at 16,800 and then towards 16,400 to reach the 16,200 mark for the week ended 4 March.

Q) How should investors prepare themselves for the coming week. What are the key levels that one should track for the coming week on Nifty and NiftyBank?

A) The recent crack in the Nifty50 has forced the index to sustain below 16,800 mark for quite some time. This has confirmed a breakdown from the parabolic trend line which was acting as a support since Dec 2021.

This has also resulted in a breakdown from the pattern which resembles Head and Shoulder. The pattern has a theoretical target of 15,400 – 15,000 levels and the pattern would be negated only a close above the 17300 mark.

Going ahead, things could get worse for the markets since we have a few more events like UP election results as well as the possibility of a US Fed rate hike.

For the immediate time frame, 16000 would be a strong support, and below that we could be heading for the mentioned targets.

We would be out of the woods once Nifty50 closes above the 17300 mark. With VIX sustaining above 25 mark it would be a difficult time for the traders to judge the direction and hence we advise them to avoid any aggressive bets in the Future.

On the other hand, long-term investors are advised to take this fall as an opportunity to accumulate their favourite stocks.

BANKNIFTY is on the verge of a breakdown from rising channel and the confirmation for the same would come below the 34000 mark.

The index spent over a year in this rising channel and hence the breakdown will be crucial. If the breakdown happens then we can see a further fall of 7% to 10% in the NIFTY BANK index.

On the contrary, there are heavy short positions in the banking index and if it holds on to the given support then we could witness a short-covering relief rally.

In such a scenario, the 36000 – 37000 zone could be the zone to watch out for. For the long term we still maintain our stance that banking stocks can outperform but for that, investors should adopt an accumulate strategy for further dips.

Q) Sectorally, auto, banks plunged the most. What led to the price action and do you think the pressure could continue in the coming week as well?

A) With regards to AUTO, the rising crude prices have been impacting near-term auto sales, and maybe this is the key reason for their underperformance.

On the other hand, for banks, higher inflation expectations might be impacting consumption demand in the near term. This could have some impact on credit growth for banks which are already struggling to achieve higher credit growth.

Q) India VIX above 29. What does it suggest? Should investors brace for more volatility? What does the history suggest?

A) Well, till the time India VIX sustains above 25, we expect more wild moves in the market since there is a breakout in VIX on the weekly scale which has an upside target of around 40 -45.

A breach of 16000 on the downside with VIX near 29 could bring in a faster fall towards the mentioned targets of 15,400 – 15,000.

History suggests that major bottoms are being made when the VIX is above the 30 mark; hence, if at all this move comes then that could be the time for bulls to come back.

Q) What should investors do with small & midcap stocks? Time to buy or time to exit high beta, high PE stocks? What are your views?

A) It’s still not the correct time to go aggressively long since we mentioned above there is a possibility of one more round of pain.

There could be a small bounce if we do not break 16000 but we are still not sure of a bottom formation. The ideal range to start looking for midcaps would be near to 15500 or above 17000.

Q) Any top 3-5 stocks that traders can look at for the March series?

A) Here is a list of top trading ideas for the March series -  

Bajaj Finance: Sell on rise| LTP Rs 6539| Stop Loss Rs 7050| Target Rs 5900

Being from the group of financials’ Bajaj Finance too underwent heavy selling in the recent sessions. On the daily and weekly chart, we are witnessing a range breakdown below 6575 and that is the first sign of weakness.

In addition, the stock has decisively closed below its 200-Days EMA and 200-Days SMA after September 2020 which indicates a fresh downside.

Thus, traders can sell the stock on rise between 6600 - 6700 with a stop loss of 7050 for an upside target of 5900 in the next 3 – 4 weeks

ITC: Buy on dips| LTP Rs 225| Stop Loss Rs 210| Target Rs 245

Being defensive in nature, ITC has been a top outperformer in this recent crack which dictates inherent strength in the counter.

On the technical front, for over a year, ITC has never sustained below the 200 mark which suggests that the downside is limited.

As per the chart, it is evident that the stock is trading well above the placement of the Ichimoku indicator on the daily scale. The stock is trading in a range formed by a rising trend line and the upper range comes around the 280 mark.

Thus, traders are advised to buy the stock in the range of 225 - 220 with a stop loss of 210 on a closing basis for the upside potential target of 245 in the coming 1 – 2 months.

Tech Mahindra: Buy| LTP Rs 1453| Stop Loss Rs 1330| Target Rs 1650

Similar to a few other IT names, even Tech Mahindra is hovering just above its 200 DEMA and 200 DSMA placed near the 1400 mark. Along with Tech Mahindra, most of the other IT stocks too are signaling a possibility of a bounce back.

Even the daily RSI is now above the 40 mark which indicates strength. Thus, traders can buy the stock near the 1450 mark with a stop loss of 1330 for the upside target of 1650 in the next 3 – 5 weeks.

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