Smart Money is certainly seen moving towards the defensives, predominantly towards the IT pack where a double benefit of business continuity even in the pandemic scare and appreciating USD (FII outflows) adding to the cause, Pushkaraj Sham Kanitkar, Vice President (Equities) at GEPL Capital said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts:

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

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

A) We are seeing a range-bound market over the past 4-5 weeks, wherein Nifty50 has largely moved in a bracket between 18000 on the upside and 17000 levels on the downside with an off-tick of 16800 in the first week of December.

There are bouts of risk-on and risk-off wherein, volatility has risen sharply and this may be attributed to a lack of real triggers in the system.

The scenario is one of a lull as we come to the holiday season even as the talks of the ‘Santa Claus’ rally were recently doing the rounds. The strategy of the Foreign Institutional Investors (FIIs) to sell on every rise is the real sour taste.

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

A) As mentioned above, the Nifty50 would be at a critical juncture around 16800. Below this a fast and furious correction to test the 200-DMA (currently at 16234) seems on the cards.

The recent pullback level of around 17600 stands as a major barrier.

BankNifty has underperformed the benchmark by a good margin and as such it already tested the 200-DMA in end of November.

A break below 35,400 (swing low) could lead BankNifty towards 34,300. On the upside, major resistance for BankNifty is placed between 36,500-36,600 zone.

Q) Sectorally, IT stocks managed to attract some buying interest while realty, banks and auto stocks witnessed selling pressure. What should be investors' strategy for the coming week?

A) IT remains to be the preferred sector. The Nifty IT index has been consolidating in a range for the last 3 months and currently attempting a breakout, accompanied by huge volumes and positive setups on the options side.

A rising USDINR would also be the cherry on the cake. The indicators are also signaling towards a positive momentum to continue in the coming week.

Banks, Autos, and Realty are on a dicey wicket and can see a further buildup of pressure.

Q) Where is the smart money moving?

A) Smart Money is certainly seen moving towards the defensives predominantly towards the IT pack where a double benefit of business continuity even in the pandemic scare and appreciating USD (FII outflows) are adding to the cause.

We may see some biases in Pharma in a scenario of pandemic scare intensifying, given that this sector has corrected and holds a fair valuation vis-à-vis the front runners.

Q) FIIs have already pulled out more than Rs 24000 cr from the cash segment of Indian equity markets. It looks like FIIs have already started to take out money from EMs including India amid a potential rate hike in 2022. What are your views?

A) The FIIs have been net sellers for the last 3 months selling almost 90,000cr from October to December of which the first 2 weeks of December contributed 24000 cr.

A lot of recent IPOs have also sucked liquidity from the market wherein some issues bombed, thereby people getting stuck.

The prefix of a potential rate hike in 2022 is there, which can lead to higher volatility in markets but sector and stock specific movements will be the flavor.

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

A) Small and midcap are showing clear exhaustion at higher levels. Looking at the broader indices, only 23% of the Nifty500 stocks remain above the 50-day Mas (Approximately a quarterly MA).

It looks like the selling can extend and the pack would underperform the benchmark in the near term, looking at the current price action. As mentioned earlier, stock specific moves would still be in and that’s where the money is to be made.

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

A) Here is a list of top trading ideas for the next 3-4 weeks:  

Tech Mahindra: Buy| LTP: Rs 1642| Target Rs 1750| Stop Loss: Rs 1530| Upside 6%

The view on IT sector is positive. Tech Mahindra is breaking out from a 2-month consolidation zone. The stock has a potential to move towards 1750 followed by 1860 in the next 3-4 weeks.

The view on Tech Mahindra will be negated if the stock fails to hold on to Rs 1,530 levels on a closing basis.

TCS: Buy| LTP Rs 3587| Target Rs 3880-4000| Stop Loss: Rs 3450| Upside 8%

TCS took support at 3400-3450 demand zone and broke out of a double-bottom formation since then the prices are consolidating in a narrow range.

If the stock sustains above 3560 there is a strong possibility that the momentum could take the stock towards 3880 followed by 4000. The view will be negated if prices break below 3450 on a daily closing basis. 

Vardhman Textiles: Buy| LTP Rs 2257| Target Rs 2480| Stop Loss Rs 2150| Upside 10%

Vardhman Textiles has broken out from an Ascending Triangle pattern with an increase in volume activity.

As long as prices sustain above 2150 levels we can expect the stock to move towards 2480 followed by 2600 levels.

(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.)