says Rahul Sharma, .
Let us not talk about today and talk about an overall trend, what do you make of this last 10-12 days underperformance that India has seen versus global markets?
We enjoyed our outperformance last year and we did not question that much and I think the recent underperformance should not be much of a bother. Net and net I think the macro picture is still intact but because we have been consolidating, compressing and seeing a bit of distribution since last three weeks or so a bit of volatility cannot be ruled out especially ahead of the budget.
Speaking of levels, I think below 17,775 is where the eyes of all the market participants are and if that breaks there could be a round of selling pressure which may come in. But broadly speaking I think this is a market where you should be looking to identify sectors and stocks which are relatively much stronger and essentially the idea of the strategy should be to go for sectors which may do well from here something like capital goods or metals. We feel these two sectors have inherent strength. We can protect that with the Nifty hedge. So cautiously optimistic is the stance as of now, breakdown has not yet happened, the best way to navigate it is with a Nifty hedge. Buy a Nifty 17,500 put option of the monthly expiry and just ride it through the entire next couple of weeks.
The entire banking space has been underperforming for the last 10 to 15 days now, what are the levels to watch out for as far as Bank Nifty is concerned and will Bank Nifty continue to be weaker than the headline index?
I think probably traders are thinking that the Bank Nifty maybe an underperformer which is still not so true because I would say banks have led this rally on the way up and it is just a bit of consolidation, time-based correction or some may call it a distribution as well. My sense is 41,500 is a crucial level to watch out on the Bank Nifty. We have still held on to that. We have not broken that since 10-12 trading sessions now. It is an important Fibonacci level as well and my sense is if this market has to break down someway or the other, the sector leader will have to give this break down before the entire market does. So as long as 41,500 does not get broken on a closing basis I would stay neutral on Bank Nifty as of now. In fact, the chances are that we may see an uptrend up to 43,000 on the Bank Nifty in case today’s attempt also fails.
Today is the sixth time probably when Nifty is trying to break this floor and even if it fails today I think there could be another round of bounce back which could take us back to 18,100 on the upside. So it is a bit tough to take a call.
How would you play this?
The best thing to do is to go long on sectors which look good which are currently metals and capital goods. Along with that buy a Nifty hedge on the metals pack. We are liking Vedanta, the stock is set for a rally of around 7% to 8% from current levels. On the capital goods we like L&T. Capital goods index especially the BSE capital goods index is showing resilience. It is showing some bit of leadership in the entire Nifty 50 pack. So L&T and
are our top picks. You can buy them for a 8% to 10% kind of an upside in the coming couple of weeks with stop losses placed at around 3% to 4% from current levels. And along with that buy Nifty hedge in case the breakdown does happen you will be able to participate on the downside as well.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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