Smart money moving to #39;under-owned#39; cap goods, infra and commodity stocks: Aditya Agarwala of Yes Securities

Market Outlook

If the index fails to hold 14,950-14,850, it may lead to deeper corrections dragging the Nifty lower towards 14,700, which is the 50-DMA. On the upside, 15,250-15,320 remains a stiff resistance zone, says Agarwala.

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Aditya Agarwala, Senior Technical Analyst, Yes Securities, is of the view that rising commodity prices and the government’s infrastructure push is seeing investors shuffle their portfolios.

Investors are moving their money away from “over-owned expensive stocks” to the “under-owned” capital goods, infrastructure and commodity stocks, says the analyst. In an interview to Moneycontrol’s Kshitij Anand, Agarwala says fresh lockdown worries fanned by a spike in COVID-19 cases in the country and US bond yields are weighing on sentiment, as he shares some trading ideas. Edited excerpts:

After the initial selloff, the bulls managed to regain control and pushed the Sensex and the Nifty above crucial levels. What led to the price action?

The US 10-year bond yields cooling off from the recent highs led to a risk-on-trade in the US markets, taking the Dow Jones to a fresh all-time high, which, in turn, led to a relief rally in the Asian markets as well including ours.

However, the bulls couldn’t keep the benchmark indices at elevated levels for long and indices ended the day in the red after a significant gap-up opening above the critical resistance levels of 15,200-15,250.

Fresh lockdown concerns as COVID-19 cases are on a rise and a spike in the US bond yields weighed on sentiment.

On the downside, 14,950-14,850 are key support areas for Nifty.

If the index fails to hold on to these supports, it may lead to deeper corrections dragging the Nifty lower towards 14,700 levels, which is the 50-DMA. On the upside, 15,250-15,320 remains a stiff resistance zone.

Small and midcaps performed in line with benchmark indices in the week gone by, where are pockets of opportunities in this space?

It is more of the stock-specific bottom-up approach when it comes to the small and midcaps. However, if one digs deeper, then clearly money is chasing sectors like power (in anticipation of the EV picking up pace), cap-goods, small banks, midcap IT and the PSU basket where clearly big volumes are being witnessed.

Q) Wall Street hit fresh new highs recently. Do you think the Nifty will go past 15,431 to hit another record high?

A) Dalal Street underperformed Wall Street in the week gone by, with benchmark Nifty50 barely closing in the green, while Dow Jones ended the week at a fresh all-time high with gains of 4 percent.

The bulls couldn’t manage to keep the Nifty beyond the critical resistance zone of 15,250 following a gap-up opening above this resistance of 15,250, leading to a sudden profit booking in late trade to shut shop in the red.

Further, concerns of a fresh lockdown as COVID-19 cases are on the rise, and a spike again in US bond yields may keep Indian equity markets choppy and volatile in the coming sessions.

If the bears manage to push the index below 14,950-14,850, profit-booking could extend to 14,700 being the 50-DMA.

On the flip side, if the bulls manage to take the index beyond 15,250-15,300, a fresh-up move would be triggered to new highs beyond 15,430.

Moreover, technical indicator RSI is not moving above the 60-level ie the upper end of the bear territory, which also suggests that the bullish momentum is losing steam.

Q) Sectorally, which sector hogged the limelight in the week gone by and why?

A) Sectorally, it was the midcap IT space, insurance sectors, and sugar stocks that hogged the limelight. Sugar stocks were up and above as global commodity prices are rising and sugar prices have also risen 15 percent in the international market recently.

There was good buying activity in the insurance stocks as well after most of the insurance companies reported good growth in February.

Q) Equity MFs continue to see outflows despite a vibrant stock market. Are investors booking profits or rebalancing their portfolio towards under-owned sectors? 

A) The recent volume action in several under-owned sectors, especially the PSU basket and the capital goods sector, shows that investors are moving money away from over-owned expensive stocks to the under-owned cap goods, infra and commodity-driven stocks as commodity prices are on a rise globally and the government’s push towards infrastructure spending.

Q) Three-five trading ideas for the next three-four weeks?

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

Birlasoft: Buy| LTP: Rs 244| Target: Rs 300| Stop Loss: Rs 215| Upside 22%

The stock has resumed its uptrend after taking support at the 20-WMA and a trendline formed joining previous highs. The RSI, too, has formed a higher low above the level of 40, suggesting a range shift in the favour of the bulls.

CSB Bank: Buy| LTP: Rs 265| Target: Rs 320| Stop Loss: Rs 235| Upside 20%

The stock has witnessed extremely high volumes in the recent bull candles breaking out of a consolidation phase to resume its uptrend.

Further, a sustained trade above 266 will extend the upmove to 320 and RSI is also in the bull territory, affirming the same.

The stock is on the verge of a breakout from an ascending triangle pattern consolidation neckline placed at 681. A successful breakout on volumes will take the stock higher towards 780 levels.

Volumes have been encouraging in the recent bull candles, suggesting bullishness and a breakout is on the cards.

Power Grid: Buy| LTP: Rs 220| Target: Rs 250| Stop Loss: Rs 210| Upside 14%

The stock resumed its uptrend after testing the trendline support. Further, RSI has also cooled off from the overbought territory, suggesting room for a fresh upmove.

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