FII activity muted in March, they wrote calls and bought puts: Mehul Kothari of AnandRathi

Mehul Kothari, AVP–Technical Research, AnandRathi says foreign institutional investor activity remained subdued in the cash segment barring the March 19 session, though some selling was seen in index and stock futures.

In an interview to Moneycontrol’s Kshitij Anand, Kothari says he sees the Nifty rising in the financial year 2021-22 and expects it to gradually climb to 16,500–17,000. Edited excerpts:

Concerns over the second wave of COVID-19 triggered profit-taking and fears that another lockdown would be on the cards. This is in addition to the spike in the US 10-year yield which irked the market.The Nifty50 not only breached the support of 14,800 last week but also sneaked near 14,350, which was the gap area of Budget 2021.

A spike in US bond yields spooked markets. Do you see this as a sign of caution or an opportunity for investors sitting on the sidelines and waiting for a dip?

Of course, the rising yield would dampen the sentiments for our markets but that could be a short-term effect.

Technically, the yield is trading near the potential reversal zone of a bearish BAT harmonic pattern and there could be a cool off anytime soon.

Thus, we expect a reversal from 1.70–1.90 on the yield front. In that scenario, a major dip in our markets would be a buying opportunity for investors.

Despite the muted price-performance, FIIs continue to remain buyers. Where is the selling coming from? FIIs are net buyers of nearly Rs 8,000 crore in the cash segment of Indian equity markets.

If we talk about the past one week, then FIIs figures were positive in the cash segment but that includes a couple of block deals as well.

So, on the whole, their activity remained subdued in the cash segment (barring the session on March 19). However, we witnessed some selling from FIIs in the index futures and stock futures in the last few days.

Also, they did some call writing and put buying. So, their overall data turned a bit on the negative side. The impact of the same was seen in the last few sessions that the Nifty corrected by around 1,000 points from the peak of 15,300.

FY21 is coming to an end, what is your market outlook for FY22?

Since the question is about the entire FY22, we would share a broader technical view for the index. After the Nifty50 made a new life-high above the peak of the year 2020, we entered a buy-on-dips market in a larger time frame.

In case of any major negative triggers, we expect the zone of 13,000 to act as strong support for the coming few months.

On the upside, considering a breakout above 12,400 from the bottom of 7,500, we expect a target of around 16,500–17,000 for the Nifty. This might happen gradually but that is where we see the index.

The vehicle scrappage policy is finally out. What will be its impact? Any stocks that are likely to benefit from it?

For this, we approached our Fundamental Research Team and they came up with an outlook that the scrappage policy is good for the entire auto pack, whether it be for private vehicles or commercial vehicles.

However, the old vehicles are not that high in numbers initially. So the benefit from the policy would be a long-drawn process.

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

A) Here is a list of top short term trading ideas:

Balrampur Chini Mills: Buy| LTP: Rs 202| Stop Loss: Rs 180| Target: Rs 240|Upside: 18%

At the beginning of March, Balrampur Chini confirmed a breakout from its multi-year high of 200. This breakout has occurred after a consolidation of 14 years.

The theoretical target for the same comes around 340 levels in the longer run. However, in the short-term, the stock travelled above the 225-mark and is again available near 200 due to the correction.

Even for short-term traders, the current price offers a decent risk-to-reward for an upside of around 15-29 percent.

Thus, traders are advised to buy the stock in the range of 202-198 with a stop loss of 180 for an upside potential target of 240 in the next three-five weeks.

Bank of Baroda: Buy| LTP: Rs 73| Stop Loss: Rs 66| Target: Rs 84| Upside: 15%

Following the rally in the entire PSU pack, Bank of Baroda underwent a fantastic rally from 64 to 99 in a span of just three weeks. The stock corrected and is now again trading near the 70-mark.

On the daily chart, it is trading near the previous demand zone. On the weekly scale, it is resting at Ichimoku support. The price action indicates that PSU Banks are preparing for a fresh upside.

Thus, traders are advised to buy the stock in the range of 73-71 with a stop loss of 66 for an upside potential target of 84 in the three-five weeks.

Bharti Airtel: Buy| LTP: Rs 530| Stop Loss: Rs 510| Target: Rs 570| Upside: 7.5%

Recently, the stock corrected almost 100 points from the peak of 623. At this juncture, it is hovering above the Ichimoku cloud support on the weekly scale with a hammer formation.

On the daily chart, it is consolidating above the placement of its 200-DEMA and 200 DSMA. The mentioned technical evidence indicates that the stock is poised for fresh upside with excellent risk-reward.

Thus, traders are advised to buy the stock at 530 with a stop loss of 510 for the upside potential target of 570 for the next three-five weeks.