The next level is the all-time high of 15431 which will be the immediate level for next week. Crossing above this next level is seen at 15785, says Chaturmohta.
Ashish Chaturmohta, Head of Derivatives and Technical Analysis, Sanctum Wealth Management
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India VIX (volatility index) was stable, rather than on a downtrend even when the Nifty corrected due to global cues, and it looks like we are surely in a bull trend with some dips, Ashish Chaturmohta, Head of Derivatives and Technical Analysis, Sanctum Wealth Management said in an interview with Moneycontrol’s Kshitij Anand.
Q: Bulls got their grip back on D-Street pushing benchmark indices higher. Nifty50 closed above 15000 levels for the week ended May 21. What led to the price action in the volatile week gone by?
A: There are two sides to this, the first one being, the domestic side where Covid-19 cases started falling and we started having more recoveries on a daily basis as compared to new case additions which is generally a sign of the peak of a Covid-19 wave.
Second, global issues which include rising inflation concerns are resulting in global sell-off, followed by Bitcoin sell-off, etc. which created pressures on the emerging markets.
Hence, Nifty was surrounded by positive and negative news flow. Another thing I would highlight here is that India VIX (volatility index) was stable, rather than on a downtrend even when the Nifty corrected due to global cues.
Hence, we are surely in a bull trend with some dips.
Q: Small & Midcaps remained resilient in the week gone by. What is supporting the prices?
A: Small and Midcaps have been outperforming the index for a while now. The rally has been in particular sectors (Sugar, steel, and chemical) or has been stock-specific (Increase in acceptance of MDF – Green panel) or theme-specific (PLI scheme, import-substitution, etc).
Further, with regard to the steel stocks, the rally will continue with a dip as steel prices are still near to the all-time high, and China reducing the production to curb carbon emissions is a long-term story for Indian Steel Companies.
Coming to the sugar stocks, ethanol blending is being heavily promoted by the government followed by lower output of sugarcane from Brazil (due to weather conditions stock price are supportive), and lastly to the Chemical stocks where I believe, will continue to perform, owing to China +1 story.
Hence, the underlying theme has been quite supportive for these stocks.
Q: Where do you see markets in the final leg of May which is also the expiry week? Where do you see the expiry for the May series?
A: For the last 10 weeks, Nifty has moved in a range between 15050 and 14200 odd levels and formed a base. Early in the week, the index saw a gap-up opening but slid back to fill the gap area.
On May 21, the index saw another gap-up opening and saw follow buying through the day to close at the high point of the day & week as well. It was a strong closing for the market and most importantly breakout from the trading zone.
The next level is the all-time high of 15431 which will be the immediate level for next week. Crossing above this next level is seen at 15785.
On the down, a recent low of 14885 will act as support, breaking below this index will retrace back into the trading range.
Q: What is driving action in Realty and Power stocks?
A: Realty is divided into two parts – residential and commercial. With regards to residential, India is a unique nation where the majority of household wealth is invested in gold and property.
Hence, whenever households have surplus cash or an increase in per capita income, realty is one sector where we can see good inflows.
Post good demand across businesses, there will be good demand for households. Additionally, Pradhan Mantri Aavas Yojana, which targets housing for all, is a boost for this sector as well.
Commercial realty is under stress for a while now, as rental or lease negotiations due to the lockdown which would impact cash flows, hence it would take a while before this sector gets back on track.
In a nutshell, realty would do well as exiting projects are being completed, old inventory is being absorbed and new inventory is being created.
Coming to the power sectors, most parts of India are witnessing hot climate and high temperature, resulting into high per unit electricity consumption per household.
This will surely keep the power companies’ business running, unlike other businesses which are either witnessing a slowdown or a washout.
Q: What are your trading bets for the next 3-4 weeks? Please give target as well as stop loss.
A: Here is a list of top trading ideas:
SBI: Buy | LTP: Rs 401 | Target: Rs 480 | Stop Loss: Rs 375| Upside 19 percent
SBI’s listed subsidiaries like, SBI life insurance and SBI cards are very well placed and enjoy a good position in its competitive landscape. In the March quarter, SBI reported slippages of Rs 21,934 crore in FY21 and pro forma slippages in 9MFY21 were Rs 16461 crore, implying new slippages of Rs 5473 crore in 4QFY21, which was very much below street expectations.
This gives us more confidence on the asset quality which was worsening since the last 12-10 quarters. Technically, SBI has seen a major multi-year consolidation between 350 and 140 odd levels.
It witnessed a breakout in February and recently it tested the breakout level to rally back to the current levels. The immediate target for the stock is seen at 480 and then 520. On the downside, 375 can be kept as a stop loss for the stock.
BPCL: Buy | LTP: Rs 461 | Buy above Rs 480 | Target: Rs 550 | Stop Loss: Rs 430 | Upside 14 percent
Potential strategic divestment by the government, refining margin revival from FY22, and a longer-term volume kicker from Mozambique LNG are the key positives for the company.
The Street is expecting high dividends from the stocks, post Rs 22 dividend announced by HPCL. Technically, the stock has formed an ascending triangle over the last year on weekly charts between 480 and 250 odd levels.
Recently, a low has been formed at a 200-Days moving average which has been acting as a support for the stock. A breakout above 480, could take the stock initially towards 550 and then towards 600 levels. On the downside, 430 can be kept as a stop loss for the stock.
Axis Bank: Buy | LTP: Rs 730 | Target: Rs 835 | Stop Loss: Rs 680 | Upside 14 percent
Axis Bank is one of India’s leading private banks with a presence across business verticals. Post the STUTI stake sale, a big overhang on the stock will take a back seat and some rally can be witnessed.
Price-wise, after two months of correction, the price has seen a bounce back. Volumes have been high suggesting buying participation in the stock.
It formed a bullish inverted head and shoulders pattern in the short-term time frame to give a breakout above the pattern. The immediate level for the stock is seen at 800 and then towards 835. On the downside, the recent low of 680 can be kept at stop loss.
Jubilant FoodWorks: Buy | LTP: Rs 3,019 | Target: Rs 3,280 | Stop Loss: Rs 2,900 | Upside 8 percent
Jubilant FoodWorks is one of India’s leading QSR, namely Domino’s, which has been able to penetrate across states of India. The company also operates Hong’s Kitchen (Chinese restaurant) and recently explored Ekdum (Biryani restaurant), which is yet to scale up.
Price-wise, the stock has seen consolidation between 3050 and 2700 odd levels for the last 10 weeks. It has formed a base and the price is at breakout level.
Crossing and sustaining above 3050, the stock can rally towards 3280 and then 3400 levels. On the downside 2900 can be kept as a stop loss for the stock.
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