Betting on Jindal Steel and Balrampur ChiniNSE -1.40 % next week, says Kunal Bothra, kunalbothra.co.in. Excerpts from an interview with ETNOW.
What do you make of this set up when you look at the charts, especially with the Sensex hitting a record high?
I believe that the Nifty has managed to make a very good comeback. It is not just the Nifty price performance which is the key, not just this week but the last two months. The reshaping of the market internals is something noteworthy because the entire market texture has changed. Sentiment has changed. Just a couple of months back, everything was extremely pessimistic and now things have started to look more optimistic. Even if a company delivers any negative news, the stock does not get sold off that extensively.
When you see a complete change of scenario, you expect this new trend which has emerged to continue. Last week, particularly, we saw very good comeback from midcaps and smallcaps. The largecaps took a bit of a breather in the last couple of days of the previous week. I believe that is going to be the market mood for the next one, one-and-a-half odd week. I expect Nifty to consolidate, hover around the 12,000-odd mark. We have to see how it tests the 12,000 mark intra week. It should consolidate at these levels and the midcaps and smallcaps should try and pick pace. The focus for a short-term trader should be more stock specific, rather than be taking a call on the entire sector as such.
What is your view on some of the large auto names?
It is time for these stocks to see a bit of profit booking because these stocks were the first ones to try and move up higher. When the index consolidates or looks set to consolidate, these stocks could see some bit of profit booking. Tata Motors has risen higher, Maruti has come back to the psychological resistance of 7700. Same is the case with Bajaj Auto. Hero MotoCorp has not performed as probably would have been expected or anticipated. The stock has best gone sideways in the last few weeks. When you see such signs, it generally indicates that largecap auto stocks can take a bit of a breather. Maruti can correct another 200 to 250 points spread over the next one to two weeks. Bajaj Auto can also drop by another 100 to 120 points and that should be the theme for the auto stocks individually. Tata Motors could probably be rising by another 10% from current levels as well.
What is your view on metal stocks? Metal stocks rallied and the metal index is up 5% for the week. How would largecap metal stocks do from here?
So they should do reasonably well. In terms of sector behaviour, sector dynamics metals is the last of the sectors to try and pick a pace when the market overall is getting into a stable uptrend. We have seen a lot of the other sectors trying to move up first and metal has followed, Last week was remarkably very well poised for many of these auto stocks. Tata Steel came back and hit that 400 mark. Jindal Steel, JSW Steel and even the other smallcap or midcap names have made a very good comeback. Metal stocks are traditionally very high beta and they ride on high momentum. It is more speculative in short term because it has been fuelled by a lot of rise in the open interest.
We have seen that happening for many of these metal stocks on Thursday and Friday as well. I believe on the back of that, metal stocks can sustain a rally and given the high beta nature of the stocks, they could rally 8-10% further from their closing prices last week.
Are you finding any PSUs looking interesting? You track a lot of these PSU names. The likes of Concor, BHEL, anything looking interesting and you can even take some of the PSU banking names if you have?
PSU banking overall looks fairly good. Though Canara Bank, Bank of India corrected a bit on Friday, I still believe that the monthly charts are poised for a very strong upside. Similarly, largecap PSU banks like SBI also moved reasonably well, trading above the Rs 300 psychological mark.
Among other PSUs, we have seen a very big volume push into stocks like BHEL, BEML and even Container Corporation (Concor) has seen a very good amount of open interest and delivery volume being built up in the last one to two weeks. It is more important because generally when you see a sector or the components of the sector seeing a very high amount of delivery volume and consistent buying, when the stocks correct they do not see too much volumes. That is a sign of long buyers who have fresh entered into a stock and want to stay put into the stock trend. I believe many of these stocks would go into a very strong upside which should be visible over the next one to three months.
Any two or three picks that you have for our viewers.
Two picks – first one is a buy on Jindal Steel. It is more of a high momentum stock. We have seen good amount of open interest getting built up last week. Buy with a target of Rs 135; keep stop loss in Rs 115 range.
The second pick is interesting because this is more of a positional buy. It is a buy on Balrampur Chini and the stock is looking absolutely fabulous on the longer term charts as well as across all timeframes – monthly, weekly as well as on the daily timeframe. That would suggest a positional buy with an immediate target of Rs 176 and stop loss to be kept closer to Rs 159.