Hemen Kapadia’s 2 top stock picks in a volatile market

Be cautious because markets do not seem conducive for any significant trading or something. First stock is GNFC. We are out of the F&O ban that is one of the reasons. The stock seems set to stage a recovery. So, one can buy GNFC at Rs 537, stop loss Rs 525 and set target at Rs 561.

Second is a buy call on HDFC AMC. After a volume spike, the stock has firmed up. One can buy HDFC AMC at Rs 1743, stop loss Rs 1722 and target Rs 1785. Small stop losses, small targets because the markets do not seem focussed, says Hemen Kapadia, Senior VP- Institutional Equity, KR Choksey Securities

What do you make of the continuous selling and the stability that we are seeing for the last few hours or so?
The markets, despite being oversold, have not gone anywhere. There has been a slew of negative news from the US, with the VIX fluctuating between 22.5 and 30.5 over the last 6 trading sessions. Our VIX, which used to be sub 13, has gone up to 16.5 and now we are at 17.5, but still at 15.76 on average. All this does not augur well for the market to sustain. There is a clear lack of participation also.

Across sectors, there does not seem to be anything which stands out. We are playing musical chairs with sectors every other day but everything fizzles out after a couple of trading sessions. And if a rising VIX internationally all year maintains this, I do not know if sustainability is going to be there. Sparks of life in individual stocks are few and far between, but overall, yes 16,800- 16,850 is an important support. That level needs to hold.

If that holds, chances are that we close above 17,200 and only then do we see a semblance of a recovery coming in but Reliance holds the key. There was a huge volume spike on Friday or Thursday over the last quite a few months. That means smart people have bought and if Reliance stabilizes, that will be the first indication that yes the market is trying to sort of find its feet.

Now what you spoke about is in terms of stability, that is going to be the key and right now, it does not seem to be there in the markets and we are keeping an eye out on that. But if you get more sector specific, wouldn't it be at such a time you would see something like Nifty FMCG holding on because it is more on the defensive side and would be attractive to look at?
Well, absolutely. Normally, FMCG is a safe haven a fund manager would run to and even some time back, IT was one of the safe havens. I will say pharma is in the past tense. The FMCG index seems to have stagnated a bit, but having said that also in a market like this, it is just last month that we posted a fresh all-time high.

I totally endorse what you are saying. FMCG is a point of solace. The Nifty FMCG is at 44,832 right now. Support comes in at 44,500 and 43,500. So yes, compared to the market it does not go down much and yes it also makes sense to sort of participate in FMCG. Hindustan Unilever and Godrej Consumer are two stocks which are showing sparks of life on the short term charts.

What are your top picks coming in such a market? What are you keeping an eye out on?
A couple of stocks; once again, I would say be cautious because markets do not seem conducive for any significant trading or something. First stock is GNFC. We are out of the F&O ban that is one of the reasons. Technically the weekly charts have formed a base. Mechanical indicators have turned positive. The stock seems set to stage a recovery. So, one can buy GNFC at Rs 537, stop loss Rs 525 and set target at Rs 561.

Second is a buy call on HDFC AMC. It has had a huge volume spike. Obviously, there would have been a block deal yesterday of 60 lakh shares on the NSE. A clear reversal is at play. It has been deeply oversold. A significant bounce is around the corner and the volume spike seems to suggest some positive activity which is happening because after the volume spike, the stock has firmed up. One can buy HDFC AMC at Rs 1743, stop loss Rs 1722 and target Rs 1785. Small stop losses, small targets because the markets do not seem focussed.