Kunal Bothra's outlook for RIL, Praj, Kolte Patil and 3 'buy' ideas for next week

There are a lot of momentum plats to try and play in this market, says independent market expert Kunal Bothra. Excerpts from an interview:

Who would have thought after the chop and churn that we started off the week with, we would manage to make it closer to 14,900, led of course by metals all the way. What is the trend that you are gathering for the week ahead?
I think it was a week that was more dedicated towards the performance of sectors and it tends to reiterate the health of the market. So yes, on the one hand, there was too much domestic news flow, FII selling and the impact of Covid second wave, but it has more affected moves of the indices.

So one odd day, Bank Nifty underperformed and Nifty outperformed and on the other day, the trend reversed. So it was a bit of a on and off week without a decisive trend on both the key indices. Even though the midcap and smallcap indicea had a bit of a rough ride on Friday as well as Thursday, when not all the midcap stocks showed momentum but net-net the start of the week was very crucial for midcap names as the outperformance continued. There are two different aspects of the markets playing out; one of them is on the index front where we are still not seeing conclusive signs of any kind of trend. On the stock and sectoral front, there is a lot of momentum to try and play with.

Let us take up some of the stocks that had a good run, apart from metals. You had the likes of Kolte Patil and Praj Industries that did well. What are the charts indicating?
Many of these midcap stocks traded exceptionally well. Praj Industries, specifically, has just gone through a different play altogether. I remember it was around Rs 45 in March 2020. Then when the sugar cycle actually turned around, many of the sugar names like Balrampur Chini and Dhampur Sugar have come back to their four-year, five-year highs. Praj Industries has also followed a similar pattern. It is very surprising to see that the stock has gone through almost a 10-month price uptrend, which makes it look very attractive.

Kolte Patil, on the other hand, is coming back again. The realty stock has since the last three months lost its way. Some of these names have corrected 10%. DLF, for example, has corrected 25-30% from its three-month high and names like Godrej Properties and Kolte Patil have corrected somewhere closer to 15% from their three-month highs. So these stocks are going through their odd phases of correction. I would sense it may get over in the next couple of months. These stocks could come back again quite strongly and could challenge their previous swing highs. So for Kolte Patil, the previous multi-month high was around the Rs 285-300 mark and I think the stock has the capacity to try and come back to these levels. I think a buy on dips is a much better approach given the kind of environment we are in. Especially if it comes to midcap names, there is a stronger degree of possible outperformance, which one can get because the indices are broadly in a trading range since the last two-three months.

Just wanted to get your sense on how long this underperformance or consolidation is going to last for Reliance and what is your own reading of the charts?
Very difficult to say when this underperformance is going to end, but I am pretty sure that whenever it ends, it has to end with a very strong, swift upmove. It is very difficult to anticipate whether it will happen in the next two months, three months or a couple of quarters, because the data for the stock has just about gone completely sideways. I was looking at the data pre- and post- March quarter result for RIL, and except for just a mild bit of open Interest buildup, there is hardly any convincing data. There is no shoot up in delivery volumes. So this is a bit of a concern for long holders on the RIL counter. If the stock rallies or if it witnesses correction and comes back to support territories, and if these zones are accompanied by strong delivery volumes, then it will become very difficult to try and fathom a turnaround for the stock. You see lack of trader participation or lack of investor participation, which could be read from the volume data on the derivative as well on the cash segment, respectively. Then it becomes very difficult to try and anticipate a turnaround for the stock anytime soon. I would sense the stock would remain in a bit of a downward drift. The Rs 1,850-1,870 range should be a major support for RIL, but there are a slew of resistances at Rs 2,025 and then Rs 2,100 levels.

What are your top ideas for the next week?
Again, going very stock specific. I will recommend a few buy calls. First one is a buy on United Breweries, as the stock is forming a classic Bullish Pennant formation on the hourly charts. So I would suggest a 'buy' with a price target closer to Rs 1,300 level and stop loss could be kept at Rs 1,180. The second stock is from the gold finance space; it is a 'buy' on Muthoot Finance. The stock is trying to indicate a classical comeback. It has confirmed a breakout of a resistance, which could lead to a strong uptick in the near term. So it's a 'buy' with a price target of Rs 1,300 for Muthoot Finance with a stop loss at Rs 1,180. And third is a midcap name, it is a 'buy' on Rain Industries. It has formed a classic Bullish Flag pattern on the charts and is heading towards a very strong multi-month breakout in the Rs 180-185 zone. So, I would suggest a 'buy' on Rain Industries for a target of Rs 200 plus. The stop loss could be kept at Rs 170.