Planning to buy PSU banks? Wait for a minimum 10% correction: Kunal Shah

"The PSU bank index witnessed a stellar performance in the past 2-3 months with the index up 1500 points," says Kunal Shah, Senior Technical & Derivatives Analyst at LKP Securities.

In an interview with ETMarkets, Shah said: “For PSU banks, a buy-on-dip strategy would be ideal with a minimum correction of 10%” Edited excerpts:

Q) Sensex and Nifty50 trade flat with a negative bias for the week ending 9 December. What led to the price action – is it profit-taking or global cues?
A) The Indian equities, after a stellar run, are witnessing profit booking on the back of negative global cues. The market will be watching the US fed meeting outcome, scheduled this week.

The fear of rate hikes still persists in the US markets, which might create some selling pressure in Indian markets as well.

Q) Which is your take on the market for the coming week? Important levels to watch out for Nifty and Nifty Bank?
A) The Nifty index downside support stands in the 18,500-18,450 zone, and if breaches on a closing basis will see further downside pressure toward the 18,000-17,800 levels.

The Bank Nifty index after a breakout is not able to surpass the hurdle of 44,000 on the upside. The index lower-end support is at 43000 and if breached, will lead to aggressive selling on the downside towards 42,000-41,400 levels.

Q) Any strategy that traders can deploy for the week?
A) Here is a strategy which traders can look at -
NIFTY LONG PUT LADDER SPREAD.
BUY 1 LOT OF NIFTY 18500PE at 95
SELL 2 LOTS OF NIFTY 18200PE at 15
BUY 1 LOT OF 18000PE 5
DEBIT SPREAD: 70
SL:20
TARGET: 150/210

Q) In terms of sectors, Capital Goods emerged as winners while IT took a hit – what led to the price action?
A) For Nifty IT, the selling pressure started to be witnessed post the comment by the fed chairman that the rate hike would continue for a longer period.

The Nasdaq index witnessed selling pressure which led to pressure on the Indian IT space. One of the Indian IT companies HCL

Tech revised its guidance on revenues on the lower end which led to further selling g pressure in the IT sector.

Q) PSU banks led the rally in the week gone by. Punjab & Sind Bank was up over 40% in a week, followed by the Central Bank of India, which rose over 30%. What should investors do – buy, sell or hold?
A) The PSU bank index witnessed a stellar performance in the past 2-3 months, with the index up 1500 points. The index has hit a resistance zone on the upside at the 4500 level and might witness some consolidation in the near term.

For PSU banks a buy-on-dip strategy would be ideal with a minimum correction of 10%.

Q) Any 3-4 trading ideas for the next 1 month?
A) Here is a list of trading ideas for the next 3-4 weeks:

HUL: Buy@2700 | LTP 2721 | Rs Stop Loss Rs 2500 | Target Rs 2900-3000 | Upside 6-10%
HUL has been trading in a strong uptrend on all the time frames, with higher high and higher low formations intact. The stock has given a falling trend line breakout on the weekly chart.

The momentum indicator RSI is on the verge of a breakout and is crossing above the level of 60 which confirms the strength of the stock.

The momentum is likely to continue on the upside towards 3000-3100 levels and the lower-end support is visible at 2500 which will act as a cushion for the bulls.

Dixon Technologies India FUT: Sell@4125 | LTP Rs 4104| Stop Loss Rs 4300 | Target Rs 3900-3800| Downside: 5%
The daily chart has given a breakdown with a rise in volumes from a one-month condition range. The F&O data also suggest fresh short built-up positions with a rise in open interest and a fall in price.

The momentum indicators are showing weakness with lower high and lower formation visible. The lower-end visible targets are 3900-3700, while the uptrend end resistance is visible at the 4300-4400 zones.

Nestle India: Buy @20250 | LTP Rs 20247 | Stop Loss: Rs 19500 | Target: 21000-21300 | Upside: 5%
The stock has given a strong breakout on the daily chart, with a sharp surge in volumes, confirming the continuation of the existing uptrend towards 21000-21300 levels.

The momentum indicator RSI has given a positive crossover on the daily chart, which confirms the strength of the stock.

The MACD indicator has given a buy crossover on the zero line, confirming the buy signal. The lower-end support is visible at 19500, which will act as a cushion for the bulls.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)