L&T, PFC top 2 Budget picks which investors can track ahead of Feb 1: Kunal Shah

“Support is very strong at the 18000-17900 zone where put writers are active, while on the higher side, 18200-18300 is a strong resistance point where call writers are very active," says Kunal Shah, Senior Technical & Derivative analyst at LKP Securities.

In an interview with ETMarkets, Shah said: “Bulls have managed to hold the support of 17800 on the Nifty50 and are providing support for the lower levels” Edited excerpts:

Nifty closed flat with a positive bias amid volatility. What led to the price action?
The Indian indices started 2023 with major volatility in the first half of the month. The Indian markets are now looking for the key event of the budget, which is scheduled for February 1st.

The bulls ahead of the key even managed to hold the support of 17800 and are providing support for the lower levels.

How should investors play markets in the run-up to the Budget next week (expiry) which is going to be truncated one? Important levels which one should watch out for Nifty and Nifty Bank?

Markets may continue to consolidate in a wide range during the upcoming truncated week. For Nifty, the support is very strong at the 18000-17900 zone where put writers are active, while on the higher side, 18200-18300 is a strong resistance point where call writers are very active. Breaking this range on either side will result in trending movements.

The Bank Nifty index too has been trading in a big range where 42000 is acting as a cushion for the bulls and 43000 is acting as a resistance point where the high open integers are built up on the call side.

What are your Budget picks that investors can make a note of for a 6-12 month time frame?

A) Budget picks:

1) L&T: Buy| Target Rs 2500-2800
L&T's infrastructure sector is going to be one of the top sectors in the budget session. With a lot of change on the ground happening in India, the allocation is definitely going to surpass the previous budget.

With a strong technical setup, L&T appears to be the best bet for the infra theme. The stock has given a breakout from a double top formation recently, and it has been trading in a strong uptrend with higher high and lower low formations intact.

The lower end of support can be seen at 2000, with potential upside targets of 2500 and 2800.

2) PFC: Buy| Target Rs 180-200
The power sector is going to be in focus in this budget with the world suffering from an energy crisis. The stock has broken out of a 12-year consolidation phase.

The momentum oscillators are in the strong buying zone, which confirms the strength of the stock. Lower-end support is visible at 130, and potential upside targets are 180/200.

In terms of sectors, capital goods, IT remained in focus. What led to the price action?
Capital goods were in focus because of the upcoming budget session, where the capital sector will be in focus. Capital Goods is trading in a strong uptrend on the long-term charts.

The IT sector witnessed some buying in the past week because of the earnings by the IT companies. Some of the mid-and large-cap companies posted better-than-expected results, which created optimism from now on.

How should investors play RIL, Kotak Mahindra Bank, ICICI Bank, and YES Bank post results? Should they buy, sell or hold?
RIL: If the support level of 2350 is breached, there will be additional selling pressure on the downside. The long positions should be unwound if the mentioned support is breached on a closing basis.

Kotak Bank has been trading in a broad range since the past year, where the support is visible at 1600 and the resistance is at 2000, and it is not showing any directional trend.

ICICI Bank is showing signs of exhaustion after a stellar run; however, the stock must break through the 840-support level, which coincides with the 200-day moving average.

Yes Bank: The bank has found support around level 18, and as long as it remains above this level, one shop should continue to hold the stock.

What is fueling the rally in metal stocks? The index hit a high in the week gone by.
The Metal sector is experiencing tailwinds as China opens up and European demand returns, resulting in strong price action.

Metal could be the outperforming sector for the year 2023, with the sector giving a fresh breakout on the technical charts.

The undertone remains bullish, and any dip should be utilized as a buying opportunity. The index is likely to head higher toward the 7400–7600 mark. The lower-end support is visible at 6500, 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)