ETMarkets Smart Talk|Nifty Bank may hit new high in Sept series; 3 stocks on radar this week: Om Mehra, Choice Broking

Outpacing all other sectors in the rally, Nifty Bank may soon hit a new high in the ongoing September series, says Om Mehra, Technical Associate, Choice Broking in an interview with ETMarkets.com. “As far as positional set-up is concerned, Nifty Bank remains the better of the two indices. We are seeing PSU banks coming back into flavor, supporting the banking index as well. No other sector has been able to outpace banks both in terms of the magnitude of returns and the drawdowns during the rally,” he said. Edited excerpts:

Given the action in mid and smallcap indices, do find Nifty less attractive now? What does the chart say?
Midcaps and smallcaps extensively outperformed when the broad-based index tussled to regain the 18,000 mark. In the recent rally of the market, almost all the sectors participated but there is much room to extend its ongoing rally. It also reflects investor confidence in the broader economy of Indian markets. We expect the midcap to test 33,000 levels in coming days and even make a new lifetime high. Smallcaps and midcaps majorly have better margins which can protect them from macro shocks and protect the earnings in line with largecaps. The rally of mid and smallcaps during the last two months marked the turning of the sentiment from an overcautious to optimistic view. We expect there are more spaces for smallcaps to deliver returns. Therefore, a lot of the increase was due to a catch-up rally in high-growth stocks. Smallcaps continued to see inflows from DIIs and HNIs and retail investors and we look forward to attaining 11,000 levels till this Diwali.

For Nifty Bank traders, what does the trade setup look like for the coming week?
Nifty Bank rally has amused Dalal Street. It’s a dream rally for banking stocks which were overlooked earlier. Majorly, Nifty Bank has braced Nifty close to 18,000 levels. As far as positional set-up is concerned, Nifty Bank remains the better of the two indices. We are seeing PSU banks coming back into flavor, supporting the banking index as well. No other sector has been able to outpace banks both in terms of the magnitude of returns and the drawdowns during the rally. We expect that there is a very good possibility that in the September series, Bank Nifty inches to a new life high.

Vakrangee was among the top gainers in the BSE500 pack. Can you help us understand what provoked the rally and what should traders do now?
Vakrangee Limited is a Rs 4,000-crore market cap technology driven company focused on building India’s largest network of last mile retail outlets to deliver real time banking financial services, ATM, insurance, e-governance, ecommerce and logistics services. In the last one month, the delivery volume has increased by 92.38 percent. The stock is trading higher than the 50-day and 200-day moving averages. The key valuation ratios of Vakrangee, currently when compared to its past, seem to suggest it is in the fair zone. It is likely to rise somewhat in the shorter frame of time. We recommend a positive cautious approach for the stock.

PSU banks continued to rally in the week. In between the two - private banks and PSU banks - which ones do you like and why?
Banking sector has materially remained among the top movers of the market. But within the overall banking basket, PSU lenders exceed their private counterparts again by a huge margin. PSU Bank recently started to muscle up and joined the ongoing rally with benchmark indices. The Finance Ministry last week reviewed the performance of public sector banks in the backdrop of the first quarter numbers and asked them to step up lending to productive sectors of the economy. Private sector banks appear to be very reasonably priced in terms of valuations. PSU Bank is finally getting ready for a good move as volatility is now contracting. In the last one month, PSU Bank has delivered 11.28 per cent return and we expect the index to test 3,500 levels in coming festive season.

Nifty IT index also bounced back this week by rallying 3.5 per cent. Do you think the up move is sustainable?
Global economies are connected to each other and any war escalation will have a direct impact on the Indian economy also. The most trusted index IT is still facing resilience in this blockbuster rally. Although there has already been significant price erosion, the top three four big players in the IT sector may surprise the bears. Midcap seems to be in an accumulation zone. Moreover, mutual fund managers see good opportunities in heavyweights. The IT Index has resistance at 30,500 level. Once it gets breached, the upside rally might get boosted.

Which are the 3-4 stocks on your radar for the week?

UPL
On the monthly chart, the stock has been trading with the support of a lower band of Bollinger which suggests a positive bias. Additionally, the stock has formed a strong base around Rs 720 level while Rs 760 will be a resistance level, crossing above the same can show more upside rally. On the daily chart, the stock has given a breakout of falling trendline and consolidating near the resistance zone which points out strength in the counter. As per the above technical parameters, the stock is looking bullish on charts. Crossing above Rs 760 can show more strength in the counter for a target of Rs 820-860 levels. While on the downside, the support is at Rs 720 level.

Pidilite
On the weekly chart, the stock has given a breakout of resistance i.e. Rs 2775, which suggests upside movement in the counter. The stock is trading above its 21-simple moving averages, confirming the support in price action. Moreover, it has given a breakout of cup & handle formation on the daily chart.

RSI plotted on the daily and the weekly timeframe is above 50 levels, which reflects the strong momentum in the stock. Hence, based on the above technical structure one can initiate a long position at Rs 2,845. Closing and sustaining above Rs 2,900 will lead towards Rs 3,000-3,060 levels in the coming days. Stop loss can be kept as Rs 2,720.

Apollo Hospital
On the weekly chart, the stock has been trading with a higher high & higher low formation for the last 3 weeks which suggests continued strength upside. On the daily chart, the price has been trading above the upper leg of “Bollinger Band” which suggests a bullish rally will continue further in the near term. As per the above technical parameters, the stock is looking bullish on the chart. One can buy the stock at Rs 4,460, and a fall to Rs 4,430 is a good buying opportunity for a target of Rs 4,700-4,900 levels while on the downside, the support comes at Rs 4,200.

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