2 top stock recommendations from Rahul Sharma

"We have advised clients to buy the dip around 18,200. And if there is an extension say 18,000 comes around, so 17,950 is the level, but around 18,000 plus-minus 50 points can be a good area to add on to long positions," says Rahul Sharma, JM Financial Services.

How do you see the weekly options expiry panning out and where do we go from here on?
We have finally seen a dip happening on the Nifty, especially after the run-up that we saw from 17,600 odd to 18,450. I think these pullbacks, corrections are good and the two levels to keep an eye on, especially for positional traders, I think the first tranche, we have initiated around 18,200.

We have advised clients to buy the dip around 18,200. And if there is an extension say 18,000 comes around, so 17,950 is the level, but around 18,000 plus-minus 50 points can be a good area to add on to long positions.
I think this rally has got long legs and we may very well be headed for 18,600 in the May series and in June we are seeing the Nifty heading towards the 19,000 mark.

So, I think a new all-time high is very much on the cards. Bank Nifty has almost done that. It continues to be the sectoral leader and I think today with the SBI results coming in, we should not be surprised if that level is taken out.
So, for today's expiry, I think 44,000 is where there is massive call writing is seen.

If we continue to sustain above the 44,000 mark post 2 pm, there could be a short covering move that could come in in the last 90 minutes of trade, where Bank Nifty can head towards 44,200 to 44,300 which is around 300 points from here.

So, I think for both the indices the view and bias is positive. Nifty may go up after a brief pause here and there, but Bank Nifty clearly is looking the favourite between the two indices along with Fin Nifty which also continues to be robust, and in fact, it is on the cusp of a breakout.

So, if we see the long-term charts around 19,900 odd, there are multiple resistances for the stock, I think that breakout is very much on the cards and may happen in the short term. So, banking and financials are the place to be and we expect Nifty should also complete its correction or dip.

What are your top picks in this market? What are you looking at?
If we simply compare from December 22 until date, out of all the sectoral indices, auto Index has been the best performing index and some of the prominent names have not really participated the way the entire index has.
So, we are looking at a sector which is very strong, out of that two stocks which come right at the top of our risk reward favourite list – one is Maruti. I think Maruti has a good 8% to 10% upside from current levels, can be accumulated around these prices. Another one is Escorts. I think Escorts has seen a good traction happening in the last two trading sessions and we believe Escorts can also see approximately around 7% to 8% kind of an up move from current levels.

So, both auto names, I think Maruti and Escorts are the ones to go for on the long side and we believe that in the short term there is good momentum to be had in the auto space which continues to be one of the better performing sectoral indices.

What is your take on AU Small Finance Bank, that stock has been trending high, sitting at all-time high level, do you see more upside on that one and the second one is Honeywell Automation, it is of course not a very liquid name but nonetheless that stock is trending high by around 10% today.
Coming to AU Bank, I think if you do have long positions this is a good time to take some profits and maybe move on to some of the other banking names like IDBI Bank, something like South Indian Bank which still offer a good risk reward opportunity at these prices.

As far as, targets are concerned, technically 750 was the target for the current setup, so that has got achieved, so maybe fresh traders, investors can wait for a dip to happen in AU Bank.

IDBI Bank has one of the better setups and we believe that the stock can head towards 80 on the upside. So, if you are a positional trader, if you are an investor, I think this is one of the better banks to go long in.

As far as Honeywell Auto is concerned, as you rightly said liquidity is on the lower side but today the volumes have been very significant and eventually the stock is shifting gears. So, I think slowly and gradually it should head towards the 43,500 mark which is another 2000-2500 points from here and we believe that today's move should actually see the stock shifting gears.

So, stay long in Honeywell Auto as well, maybe 40,000 can be a stop loss for long positions. It is a big stop loss and a big target but that is the kind of move that this stock has exhibited in the past as well.

So, we feel this time also it should not be any different and I think between the two I think it is better to go with the second rung private banks where we see the momentum should kick in anytime soon.