ETMarkets Smart Talk:Geojit’s Anand James on why he prefers PSU banks over private banks; 4 buy calls this week

Anand James, Chief Market Strategist at Geojit Financial Services, prefers PSU banks over large private sector banks in the ongoing rally. In an interview with ETMarkets.com, he said that the PSU Bank index has broken above its 2021 peak but is still way below 2015 peaks, suggesting a lot of room for further upsides. Edited excerpts:

Nifty midcap and smallcap indices are leaving the Nifty behind. What does the chart predict about this week?
Nifty Midcap100 index has broken out of the flag pattern on a weekly time frame alongside a Psar breakout in the monthly charts painting a positive outlook for the index in the medium term. Even though we expect big moves, a bit of caution is likely to prevail as the weekly RSI is suggesting that an overbought region is in the vicinity.

In the case of Smallcap100, the reversal that started in July is aiming at the monthly 61.8% Fibonacci retracement of the Jan’22 high and Jul’22 low. Overbought situations prevail here too, but patterns in weekly and monthly charts favour another 5% move in the index from current levels.

Nifty IT index also bounced back in the week by rallying 3.5 per cent. Do you think the up move is sustainable?
After being heavily bearish on the IT sector during the April-July period, by selling to the tune of around Rs 35,500 crore, we have begun to see green shoots in August where they turned net buyers to the tune of Rs 400 crore. Further, several of the IT stocks, especially from the midcap space are showing reversal/ bullish continuation patterns, encouraging us to keep a positive bias in the near term.

For Nifty Bank traders, what does the trade setup look like for this week?
The set up favours continuation of upsides for the following reasons. Two stocks, namely ICICI Bank and SBI, which together weigh around 35% in Nifty Bank index, have done the weightlifting so far, with both of them 16% and 5.3% above their respective peaks seen in Oct/Nov.

HDFC Bank, which contributes 25.7% to the index, has been a laggard so far, trailing its record peak by 13.2%. Same is the case with Kotak Bank as well as Axis which trail their peaks by 7.7% and 4.8%, respectively. In other words, there is plenty of catch up that can be seen from stocks other than ICICI Bank and SBI, which could give further legs to the Bank Nifty.

The present up move, which is the third such attempt since markets came off the 2022 peaks, has gained 26% in the span of 84 days, both of which are longer than the previous two attempts. Lastly, the present move is replete with bullish continuation patterns, adding credence to the expectation that this run could get extended much beyond the record peak.

Among the smaller banks, RBL Bank has gained 32 per cent in a month. What should be the strategy going ahead?
Unlike most other banks, which are still in a consolidation phase, RBL Bank has set off on a new uptrend. A fair price for the first move appears to be Rs 130, which should attract consolidation or a pause. Those looking for an immediate entry may hunt for Rs 124, and those willing to let the profits run, could place their downside marker at Rs 117, and look for Rs 150 in the next leg.

PSU banks continued to rally in the week. In between the two - private banks and PSU banks - which ones do you like and why?
We prefer PSU banks for several reasons. Firstly, the PSU Bank Index has broken above its 2021 peak, suggesting strength. Secondly it is still way below 2015 peaks, suggesting a lot of room for further upsides. Thirdly, more PSU banks show upside continuation patterns than those in the private sector, with a couple of which contribute heavily to the private bank index appearing very sluggish.

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

LTTS (CMP: Rs 3,753)

View: Buy

Target: Rs 3,950

Stop loss: Rs 3,660

The stock has seen a trendline breakout on the daily charts and is on the cusp of witnessing Psar breakout, the momentum indicator MACD is about to cross the signal line and monthly charts are also showing signs of selling exhaustion. All these are favoring a positive move in the week.

KSCL (CMP: Rs 460)

View: Buy

Target: Rs 490

Stop loss: Rs 444

The stock has been making lower lows since April 2022. On Friday, it broke above the 20-DMA at Rs 458 and closed above the Psar value of Rs 438. Also, the daily MACD has crossed above the signal line indicating bullishness. In the weekly charts, a bullish engulfing candle pattern is formed supporting our bullish view.

Birlasoft (CMP: Rs 328)

View: Buy

Target: Rs 350 - 370

Stop loss: Rs 314

The stock has broken out of the narrow range in which it was trading since the later part of August. Also, the MACD has turned positive along with a break of 20-DMA and Psar pointing towards a positive outlook for the stock in the near term. In the weekly time frame as well, the MACD has crossed the signal line and has turned positive favoring our bullish view.

NIIT (CMP: Rs 373)

View: Buy

Target: Rs 405

Stop loss: Rs 360

The stock has broken out of the declining trendline resistance at Rs 353 and the daily Psar of Rs 363 indicating positivity in the near term. The trading volume has spiked above 45-D average, indicating renewed participation. Even as the longer time frame charts are telling a different story, we could ride the current reversal in the stock given the fresh buying seen across IT stocks.

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