The auto sector has run up substantially, and any weakness in four-wheelers space can be a potential shorting candidate. For Bank Nifty a sell on rally strategy can be deployed for the coming week, Umesh Mehta, Head of Research, Samco Group, said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:
Q) What led to the price action on D-Street in the week gone by?
A) The past few months and weeks witnessed domestic bourses trying to mirror global equity markets especially, the US markets. On July 8, Nasdaq hit a record closing high supported by technology shares as early signs of an economic rebound which offset further lockdown concerns across the country.
Indian markets mirrored this upbeat sentiment and inched higher along with positive domestic cues from Principal Economic Adviser Sanjeev Sanyal on further possible measures to be undertaken which could boost demand and hinted at decent headroom available for both monetary and fiscal measures.
Also, the Bank Nifty index, which was rising mutedly until now, had managed to outperform the benchmark index this week and financials have contributed the most towards Nifty’s gains. These factors kept markets buoyant the entire week.
Q) What is the outlook for Nifty in the coming week? And, what are the important levels to watch out for?
A) The Nifty heavyweight RIL will hold its 43rd annual general meeting (AGM) in the coming week on July 15, 2020. Going by past records, RIL’s AGM improves the sentiment of its stock price, and given its weight in the index, markets too are expected to remain upbeat with positive bias unless negative global cues spoil the RIL AGM party.
It is expected that domestic cues may not have any major impact going ahead for the next few weeks and global signals may dictate the behaviour of domestic bourses.
The US markets are expected to be range-bound and any severe cracks there can bleed our markets as well. Indian bourses too are a little stretched in the short term and the very limited upside is expected in the coming week. If Nifty cracks below 10,600 decisively it can signal a major correction down.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Q) Any particular strategy which traders could execute for the week?
A) Trades could write naked call options of higher strikes as they will benefit from falling prices of the underlying since the upside is likely to be capped for the short term.
Further, given that recently the auto sector has run up substantially any weakness in four-wheelers space can be a potential shorting candidate. Bank Nifty justifies a sell on rally strategy for the coming week.
Q) Any top 2-5 stocks which investors can bet on in the coming week? Please give a small rationale with target and stop-loss?
A) Here are two stock ideas which can be deployed for the near term -
Alkem Laboratories: Buy | LTP: Rs 2,421 | Target: Rs 2,700 | Stop Loss: Rs 2,275 | Upside 11%
The stock is in a good momentum on higher time frame charts whereas in the short-term it has mean reverted to crucial moving averages.
This presents a good buy on dips opportunity for entry. The stock should be bought with a target price of 27,00 and a stop loss of 2,275.
Tata Steel: Buy | LTP: Rs 338 | Target: Rs 400 | Stop Loss: Rs 335 | Upside 18%
Buy only on a break above Rs 350 which can quickly take the stock price to Rs 390 to Rs 400 levels. If the price breaks above Rs 350 than a stop at Rs 335 should be placed.
Globally there are talks of another infrastructure-led stimulus, if it becomes a reality, steel stocks would be the first to fly off the runway.
Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol.
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