ETMarkets Smart Talk | Overlooking IT stocks as investment bet for now: Sumeet Bagadia

With the Nifty IT index ending over 3% lower on Friday, Sumeet Bagadia, Executive Director, Choice Broking, said there is still more opportunity for the downside as selling in IT stocks was noticed in high quantities “We would overlook the IT sector as an investment bet for the time being,” he said.

Edited excerpts from an interview:

Nifty is showing strong support at 18,400-500 levels. Do you see the support base shifting lower in the week ahead?
Nifty had a phenomenal run in the month of October and November and has potentially delivered over 10 percent return in just two months. There were lots of stirs and juggle globally in the past couple of weeks, but the market ignored the noise and deliberately moved higher.

However, last Friday's severe sell off cornered the bulls and made them in panic mode. Possibly there could be one reason that China is easing Covid norms, while others could be profit booking from a higher level. Concerning would be as in the weekly chart, the index has formed Dark Cloud formation. Although the primary trend has not changed, we anticipate there could be consolidation and faster movement within the 18200-18800 range. Indicators such as RSI still hold above average line, while ADX also indicates not much concern about reversal. Coming to the OI Data, on the call side, the highest OI observed at 18700, followed by 18800 strike price, while on the put side, the highest OI was at 18200, followed by 18000 strike price. The VIX has closed at 13.48 and has remained under the 15 levels, as we anticipate that Nifty will rise over the course of the coming week.

Nifty Bank outperformed once again. What are the key levels to watch out for?
Bank Nifty made a time high of 43853.40 and closed the session at 43633. The index ended with a gain of 1.29 per cent compared to last week. In the last week, the banking sector has outperformed despite jittery movement globally. Despite the RBI rate hike and Friday's selloff, the index rallied. This means traders who were bullish earlier have maintained their stance. Bank Nifty is moving in a positive upward channel with the Higher High- Higher Low formation. A strong base is placed around the 42800 zone. Further, if the index sustains 43850 levels momentum would be skewed on the higher side. It would be suggested that traders and investors should keep booking small profits with trailing stop loss. Bank performance, particularly that of public sector lenders, in the first quarter of FY23 has lent validity to this optimism.

Punjab and Sind Bank surprised with a rally of over 45% last week. What does the chart indicate - a potential slowdown or non-stop rally ahead?
Punjab and Sind Bank set a 52-week high of Rs 34.80 last week. The stock has surged more than 45 percent in the last one week, beating benchmark indices. Following the breach of the Rs 24-25 barrier, the stock increased in value and became unstoppable. The breakout is now expected to fuel the current rally in the stock, which might take it to the next level of around Rs 40 in the near term. PSB is trading higher than 20 and 50 DMA, indicating strong traction.

Additionally, the delivery percentage during a month has increased drastically. In the weekly chart, the volume trend has been steady and rising, showing a greater enthusiasm to drive prices higher.

Moreover, PSU Bank Index continues to outperform in Dec series, and we remain optimistic in overall performance of public lender banks. We advise taking a cautiously optimistic stance. Over time, the outlook remains reassuring and promising.

What sparked the 12% rally in Yes Bank shares on Friday? Do you scope for further upside in the coming week as well?
The rally in Yes bank on Friday was sparked by the news from RBI, which stated that Yes Bank had received final approval for its proposed capital increase plan from the Carlyle Group and Verventa Holdings, prompting a rise in Yes Bank Friday.

Yes Bank will be able to have one of the highest capital ratios among peers thanks to this, which will be one of the biggest capital raisings by a domestic private lender. Technically, Yes Bank shares increased by more than 14% to Rs 20 a share in Friday's opening deals on the BSE, trading close to 2-year highs. It has successfully exited the lengthy, two-year consolidation range of Rs 12 to 15 and has now successfully closed at Rs 19.70. The resistance zone at Rs 25, which would represent a 30% gain from current levels, can be seen on the monthly charts.

The week was a nightmare for IT investors as the Nifty IT index ended over 6% down, with stocks losing up to 13%. Do you see it in the oversold zone now?
All sectoral indices experienced a general selloff this week, with IT stocks emerging as the greatest underperformer. A slide in the domestic market was spurred by IT stocks extending their losses after warning of a likely slowdown in activity on global recession fears. After interest rate increases and concerns about a recession, Nifty IT gave a false breakout over 30350 levels and has since fallen from the resistance zone.

There is still more opportunity for the downside as selling IT stocks was noticed in high quantities, and the next support zone is put at 28500. We would overlook the IT sector as an investment bet for the time being.

Which are the top stocks that would be on your radar for the week?
Marico
The stock is constructing a Higher High- Higher Low formation on the daily chart after decent correction. Additionally, soccer patterns can be seen simultaneously, indicating that the stock is getting ready for a respectable uptrend. Stock is now supported by the 21 and 50 days DMA. We anticipate volume participants will also support price action once in coming days. Based on price action, one can initiate a long position at cmp 523.7 or near 518-520 zone for the target of 548-552. SL can be kept as 506.

VIP Industries
VIP Industries has been in an upward trend for almost a year and a half, indicating that it has established its major trend with minor corrections along the way. The stock is trading above the 5-day, 20-day, 50-day, 100-day, and 200-day exponential moving averages, indicating steady momentum. The counter saw a volume breakout as well as a price breakout at trend line support. VIP is currently trading at Rs 731.25. Based on the chart, we recommend accumulating in the Rs 722-726 zone with a stop loss of Rs 705 and a target of Rs 775-780.

Glenmark
Glenmark witnessed tight consolidation over the previous two weeks. As the 200 and 20 daily EMAs are positioned, the levels between Rs 420 and Rs 425 can act as strong support. The stock is presently forming a rounding bottom pattern on daily charts. It is also trading in a rising channel, which allows further movement. The RSI Indicator is comfortably set at Rs 60 levels, which on charts indicates positive momentum. We recommend one can initiate a long position at CMP Rs 437 which can be accumulated near Rs 430-432 levels for a medium-term target price of Rs 465-470. Our analysis will be deemed invalid if the price closes below Rs 420.


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