PSU banks might be good buy now
Anil Manghnani of Modern Share & Stock Brokers said that everyone is talking about the bear face of the bear market. However, according to him, as long as the Nifty holds on to 4803, it may be a little safe for the shorter term. His advice is to go long and keep 4800 as the stop loss.
Meanwhile, talking about the banking sector, Neppolian Pillai said that it continues to be one of the strongest sectors of the market. According to him, there are buying opportunity within the largest of largecap banks but the private sectors side looks a little bit weaker.
Excerpts of CNBC-TV18’s exclusive interview with Anil Manghnani and Neppolian Pillai:
Q: The theory of a range seems to have gone out of the window this month. What would you do as a Nifty trader, what would you work with in terms of what’s happening with the Nifty?
Manghnani: Now everybody is again talking about the bear face of the bear market. There are many ways to define a bear market or a bear face. The two that I particularly look at is, one is the 50-weekly moving average which I mentioned the other day. Any close below that on a weekly basis becomes a little difficult for the market. Currently, it’s at about 4890 for the Nifty, so we are just trading around those levels. It’s dipped below that on a Sensex about 16577, but we still have today and probably Friday’s trade for the Sensex to comeback over that. Any close below these levels on a weekly basis would define trouble.
The second thing I am fighting with, it’s not matching on the Sensex and the Nifty, is the higher bottom theory, even on a shorter frame. After the 15332 bottom of January 22, we had a 16457 on the Sensex, which corresponds to 4803. On Tuesday, the Sensex broke below and it’s still trading below that 16457, it already broke that higher bottom theory. So the only thing now that’s saving us from entering that difficult bear face term is the 4803 on the Nifty. As long as we hold 4803 on the Nifty, we may be a little safe for the shorter-term.
If you are going long on the Nifty, it’s safe because you are so close to 4800, that your stop loss is limited. So as a Nifty trader, you can go long and keep 4800 as your stop loss.
Q: Banking as a sector has taken quite a knock after the Budget. What are the charts suggesting about the sector and maybe a leading stock like an SBI?
Pillai: The sector continues to be one of the strongest sector in the market, it’s moving within an upward slopping channel. If you look at the comparative chart, last month it was at the higher end of the channel, this month it’s falling to come and touch the lower end. So to that extent, it’s going to be a buying opportunity within the largest of largecap banks.
The private sectors side looks a little bit weaker than the PSUs. So State Bank of India, at the current level of roughly about Rs 1845 to roughly about Rs 1785, would be a great buy range. It’s not gone into a monthly sell yet. It should give you a pullback upto Rs 1960 to Rs 2025. But at this stage, you have to sharply trade rather invest because you are right on that brink of probably entering a bear market. We have not entered it yet. So to that extent, continue to trade and keep the trading range of Rs 1845-1785.
Q: What about FMCG, Hindustan Unilever has done pretty well since the Budget as well. Can you justify or seem more upside here and what about the sector?
Pillai: I remember talking last time that FMCG has broken out of a two-year downtrend-line. Though the long-term four-year downtrend-line is still intact, to that extent it would underperform. Since it’s broken out of the two-year trend, you see all of them, ITC, Hindustan Unilever everything moving up.
Hindustan Unilever it is currently around Rs 226. If you can buy it between around Rs 218-200 levels, it should give you a target of Rs 246. Within the largecap FMCG this looks the best followed by ITC.
Q: The market is talking about autos and pharmaceuticals again. How are two stocks from both those sectors looking Maruti and Dr Reddy’s?
Manghnani: From the Budget beneficial sectors of auto, pharma and FMCG, if you look at three of them on a sectorial basis, I think the one that is clearly broken out of the underperforming stage is pharmaceuticals and you can safely see why. Cipla, Ranbaxy, Sun Pharma, these stocks are just running away like anything.
Ranbaxy is being an old favourite of mine for a long time, so I’m happy to see that move. We have talked about how Cipla did a classic double bottom after hitting Rs 160 three-four months back and in the carnage of January it touched Rs 160 again. So it’s retested its bottom and is now moving up. So having mentioned about Cipla and Ranbaxy, since they have already moved, you stay invested.
But the one we are looking at right now is Dr Reddy. That still hasn’t moved in the same context of Ranbaxy and Cipla and it’s making classic bottoming out sort of formations on the charts, especially on the monthly. I think it’s in a good range, Rs 557-509 would be an ideal range to pick up the stock. Once it takes out Rs 599, then you could see a nice move upto Rs 630.
In auto pack, the breakouts are not as strong as you have seen in pharmaceuticals, and like Neppolian already mentioned in FMCG. But there are early signs that this may now have finished the underperforming stage and now become more of a market performer. And with the Budget sops, you have seen clear-cut movements in both, not four-wheelers but even two-wheelers like Hero Honda moving up. Hero Honda has been our favourite pick over the last few months on a technical basis. Now we have taken out Maruti.
Like Neppolian mentioned, it’s a trading market, so don’t look at it as an investment point of view, but a definite a trading point of view. It’s struggling to break Rs 910, that is a resistance. But anywhere between Rs 910-860 again if it falls is a buying range. I think once it takes out Rs 910 at the upper end, you could easily see Rs 945-975 as a trading move for the stock.
Q: The only non-Index stock in your list is Sesa Goa. What kind of targets do you have for it?
Pillai: Metal is a sector which is strong but it’s coming off the highs. If you look at Sesa Goa, after falling right upto Rs 2000 in that carnage, it’s back to about Rs 3400. Now that gives me interest in that stock that it’s a momentum stock. And since we are talking of trading strategy, and not investment strategy, that stock can really give you a nice trading move. Though it’s about Rs 3450 or Rs 3470 now, my buy range would be slightly lower, closer to around that Rs 3250 zone. It should give you a range right upto Rs 3630 on the upside to around Rs 3750. That’s a Rs 400 range if you but at the lower end. That looks good, momentum is in the stock and it’s tradable at the lower level.
Q: What about real estate, those stocks have been smashed up. Do you sense any kind of an upmove coming there in any of the leading stocks?
Pillai: Not really, I think the real estate sector has gone into a bearish mode already, not such as any other sector. So to that extent, the downside is still there. DLF could fall right upto about Rs 675 and the leading Unitech could comedown all the way upto Rs 307 to about that Rs 250 level. Any pullback is going to be a relief rally. I think from an investment point of view, one needs to wait. Even from a trading buy and from a trade point of view, one needs to wait for the lower level to come in before you move in. At the current stage I think nothing is buyable as of now.
Source: Moneycontrol