Independent market analyst Kunal Bothra is convinced that the index might just scale above that 11,500 mark next week. He spoke with ETNow.
ET Now: What is you view on the Nifty?
Kunal Bothra: Yes, the markets had a very good extension of rally last week. The key part over here is if I scan technical terms, you have good sector churns. Private sector bank rally has shifted to momentum sectors. You have defensive sectors like FMCG and pharma doing pretty well. So there were a lot of momentum stocks that managed to come back quite strongly in that shortened week.
The second part is very interesting because till last week 11,500 call was seeing the highest amount of open interest. The Nifty was not able to scale through that level, but on Friday there was good unwinding which happened in 11,500 call. That got shifted to higher strikes of 11,600 and 11,700, which means that 11,400 could now become a good base for the Nifty in the short term and you should see the index scaling above that 11,500 mark next week.
ET Now: I just wanted to get a sense about Bank Nifty from you as well. You know it's not a lot of times you see Kotak not at a high, HDFC, HDFC Bank not at a high but Bank Nifty at a high?
Kunal Bothra: Yes, for such kind of diversity, the Nifty and the Bank Nifty have been led by stronger private sector names such as DFC Bank, IndusInd Bank and Kotak Bank. They were the ones which rallied almost 15-20 per cent in the last couple of months, but all of a sudden in the last two weeks, we have seen that all these three stocks, especially on the Bank Nifty, are taking a bit of a breather.
Whether this is a good consolidation, where other names are springing up into action and these stocks are taking rest and then the entire pack could come back quite strongly. Those kind of triggers could probably happen over the next couple of weeks, but I believe that if these largecap stocks HDFC Bank, IndusInd Bank and Kotak Bank break their short term supports, by that I mean, key moving average supports which is almost 3 per cent lower from current levels, you could be challenging the entire uptrend thesis for these stocks.
As of now, they are into a good correction mode, good consolidation mode but whether this turns into a bother for the market, we will get to know over the next couple of days, maybe.
ET Now: Any view on Jet Airways or the aviation pack and Maruti Suzuki?
Kunal Bothra: Particularly on Jet Airways, yes. The last one week, we saw the stock in the thick of news. Earlier, we used to look at Jet Airways falling as may be a correlation in terms of rising crude prices. But just in the last couple of weeks, we saw that it was more on the back of news. Now, what has transpired is the stock prices have come back into deep oversold weekly and monthly zones.
Such kind of patterns result in two sorts of results; one, the stock goes for a prolonged consolidation that spans the timeframe of maybe six, seven months odd. Stock ranging around this 300-mark odd could act as a pivot. So maybe, a 10 per cent rise and then a 5-7 per cent lower levels from those 300 range is what you could sense that the stock would consolidate.
If the reactions on the fundamentals improve, then you could see a V-shape recovery. But I think as a trader it is much more prudent to wait and watch. There is no benefit as such in terms of catching the bottom rather than try and look at it in terms of when the stock bottoms out and then you see a good risk reward entering long positions.
As of now, Jet Airways could be kept on the radar but only above Rs 340-350 levels. That's where I believe a trader could get confirmation. Maruti is coming back to hit its 200-day moving average which is just a shade below that 9,000 mark odd. I believe the stock could find some bit of support at those levels.
ET Now: Any picks for our viewers?
Kunal Bothra: There are two stocks; I will start off with L&T Finance. I believe that in terms of technical structure, it is a bullish flag pattern getting formed over the last three weeks or a text book kind of a pattern getting formed where the stock rose from 145 to 170 levels odd and then consolidated at that range for almost two weeks. I believe that the stock could head towards a breakout on the upside. I am eyeing Rs 200-195 as the target range on L&T Finance, suggesting a buy with a stop loss at Rs 170.
The second would be a buy on ACC. Now interestingly, the pattern which we are seeing for most stocks is one single day or couple of days, we see the stock rising almost 5-10 per cent. And then you see gradual uptrend in individual names. For ACC also, I sense a similar pattern. After that rise from Rs 1,300 to Rs 1,500, the stock has gained only Rs 100 in a matter of two weeks. But I believe on a positional basis. You could see the stock scaling towards at least Rs 1,700-1,720. So, that is also a buy, target of Rs 1,700 with a stop loss at Rs 1,550.