The trends over the past few weeks as well as over the past few quarters have been just phenomenal for the overall IT pack, says Independent Market Expert Kunal Bothra. Excerpts from an interview:
Considering we have seen a convincing move beyond 15900 which clearly turned out to be a tough ceiling for the index, what is in store for the markets next because we were unable to hold on to those record highs last week?
I think there are a lot of factors that we need to consider and watch out for like whether the index has the fire to break past above the 16000 level. I think we want the index to have the strength to sustain about the 16000 levels.
If we look at the market internals we saw a mixed sectoral approach last week. We witnessed predominantly the IT stocks doing exceptionally well, Also, the Bank Nifty managed to participate and show some support and resilience over the last week. But there are still a lot of stocks within the banking sector like the large cap names which are yet to fire so we need to see stronger action in those areas. Metal stocks have also done reasonably well.
But there are some sectors which have been underperformers and that is one of the reasons why the index has been largely in a consolidation mode. The global texture is also something to look at because when we scan through the global charts it is not as if all the global markets are hitting all time highs.
So I think it is possible that the index may remain in this very slow gradual uptrend and the action may be very stock specific like what we saw on Friday where we had a mix of stocks right from real estate to pharma, brokerage stocks and AMC stocks etc doing well.
So we could probably be in a phase for some more time where there would be more stock specific action rather than a big strong sectoral trend in the making.
What are your thoughts on the IT index which snapped a two week losing streak and it clearly had a terrific run with Wipro being one of the outperformers?
I think not just Wipro but the previous week saw a lot of midcap IT names doing exceptionally well. We saw a 15-20% move on L&T Infotech and prior to that we had Mindtree, Mphasis doing exceptionally well. Intellect Design was one of the other midcap IT names which also did extremely well. So we had a slew of large caps and midcaps which managed to do pretty well.
I think this is where the market will get back into confidence because we have the IT stocks which are managing to perform so strongly and there is a lot of demand which is chasing these stocks even at current levels. We are not talking here about just a phase of a rally where the stocks have given returns of 15%, 20%, 30% in a matter of a short time frame but if we look at it over the last 14-15 months horizon we are talking of large cap stocks giving returns of more than 3x.
So we have seen that the return potential has been exceptional and the fact that these stocks are still being chased by market participants on every good news is something quite noteworthy.
But when we look at the charts we are more comfortable in initiating trades where there is an ideal mix of risk reward. So buying into stocks which have done so strongly may call in for some sort of a short term trade which would last for a couple of trading sessions.
The risk reward is not favourable to try and initiate fresh long so either these stocks go through a bit of a time correction or if there is a price correction then I think the risk reward would become attractive. So it probably makes sense to try and enter the stocks at those levels. But yes, the trends so far over the last few weeks as well as over the last few quarters have been just phenomenal for the overall IT pack.
What are your trading bets for next week?
I am expecting stock specific movements so I have three buy calls. The first one is a buy on Havells. I have been bullish on the stock since the last couple of weeks and had been indicating a lot of buy calls earlier. The stock now has finally given a breakout on Friday and I would expect a stronger continuation move. Traders could look at a fresh buy at current levels with targets of Rs 1140 and a stop loss at Rs 1030.
The second would be a buy on Hindalco as the metal stocks have done exceptionally well and they are still looking very strong. Many of these metal stocks are at fresh short term swing highs and some of them are at fresh life highs. So I would bet on Hindalco from current juncture and expect at least another Rs 25 to Rs 30 on the upside with Rs 430 as a potential target and a stop loss could be kept at Rs 292.
One of the underdogs which managed to resurface into action was
and I think that is one stock to watch out for. If the stock manages to surpass above the Rs 550 mark which has been a huge hurdle point for Bharti Airtel then I am expecting a very strong round of short covering. So I think above Rs 550 levels is where every trader could look at may be increasing the position and size in the stock. Traders could look at a buy with a short term target of Rs 575 and a stop loss at Rs 525.