We are just 25 points away from Nifty Futures hitting 14,400. We saw good traction for the broader markets as well. What can we expect next week?
Absolutely. From 13,200 levels, the indices have been on a non-stop mode. There was just one down tick or scare which happened two weeks back when there was a 600-point correction. But other than that, it has been a very smooth and steady journey for the index.
Skating past above 14,400-14,500 levels are now just very typical formalities for the indices. We have seen a classic combo of the markets. We have not just seen the advance return ratio being at one of the healthiest for the index in quite some quite, but the market mix as well is very interesting as we have a mix of defensives, low beta pockets of stocks and high beta pocket of stocks.
When you have such a mix of a variety of sectors that move higher, the market texture just keeps on improving and it becomes easier for the index to scale past the resistances almost regularly.
These are very classic indicators that the markets are showing. In terms of trailing stop losses, 14000-14100 should act as a good enough or a reasonable enough short-term support. My sense is that looking at the way the momentum is building up, there could be a higher possibility that over the next couple of weeks, we may be looking to test the 14,500-14,600 range. So that is what I would look out for the index targets over the next couple of weeks.
What trends are you seeing translate into some of the real estate plays; even HDFC. What is looking like a stronger trade now?
In the real estate pack, these stocks would go through a consolidation phase. They have had a fantastic last quarter and many of these stocks have seen three months of straight uptrend.
The chart pattern is still indicating that there is more steam left ahead, but as these stocks have run up so sharply, it is natural that the indicators come back into the overbought territories. That is what is happening for many of these real estate stocks. I would not be surprised if for the next couple of weeks, you see some bit of underperformance. We will see very stock-specific moves unlike what we have seen in the last so many weeks.
But for financial services names, there is lot of steam still left ahead because many of these stocks have just about managed to show signs of recent breakout. So there are three or four clear leaders, which were part of the first movers from the financial services names. Other than Bajaj Finance and Bajaj Finserv, you had Chola Finance that did extremely well. Shriram Transport also did pretty well, but this week the highlight was the second rung stocks which managed to breakout.
Yet again, it was the likes of LIC Housing, Indiabulls. We also saw some respite coming into Piramal Enterprises as well. My sense is that the focus would now get back into the underperforming stocks from the tier-two names in the financial space.
I for one believe that names like LIC Housing as well as Indiabulls Housing are two names to be watched out for as they are typically very high beta kind of stocks and when they see a gradual pick up and when they see a trend breakout, it is not a gradual pick up of trend. It is a very fast pace upmove that happens in this space. So two names which I would be watching out for are LIC Housing and Indiabulls Housing in the financial services pack.
On the financial side, we saw some smart moves this week. Even from the broader markets, the likes of IDFC First, SBI Cards are not just limited to the key private sector major players. But what stood out to you?
The moves on IDFC First Bank and IDFC were the key highlights. From the midcap space, it is very rare to see these stocks jump for two consecutive days. I think it was 12% and 14% odd respectively on two of the consecutive days. That generally indicates that it is not just a short boast of momentum but a very strong push of buying that is happening, which has led to the breakout in the stock.
What is very very interesting for these second rung or midcap names in this category is that these stocks are breaking out of their three-year and four-year downtrend. So these stocks are way below their long term or all-time high levels and these stocks have now just shown signs of breakout out of their structural downtrend. So that is the first sign that is required.
When you have such a strong push to breakout into these kinds of names, it generally results in a multi timeframe or a longish term of an uptrend into these stocks. So if someone is looking out for a medium-term time horizon, then names like IDFC First Bank, IDFC and even SBI Cards or HDFC Life are still offering a lot of opportunity.
So it has to now jell back into the risk appetite mode of every investor. How much capital does one have lying free and if someone is looking out for very opportunistic kinds of trades, then the midcaps and second-run stocks are providing a lot of opportunity.
Any stock picks for the week ahead?
Yes, a couple of stocks. First one is a buy on Reliance Industries. There is very interesting data that I would want to highlight. In the last four days, there has been an 18% addition for Reliance Industries in the F&O segment and the average delivery volumes for Reliance in the last four days has shot up from an average of 30% to almost 45-46%, which means there is an inclination of buying that is happening into the stock at current levels. So at Rs 1,900-1,930, where the stock closed on Friday, it offers an opportunity of another 7% to 8% upside targets of Rs 2,100; stop loss to be kept at Rs 1,885.
The second would be Marico. Again, the stock has already perched at the fresh high for itself. We have seen continuous momentum into the stock price almost over the two weeks it scaled up 7% to 8% from the sub Rs 400 lows. Now the stock looks extremely strong in terms of momentum. So I am expecting many of these FMCG stocks to probably breakout over the next week or so. So buy Marico with a target of Rs 450 and stop loss to be kept at Rs 410.
