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    Kunal Bothra on stocks to short and buy next week

    Synopsis

    If the recovery which panned out on Friday lasts on Monday as well, some positivity could return.

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    Given the acute volatility that we have seen, there was a pullback strike on Friday’s trading session. Do you think the levels are indicating some sort of a decisive pullback or does the undertone remain very choppy and in favour of declines?
    After such a sharp set of corrections, even a 10% pullback tends to act as more of a reprieve and relief rally for short-term traders. But then, every sort of rally is faced by a different set of market internals. On Friday, we saw the Nifty recovering. There was a different set of factors throughout the day on Friday. It is not just largecaps which managed to give a strong outperformance, even the midcaps went through a strong bit of outperformance. Nifty IT was one of the top sectoral movers as well.

    Maybe, the markets could go through a bit of a revival but the bigger catch for markets is what would happen on the global front. Till the time the global markets or the volatility does not ease off, it is going to be difficult for the markets to settle in a range. Yes, there might be periods of sharp corrections and that would be counted by very sharper periods of rallies which we had seen on Friday as well. But till the time the volatility settles down and the Nifty establishes the trading range, it is going to be difficult for short-term traders to try and establish a trend.

    So yes, you can go with the flow of the markets. If the recovery which panned out on Friday lasts on Monday as well, you could see some positivity coming back. In terms of levels, 8,550 on the Nifty spot is now a very critical and short-term support. Till the time we float above this particular level, for the good part of next week as well or the first half of next week, there could be a chance that some stability might creep in.

    What about the Nifty Bank? It has been bruised in the week gone by. It has posted its worst week since 2004. What do you make of the levels that we are seeing here?
    A large bit of the underperformance comes from the largecap heavyweight private sector banks. It is a bit of a concern because at one point of time, these are really mouth-watering levels for traders or investors to try and chip into the stocks.

    "I will go with one buy and one sell. One of the prime candidates for shorting or in terms of selling could be Interglobe Aviation."

    — Kunal Bothra




    But largecap stocks like ICICI Bank, HDFC Bank and Kotak Bank keep on falling 5%-10% on a regular basis. When the confidence gets shaken for many of these investors, that is one of the reasons why even though on Friday we saw very good recovery, it could not snowball into a strong recovery for bank Nifty, except for some bit of intraday rally in between.

    Till the time the underperformance from the private sector banks continues, it is going to be difficult for banks to participate in full gusto. In terms of price levels, the Thursday level for Bank Nifty, which was at 18,500-ish kind of levels on spot, should now act as more of a short to medium term kind of a support. If these levels do not break both on the Bank Nifty as well as Nifty, then there could be a case of stability and a decent amount of rebound in many of these individual names as well as on the indices.

    What are some of your top picks?
    I will go with one buy and one sell. One of the prime candidates for shorting or in terms of selling could be Interglobe Aviation. We have seen what has happened to many of the aviation stocks across the globe. Even IndiGo could face the brunt of sharp selling pressure from current levels. In fact, in the last one week, there were two or three bouts of rallies in individual stocks but Interglobe stock price could not bounce back quite sharply. It had consecutive negative closing days. In that regard, go short on Indigo. The positional targets are to be kept at Rs 720 and stop loss at Rs 980.

    Hindustan Petroleum Corporation Ltd (HPCL) could be a beneficiary of crude falling significantly. At the current levels of Rs 205-210, it could be bought into positional targets of Rs 230. The stop loss could be kept at Rs 198
    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

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