It looks like bulls are smiling today but who will have the last laugh eventually, the bears or the bulls?
I guess the trend will have the last laugh. I think we have been in this downtrend for the last two and a half, three months. It has been a very classical downtrend in every sense with just about every parameter in favour of the sellers or the bears. 16800 was our working target on the downside, it was the previous low, it was also a point where multiple supports had kicked in. So yesterday you had a sort of a mini selling climax with the Nifty going close to 16800 and from there we have seen a bounce. So I think whatever has happened is very normal, even the Bank Nifty has reversed from that 38500 level and we have seen these bounces a few times in the last couple of months and they have just acted as a trap. People hope that it is a bottom but it does not end up being a bottom because the markets go on to make a lower low. So I would remain bearish. I think this is just a short-term pullback that will get sold into at higher levels. 17100 and 17300 are very important resistances. I do not think this downtrend is going to dissolve in a hurry. Eventually 16800 is likely to break leading to another 4 to 5% downside at least.
So trend will have a last laugh but the point is that trend is something where we are debating right now whether it is 16000 or whether it is 15000 so what is the trend? Are we in for volatile times or are we in for a linear decline because that is the difference that volatile means that you will keep on going up and down and a linear decline means that we will fall and we will continue to fall?
Every downtrend is different. You cannot compare the downtrends of the last 20-25 years to what has happened in the last 18 months because in one sense the mid-caps and small caps have been in a downtrend since October 21. It is just that the Nifty made a new high of 18900 in November-December and therefore you cannot call it in a bear market or in a downtrend.
But I think the trajectory will remain down. It will be volatile. It is not going to be a linear decline because we live in a very dynamic world where too many things are happening on a daily basis. So you will see a lot of volatility but the sequence of lower tops and lower bottoms will continue. So I think that the trend is clearly down. Pullback rallies should be sold into. This has been the stance for the last two and a half months and it remains. So do not get carried away with the uptick. I think that is the advice that we are putting out to our clients as well.
Just wondering what is going to happen to the weak pockets in the market right now and perhaps you can help us identify that a little bit better. And just because TCS is in news we were just taking stock of how some of the IT sector constituents have performed. The fact that Infy is just about 4% odd from its 52-week low, has the time come to buy into any of the IT names? Do you even foresee any kind of rebound and a meaningful one at that coming anytime soon?
Well the IT index in India witnessed collateral damage on account of the developments around SVB in the US. I think it is very clear because before this news flow I think IT was relatively stable and there seems to be a knee-jerk reaction on account of that in the last one week. I think it is temporary. I do not see much downside for the IT index. In fact I do believe that it bottomed out a couple of months back. This is a buying opportunity from an investment perspective. So go out there and create those long-term positions in IT stocks, large caps, mid caps.
I think we like it across the board. And the other two pockets of the market that we like is PSU and capital goods. So these are the only three pockets that we like. But in terms of the weaker names we are still very bearish on the Bank Nifty.
I think our eventual target is 37,500. We are very bearish on Reliance. So far it has all moved as as per our view and we do believe that eventually a stock like Reliance can move towards 2050 and lower. And metals obviously after the washout day that we saw yesterday I think it will see much more pain. So there are pockets in the market where you can play strength and weakness while the Nifty oscillates in the 16,800, 17,300 kind of a band.
What’s the view when it comes to those defensives because FMCG you said is in a downtrend and pharma at new lows so what is the strategy right now? And if you would like to share any names more than welcome?
Defensives seem to have gone out of favour to a certain extent because I think it is more of a debate between growth or value. I think the market has moved into value which is clearly visible given the way PSU stocks have behaved in the recent past. Pharma obviously is making new lows, it is clearly not a defensive from a market’s perspective.
You cannot hide in the pharma stocks. And FMCG if you look at the index it is just one stock ITC which is holding the entire index. And aside of ITC every other chart in the FMCG space has been quite weak for the last three and a half months now. So I do not see any strength there. And even ITC is looking a little toppish around the 380, 400 zone. I do not think it’s going to get past that number in a hurry. So again I would be bearish both on pharma and FMCG. I think they should be sold into even at these levels.
In 2023, the remaining next nine months, do you think more money would be made by going long or by going short?
I think more money would be made by going short. At the same time, this is going to be a trading market. At the start of the year I made this comment that if we are just going to be confined within 16,000, 19,000, we are doing very well for ourselves. But now there is a scenario which comes up and says that maybe we might even break 16,000 at some point of time this year, not immediately, at some point of time.
So the best case scenario is we stay stuck in a range and therefore I think the rest of 2023 is going to be a stock picker’s market because mid caps and small caps have outperformed on a relative basis. I think we just need to accept that and there will be some pockets that will stand out going forward once the Nifty and the Bank Nifty stabilises.
