What can traders learn from the week that went by?
The first learning of this market is that corrections do happen and they are part and parcel of the entire market trend. You just do not have just a bull trend which is there as was visible for the entire previous year and I think the last four, five quarters for the markets. Given India VIX has shifted up higher, the range for the markets have shifted lower dramatically. So from earlier 17,000-17,500, we are now likely to be trading in the range of 16,200 on the downside and possibly 17,000 on the upside. This should be a fresh range for the Nifty over the very near term. When you look at this in the context of Bank Nifty, which is also one of the key indices to watch out for, the range on the downside is closer to 36,000 or 35,750 as support and on the upside, it is 37,500 as a major resistance.
On Friday, India VIX dropped back 26-27 levels from 33 levels. We need to see whether the VIX drops off over the next one week. If that happens, there is a stronger chance that the markets may be less volatile and the trends can sustain. If trends sustain then that could give a strong booster to many of the midcaps and the ones which have been beaten down significantly in the last one week. That is the first most important factor to watch out for. It is going to be a crucial next week that could probably decide the spate of the entire series of the month of March as well.
What is your outlook on PSU versus private sector banks?
I think there has been a change in the banking stocks in the last three weeks. At the start of 2022, the Bank Nifty started to rally up from the 34,000-35,000 mark to those 39,300 levels. Specifically, stocks like Canara Bank, Bank of Baroda, SBI did extremely well but somehow over the last two, three weeks. After the first week of February is where you have seen the PSU banking stocks getting into a bit of selling pressure. The correction in these PSU stocks makes them a bit more fragile over the very near term but I believe we are now at a position where it is more important to have more sustainability of your portfolios rather than a more return-oriented kind of portfolio because of the kind of news flow and volatility.
From a very short term kind of adjustment, it makes a lot of sense to try and look at more private sector banks. They can add a lot of robustness to your portfolios. You can look at ICICI Bank, HDFC Bank at current levels, even Kotak Bank which was one of the better performers at the start of this week. These are the stocks that I would be looking out for from the private sector banks. Axis Bank is also looking quite attractive. It is trying to come back above that Rs 750-760 mark for itself. So, these are the few names that I would look out for more in terms of the robustness of the portfolio. But for someone who is looking at more high beta names and probably wants to initiate a few intraday trades, it could probably make sense to try and buy a Bank of Baroda if the stock comes closer to Rs 104-105 levels; maybe an SBI as well if the stock corrects back closer to that Rs 470-465 mark for itself.
What are your picks heading into the new week, at least one of them is going to be the new entrant to the Nifty 50?
Because that stock has somehow shown a lot of very-very positive data points. Now, typically, we lookout for price so the first stock which I am discussing is Apollo Hospitals. The stock in the last two weeks has gone into a price consolidation. Of course, in the last couple of days, even this stock was as volatile as the majority of the market stocks were. But somehow the recovery on Friday which we saw in Apollo Hospital was quite strong. The options premium for a 5000 call, 4900 call for Apollo Hospital which is almost like a 5% to 7% out of the money is at a premium of almost 2.5 to 3%. That itself tells you that there is more bullish biasness for the stock. I am expecting that this range breakout could happen pretty soon for Apollo Hospital. I would suggest a buy with Rs 5000 as more of a multi-week target for the stock and stop-loss could be kept at the Rs 4450-mark. And the second stock would be an interesting name, it is a buy on GNFC from the midcap space. The stock is forming a bullish flag pattern. For the entire or the first half of the month of February, this stock was a strong performer from the midcap space. There was a good volume spike up for GNFC and good price action as well. Now, the stock could make a decent comeback if the market volatility settles down significantly. This could also be a second stock that can be on traders’ radar specifically from a short-term trading perspective. I would suggest a buy with Rs 600 as the target for GNFC and a stop loss at Rs 525.
