Nifty Bank eyes 40,000! Use dips to buy banking stocks: Mehul Kothari | Also check top trading ideas for coming weeks
The index NIFTY Bank has managed to clear the life high of 37,700 in the week gone by. Now, there is a much stronger breakout in the index which hints that it is inching towards higher levels of 40,000, Mehul Kothari, AVP – Technical Research at AnandRathi – said in an interview with Zeebiz’s Kshitij Anand
The index NIFTY Bank has managed to clear the life high of 37,700 in the week gone by. Now, there is a much stronger breakout in the index which hints that it is inching towards higher levels of 40,000, Mehul Kothari, AVP – Technical Research at AnandRathi – said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts:
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Q) Market has created history last week as Sensex, and Nifty50 touched fresh record highs in a quick span of time. What led to the price action?
A) During the week went by, the index NIFTY50 not only surpassed the milestone of 17,500, but also registered a high which was an inch below 17,800 marks. Apart from Monday’s session, rest of the sessions belonged to bulls and the index gained over a percent from previous week’s close. Although the ongoing positive sentiments pulled the index higher, but for a change, the price action was led by much awaited banking index. The NIFTY Private Bank index surged by almost 5 percent and that led this faster up move.
Q) Banking index hit a fresh high on Friday and is up over 20% so far in 2021. Do you think the recommendation of Bad Bank will lead to smart money moving towards the banking and financial services space?
A) Since the past couple of months, we were expecting the NIFTY Bank index to display its strength, but it kept failing. All we knew that there must be a point where the rally in markets might not sustain without the participation of financials.In line with that view, the index NIFTY Bank has managed to clear the life high of 37,700 in the week gone by. Now, there is a much stronger breakout in the index, which hints that it is inching towards higher levels of 40,000. The trend would remain strong till the time NIFTY Bank index is above 36,000 levels. Thus, any dip for the time being could be used as a buying opportunity in banking stocks.
Q) As we head towards the FOMC meeting in the coming week – do you see volatility to increase? What should be the strategy for investors – stay put or buy on dips?
A) As mentioned above, till the time NIFTY Bank is trading above 36,000 marks, the short-to-medium term structure remains bullish. Going by that theory; buy on dips could be a much better approach.
Q) In terms of sectors – which sectors will drive the next leg of the rally? From a technical or fundamental basis?
A) Going by the technical, along with banking stocks, we are witnessing a fresh breakout in NIFTY CPSE index and the NIFTY Auto index. We expect the NIFTY CPSE index to rally towards 2250 – 2300, which is currently quoting around 2140. Hence, around 5 per cent of rally still could be witnessed in PSU stocks. On the other hand, NIFTY Auto might surge towards 10800 – 11000 marks. The risk-to-reward ratio to go long in auto stocks seems to be highly lucrative.
Q) What is your view on small & midcaps space which have outperformed the index so far in 2021?
A) At this juncture, NIFTY Midcap 100 index is at a very critical zone. The index is hovering at a rising trend line resistance, which is formed by joining the tops of year 2008 and 2018. This 30000 – 30500 level would play an important role. If the index fails to clear that zone, then there could be some profit booking in the index. On the other hand, the NIFTY Smallcap 100 index which was an underperformer in comparison to MIDCAP has confirmed a fresh breakout from its previous swing high. Till the time the index is trading above 9500, the smallcap stock remain in a buy-on-dips trajectory.
Q) Please share 3-5 trading ideas for the next 3-4 weeks
A) Here is a list of top trading ideas for the coming week from the cash market:
3M India Ltd: Buy| LTP: Rs 25,274| Stop Loss: Rs 24,100| Target: Rs 27,000| Upside nearly 7%
The stock of 3M India is from the broader market space and has moved above its 200-DEMA confirming bullish bias. Further, we are witnessing a range breakout along with positive crossover of short as well as medium-term moving average, which suggests that the stock is poised for a decent upside. Traders are advised to buy the stock in the range of 25200 – 25000 with a stop loss of 24100 for an upside target of 27000 in the coming 3 – 5 weeks.
Tata Motors DVR: Buy| LTP: Rs 146| Stop Loss: Rs 138| Target: Rs 159| Upside 9%
Few sessions back, Tata Motors DVR underwent a stupendous rally in just a single session. Then after the stock underwent a corrective move and is now back to the demand zone. Like what we saw in 3M India, we are witnessing a moving average crossover on the daily scale of Tata Motors DVR. The risk-to-reward ratio at this juncture is highly lucrative for short-term traders. Thus, traders are advised to go long in the stock near 145 with a stop loss of 138 for an upside target of 159.
Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.
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