We have seen a stellar rally in the month of March. Going forward, do you expect this momentum to continue to the upside or do you think there will be a bit of buying fatigue that will finally kick in now?
I think the shopping has just begun. My feeling is that Friday’s move in the index was just an indication that the breadth of the market has started to open up. The index, Nifty, has managed to recover above the 17,500 mark. Bank Nifty had a strong rally and that was the missing factor in the broader market. So, the mojo has now also managed to return to the banking index. But then the second and more important part is that the winners in the F&O basket weren’t the usual large cap names, but rather high beta stocks and underperforming names like BHEL, Indiabulls Housing, GMR Infra, IDFC First Bank, etc of stocks that were the main gainers in the second half of the trade, so it is an indication that it had more to do with the opening of the market. If globally things remain calmer and slightly positive, we expect the index, as well as specific stock action, to see an improvement in the next week or two.
We had seen earlier in the month that it was the large caps that were really doing the heavy lifting. But you can’t take away from the fact that the broader markets are getting pretty hot. Do you see it as a positive sign that the rally is now broadening and many of these small and mid-cap stocks are participating as well?
Absolutely. When the market enters a corrective zone, traders or investors usually go into a shell; then, the commercial activity drops significantly. We don’t see a lot of volume on mid-cap names and trading activity shifts to more large-cap names as that’s where people generally find more confidence or relative stability compared to high-flying and beta mid-caps. high.
There are two ways to gauge market sentiment: one is of course the drop in India VIX and the second is how the mid-caps open or the breadth of the market. So, we have seen both signs occur where the Indian VIX started to correct and now we are at the 18.5 or 18.9 levels. Now, the breadth of the market has also started to open up. These are very strong early moves that we normally see. We don’t think these are the best formations in the markets because mid-caps are now back in a frenzy. After a three month, four month, five month correction period, if you see the first sign of mid-caps starting to come back, we see these are very strong early moves and we could see more legs to the upside.
I think we are now in a phase where mid-caps can start to outperform. Yes. Large caps can also come forward and can probably play a big role like what we have seen for Reliance, ITC etc. Therefore, they should also be part of the portfolios. But I think generating higher returns could probably come from more mid-cap names rather than large-cap stocks.
In terms of stock picks, what would be the top bets for the week ahead?
So I’m going to name three actions here. The first one I suggest is HDFC Bank. It has seen a very interesting breakup, similar to what happened with Reliance Industries, and it had a positive effect on Nifty. I think something similar could happen to HDFC Bank, and it could lead to Bank Nifty as well. I would suggest a buy, with Rs 1,700 as the positional target and Rs 1,440 as the stop loss. ITC is the second choice and I have been extremely bullish for the last month; I think it also looks very attractive. It started the new expiry on a very positive note for itself, breaking above Rs 250 levels. So I would suggest a buy with Rs 275 as target and stop loss at Rs 245. And from the high beta pocket, BHEL is one of the best in the F&O basket, shares rose 8-8.5% on Friday. . I think the stock has opened up some very strong legs to the upside and could see a potential breakout in the near term. I would suggest a buy with Rs 62 as short term target and stop loss at Rs 50.