We have seen a great rally in the month of March. Going forward, do you expect this momentum to continue upwards or do you think there will be a bit of buying fatigue that will finally come to the fore?
I believe the buying has just begun. My understanding is that Friday’s volatility on the index was just a sign that the market has started to open up. Nifty has managed to bounce back above 17,500. Bank Nifty made a strong comeback, and this was the missing factor from the overall market. Hence, Mojo has now managed to get back into the banking index as well. But then the second and most important part is that the gainers in the F&O basket were not the usual largecap names, but high beta stocks and underperforming names like BHEL, Indiabulls Housing, GMR Infra, IDFC First Bank, etc. These were slew the number of stocks that were the biggest gainers in the second half of the trade, so this is an indication that it was higher as the market opened wide. If things remain calm and slightly positive globally, we expect index as well as stock-specific action to pick up in the next one to two weeks.
We saw in the first month that it was the large caps that were doing the really heavy lifting. But you can’t take away the fact that the broader markets are heating up significantly. Do you see this as a positive sign that the rally is now widening and many of these midcap and smallcap stocks are also participating?
Absolutely yes. When the market turns into a corrective zone, traders or investors usually go into a shell; Therefore, trading activity is significantly reduced. We don’t see much volume in midcap names and trading activity tends to shift to more largecap names as this is where people usually find more confidence or relative stability than high beta, high flying midcaps.
There are two ways to measure market sentiment – one is, of course, the decline in India VIX and the other is how the midcap or the breadth of the market opens. So we have seen both those signals happening where India VIX has started correcting and now we are at 18.5 or 18.9 level. Now the door of the market has also started opening. These are very strong opening moves that we usually see. We don’t think these are the top type of formations in the market as midcaps are back in a frenzy now. After three months, four months, five months of correction, if you look at the first signs where midcaps start to bounce back, we see these are very strong opening moves and we could see more legs on the upside.
I believe we are now at a stage where midcaps can start to outperform. Yes. Large caps can also go along and they can probably play a heavy role like we have seen for Reliance, ITC, etc. Hence, they should also be a part of the portfolio. But I think more midcap names instead of largecap stocks can generate higher returns.
What will be the top bets for the week ahead in terms of stock picks?
That’s why I will name three stocks here. The first one I am suggesting is HDFC Bank. It has seen a very interesting breakout similar to Reliance Industries, and it has had a positive impact on Nifty. I believe something similar could happen for HDFC Bank and it could propel Bank Nifty as well. I would suggest a buy position with a position target of Rs 1,700 and a stop loss at Rs 1,440. ITC is the second choice and I am very bullish on it for the past one month; I think it looks very attractive too. It started fresh closing on a very positive note for itself, breaking the level around Rs.250. Hence, I would suggest buying with Rs 275 as target and stop loss at Rs 245. And pocketing higher beta, BHEL is one of the best performers of the F&O basket, with the stock up 8-8.5% on Friday. , I believe the stock has opened some very strong legs to the upside and could see a potential breakout in the near term. I suggest buying with Rs.62 as near term target and stop loss at Rs.50.
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