This week wasn’t a great one for the markets. Various global brokerage firms also suggested that it is time to take chips off the table. Do you think that this correction or a pause that we are seeing in the markets will be a sustained one?
I believe that the volatility in the markets would probably continue for some more time. Last week also we were discussing about a strong comeback in the IT names and then in the start of this week we had healthcare stocks which did well. Auto stocks like Tata Motors, M&M etc which did pretty well mid of the week were amongst the top losers in the Nifty which itself tends to make it difficult to decipher the short term trend.
Now the major onus of the market trend would probably lie on how the Bank Nifty behaves. I believe that it is a very important sector trend to take note of because if the Bank Nifty continues to decline and slide like how we have seen in the last two weeks consecutively then there is a possibility that the markets can drag further.
A major part of the action which I spotted on Thursday was predominantly because of the weekly expiry which transpired. There was lot of call writing which was happening at odd strikes of 17800-17850 and then 18000 strikes on the Nifty.
So we would probably have a muted start to the next week but if the Bank Nifty manages to show signs of recovery then the markets could probably form a firm bottom in place and then there could be some buying which could come back again. If the Bank Nifty manages to sustain then there could be a chance of a very strong and solid recovery for the markets.
The correlation between crude oil and India Brent crude has been sliding a little bit. Is there a correlation to draw here in the near future and what are your picks for next week?
Absolutely there is a strong correlation with respect to crude oil prices and it goes on for years on a trot. We have seen crude oil prices or the bottom formation of crude oil prices generally resulting into some sort of a bottom formation on our markets as well. Also, whenever we have seen top whether it is an intermittent top in between or whether it is a short term bottom those get replicated for our markets as well. So yes there is a definite linkage to the crude oil prices with respect to the Nifty.
But I believe that crude oil prices even historically as well are going through a soft trend.
In terms of stock specific calls I would suggest couple of buy calls expecting that some of the stocks and the category would probably try and go into a bounce back mode. So the first one which I would be suggesting would be a buy on HDFC Bank. I believe HDFC Bank looks very attractive in the short term charts purely because of the fact that the stock has found a triple bottom on the short term time frame charts. So it looks attractive and I believe that HDFC Bank can probably recover and come back to the levels of at least Rs 1600 over the near term. I would suggest a buy with stop loss to be kept at Rs 1500 mark.
The second one is also a buy from the banking space. It is a buy on ICICI Bank. The stock has filled that gap which was created just on the results day on the Rs 716 mark. Somehow the stock has managed to outperform on a day like Thursday as well when there was an extreme amount of volatility and it remained above that Rs 760 mark for almost throughout the trading session. So I am expecting some strong follow through price action for ICICI Bank and some recovery as well over the next couple of days. So I would suggest a buy at a target of Rs 800 and the stop loss can be kept at Rs 740.