In terms of the overall trend going forward, what are going to be the key things to watch out for?
I think first of all we have to look at the kind of volatility that has come back into the markets in the last one or two weeks. Last week was quite a typical week for the markets because on one hand the week started with the Nifty IT doing extremely well and it ended with the pharma stocks doing exceptionally well. And these included the large cap stocks and not the midcap or the smallcap ones which often give price performance when a move of 10% plus happens on a TCS or Infosys earnings. And similar is the case in the pharma stocks as well, Lupin, Dr Reddy’s, Sun Pharma and many of these other stocks like Cipla were also moving up higher. But there has been a slight change to the market behaviour as intraday dips or intraday sharp corrections which come across on the Bank Nifty tend to trigger out a lot of stop losses for a lot of traders like what we saw on Friday. There was a sudden fall of 400 plus points in the Bank Nifty in just a matter of 15-20 minutes and then we saw a mild recovery. So, these intraday volatilities are not something which is pleasing for short term traders as it does not give confidence to traders to try and carry forward positions. So my sense is that the market positioning over the next couple of weeks and especially for the next week should be more on a lighter approach. I believe the traders will not go in heavy for the markets because of this sudden intraday jerks and volatility which we are seeing in the indices. So I sense that one has to be a slight bit more cautious over here till the Nifty is going up. Yes, the momentum could probably stay put on the Nifty and individual stocks but you have to have the support of Bank Nifty. I think if the Bank Nifty does not support then the eventual mean reversion for the Nifty would also happen.
Any trading ideas for Monday morning?
I would like to recommend two stocks. I think the market theme is getting a bit changed, many of the laggard stocks, the ones which have been correcting are the ones which are showing signs of revival. There has been a definite shift and bend towards defensives.
Now with that theme I am suggesting two buy calls; first one is a buy on Bharti Airtel. We were discussing this stock on Friday as well and that it is showing signs of recovery. There has been a good built up of open interest at those 475-480 levels for Bharti Airtel which I now believe is a good volume price support for the stock price. So this should come as a good revival trend for Bharti Airtel over the next couple of weeks. I would expect Rs 525 as an immediate short term target and would suggest a buy stop loss to be kept at almost Rs 478 mark.
And the second one would be a buy on Mahanagar Gas. I think in the entire last two months of price recovery for the indices, this stock had gone through a correction. On the hourly charts there were some price pattern breakouts which have happened for MGL like indicator breakouts and Ichimoku pattern breakouts. I believe that this stock can also see a very strong revival from here on. So I would like to recommend a buy on MGL with a target price of Rs 1000 and a stop loss at Rs 898.