Kunal Bothra, independent market analyst, in an interaction with ET Now, talks about the short-term outlook for Nifty index and also hands out a few stock recommendations. Lets take a look at the edited excerpts:
ET Now: Where do you think the Brent crude oil prices are headed? How is the Nifty setup looking with second straight weekly gains?
Kunal Bothra: The very short-term charts for Brent crude show that we have entered into an extremely oversold territory. What happened is, when crude was at $85, it was trying to find a new range. In the scenario of a sharp correction, the range shifts lower. Thus from a range of $80-$90 levels, the range for the crude is now $67-$65 as a support and closer to $75 for Brent. So, that should now be the new range for crude and maybe a spike can take it towards $73-$74 at least before it cools off once again and establishes this range of $8-9 dollars.
Given the backdrop of the last few weeks of sharp correction on crude, the setup on the indices both Nifty and Bank Nifty is also extremely positive. The Nifty should try and claw back above the 200 DMA which is at 10,750-10,800 levels.
ET Now: In terms of Bank Nifty, where do you think that index is headed?
Kunal Bothra: I expect Bank Nifty to rise to almost 26,800 to 26,900 kind of levels on an immediate basis. The good part about Bank Nifty is the emergence or rather a pickup of new stocks like ICICI Bank and Axis Bank. These stocks are doing extremely well and are holding the Bank Nifty at a time when HDFC Bank and most of the other stocks – Kotak Bank or IndusInd Bank – are trading below their 200 DMAs and are unable to find their mojo back.
The mix of Bank Nifty, where you have a new set of banks emerging as stronger candidates, is positive. Also, PSU banking names have done pretty well in the last couple of weeks.
ET Now: Dealers are pointing out that sentiment seems to have improved. Has it already been factored in or do you believe that when dealers say that sentiments are improving, it is a sign that worst may be over for now at least?
Kunal Bothra: Yes, I think the worst may be over for now and what happens is when you see the sentiments improving it is not just that Nifty is improving but that the breadth of the market is witnessing significant improvement. You see more trading options if I say in technical language, stocks tend to complete their bullish patterns and that in itself spreads positivity across the market sentiment.
Overall, I would agree with the fact that the index has been consolidating in the last one week but the bias before that was bullish and it gives a positive takeaway that the index trend over the next couple of weeks should also be on the positive side.
ET Now: Any picks that you have for Mondays session?
Kunal Bothra: Yes, a couple of them. One of them is Hero MotoCorp. I think most of the two-wheeler stocks are making a decent comeback. The Nifty Auto index is doing well over the last one-two weeks. Hero MotoCorp on the hourly charts specifically is on the verge of a breakout of a double bottom pattern. Historically, we have seen that such kind of patterns on stocks generally get fulfilled and you see the stock rising higher which is what I am anticipating could happen for Hero MotoCorp. This suggests a buy with Rs 3,050 as an immediate target and a stop loss of Rs 2,880.
The second stock I am bullish on is JSW Energy. It is at a very interesting level because it has broken out of almost six or seven-month downward sloping trend line and that too on the back of some extremely strong volumes. The index confirmed a break of 200 DMA on Friday, and it could be a very interesting bet over the next couple of weeks. I have a buy call on the stock with a target of Rs 78 at least and a stop loss to be kept at Rs 68.