Talking to ETNOW, Kunal Bothra, Independent Market Analyst, says he is bullish on two metal stocks and one auto stocks for next week.
The week was a much needed breather for the market but the good thing is we have not fallen.
Absolutely. The mix of the market was very good this week. In the first half, you saw a bit of volatility coming in. One of the strongest sectors in March was the Bank Nifty or the banking sector, That sector took a bit of a breather. The Bank Nifty corrected 650 or 700 points from its recent swing highs. But what was supportive for the
this week was the emergence or the re-emergence of new sectors.
Cement stocks made a very strong comeback in the fag end of the week. We saw auto stocks like Eicher Motors, Tata Motors also trying to make a very good comeback. To top it up, on Friday we saw very good recovery into the metal pack. Net-net, I believe that this week was more of a consolidating week for the Nifty but the internals shaped up pretty well and all of that indicates that this is a sign of a new trend in the making for the broader markets and the benchmark indices.
What would be your bet in the auto pack? What do you think happened over there?
As the saying goes, at the bottom, the news is always negative but the prices are at their multi-year support levels. I would look at purely chart patterns and then looking at the patterns, last week we saw very good mix up happening into names like
which was making a comeback. Maruti, Tata Motors also improved. When you see a weaker index or a weaker stock rallying by 10-15% and supporting these benchmark indices at a time when the stronger sector underperforms, that is a very credible comeback.
One of the patterns which we have seen in every phase of bull markets is that the weaker stocks are the last movers and when you see mild recovery in the weaker sector, that itself is a strong trend. In terms of names, Tata Motors is one of the stronger candidates for a strong breakout on the upside, then followed by Maruti as well as Eicher Motors, which is trying to make a very strong price pattern on the weekly timeframe.
Metal stocks rallied this week after poor performance in last 30-40 days or maybe even one quarter. Is this a start of a trend, not only in India but also in global metal names?
So yes the push is coming across from the global markets for the sector but in terms of open interest built up on the futures and options segment for the metal stocks, or whether it is a cash or delivery data, the volumes on intraday or daily basis, there is a strong sense of a credible comeback for metal stocks. More important part is the way the sector has performed.
Largecap stocks like Tata Steel, JSW Steel made a very strong comeback and midcap names like SAIL and Jindal Steel also made a very good comeback in the last two weeks. Net-net, with the structure and the health of the sector improving in terms of volumes and open interest, there is a very credible trend in the making for metal stocks.
When we talk about the metals pack, what is the trend that has been seen generally? Do you think that if the trend reverses, the move could be quite phenomenal?
Yes, sectors like metals and realty are very high beta spaces. When you see a new trend in the making, those trends do not last for one, two, three weeks. They go into a multi-week, multi-month, multi-quarter rally and I believe the metal stocks are showing signs of those kinds of trends. It was led by Tata Steel which bottomed out first in the metal pack and then it led to the midcap names also participating. I believe that there is a new trend in the making and given the high beta nature of these stocks, there is much more upside left in the short to medium term.
Any stocks that are looking interesting to you?
Yes and since the markets have raised the bar, even I will raise the bar and rather than giving two stocks, I will give three stocks. Two from the same sector and that is metal stocks we have been discussing earlier. SAIL is a very strong buy. It shows inverse head and shoulder chart pattern. The stock is showing beautiful traction. Volumes on the weekly charts are extremely strong. So, it is a buy on SAIL, targets revised to Rs 66 and stop loss could be tailed to Rs 56.
Tata Steel is another buy. The stock is trying to make a very good comeback. We saw swing breakouts for Tata Steel and that is also a buy, targets of Rs 580, stop loss at Rs 535.
From the auto pack, I have picked up Eicher Motors. It is showing bullish hammer pattern on the weekly charts. That stock should make a strong comeback, Rs 22,000 as a target on Eicher Motors, suggesting a buy with stop loss Rs 20,250.