Mon, Sep 01 at 12:46 , Updated at Mon, Sep 01 at 13:41
The September series hasn’t started off too badly. August was down a bit and Friday was very good; today is not too bad. Now the question arises, can markets break those ranges that are formed on the Nifty and power ahead in the month of September and what are the best sectors to bag?
Anil Manghnani of Modern Shares & Stock Brokers feels that the market ranges are probably getting narrower as the volumes continue to shrink even if one takes the end of the June series. He said, “On any fall if we are held within 4,200 or 14,000, this rally still maintains strength to go back and retest 4,650-4,700 levels and about 15,600 to 15,800 on the Sensex. So the fall can be bought into with money stop loss below 4,200 on the Nifty and 14,000 on the Sensex, with a view that this market although rangebound, thin on volumes and movement, may still go and retest the levels again.”
Neppolian Pillai of Modern Shares & Stock Brokers said that one can start looking at the four-wheeler side - Maruti, Tata Motors and Mahindra & Mahindra have moved but the momentum seems to be within Ashok Leyland. He believes that banking has been the star sector within the bear market rally.Excerpts from CNBC-TV18’s exclusive interview with Anil Manghnani and Neppolian Pillai:
Q: How is the Nifty looking like? Which side are you trading now for the September series? Manghnani: The ranges are probably getting narrower as the volumes continue to shrink even if one takes the end of the June series. A couple of months back, the market was around 4,313. Two months later, it is pretty much around the same level. So if one removes all the noise or the volatility, the market hasn’t done too much on the Nifty although stocks have moved up and down quite a bit. So, as the volumes continue to shrink, the range will get narrow.
The 50% retracement from 3,790 which was this year’s low, right up to 4,650 comes to around 4,220 and similarly from 12,500 odd-level, we rallied to 15,600 - that 50% is around 14,047. On any fall, if we are held within 4,200 or 14,000, this rally still maintains strength to go back and retest 4,650-4,700 levels and about 15,600 to 15,800 on the Sensex. So the fall can be bought into with money stop loss below 4,200 on the Nifty and 14,000 on the Sensex, with a view that this market although rangebound and thin on volumes and movement, may still go and retest 4,650-15,600 levels again.
Q: You are saying that there is a short at doing that within this series for the market - to break its range at 4,400-4,450 and get all the way to 4,600? Manghnani: It has a chance. I do not think the world markets are all behaving in the same manner, maybe the trend is similar but the percentage gain or loss is not comparable - it is not on a day-to-day basis and that is visible. If you see what is happening worldwide, it is one day up and one day down with Dow struggling to cross the 11,600-11,700 area and keeps falling from there. If this GDP (Gross Domestic Product) number is not a one off and Dow starts breaking above 11,700-11,800 and get some sort of move, it helps Asia as a whole.
I hope that 4,200 will hold and if you are buying within 4,300 to 4,200 sort of Nifty levels, your stoploss is only about a percent and a half. That is fair enough if you are a Nifty trader and with the way stocks are moving up 4-5% and coming back to where you originally purchased them, the Nifty is an easier option right now as stocks are not doing too much.
Q3: Interesting that we talk about autos today and Ashok Leyland is your pick from there, what do you see for it in this series? Pillai: Auto sector as a whole is an underperforming sector. After a long time - maybe after two years, the sectoral chart is trying to breakout. So far we have been saying that one should trade four-wheelers and invest in the two-wheelers and that has come true. Now one can start looking at four-wheeler side, Maruti’s, Tata Motors and Mahindra & Mahindra have moved but the momentum seems to be within Ashok Leyland. If one can pick this stock between Rs 33 and Rs 31, it should go to about Rs 37 to Rs 38 kind of levels. It is the smallest stock and there will be larger trading interest going forward once the momentum picks up further. So that would be our pick, one should keep Rs 30 stoploss to protect one’s positions.
Q: What about banking. How is that looking and what would be your pick there if you had to pick one? Pillai: Banking has been the star sector within the bear market rally. That’s one sector, which rallied about 50% majorly because for the last two months they have been sitting on the major downtrend line. They have maintained the uptrend and have given that kind of move on the upside with all the largecap stocks within the banking sector. There are many small midcaps, which have not moved up. Our pick for this month will be Yes Bank; within a band of Rs 132-121 for a target of about Rs 152-162. We can keep a stop of about Rs 120 and trade that on the long side.
Q: How is oil looking as a sector looking for September and what’s the horse you are backing there? Manghnani: It’s still one of the outperforming sectors given the way some of the other sectors even the largecaps from the January highs have corrected in excess of 50-60%. This is one sector where the heavyweights like ONGC and Reliance Industries are still not down. That’s why the sector although down from January is still outperforming on the downside from the rest whether its banking, realty or capital goods.
I picked a smaller stock; it’s probably just retracement move. The stock fell from about Rs 78 in the most recent rally last month to about Rs 59. The range to buy MRPL is between Rs 62 to Rs 56 purely for a trading retracement bounce back of the recent fall back up to Rs 67-71 levels. One can keep a small stop around Rs 55. It’s a nice trading stock maybe doesn’t do too much on a regular basis but when it does move it will give 7-10% move that one is looking for.
Q: There seems to be some interest in capital goods and infrastructure on Friday, anything that is looking strong from that pack to you? Pillai: With the theory holding up that capital goods and banking would be the leading sectors even the stocks from that sector have rallied well. One stock, which has not done much with the bottom of about Rs 738 is ABB. It is still at about the Rs 880 level. We would like to slightly buy it lower at Rs 860 to about Rs 815. We have a target of about Rs 947 to about Rs 1,040 kind of levels. With the stop of Rs 800 that should do well because other stocks like Larsen & Toubro (L&T) and Bharat Heavy Electricals Ltd (BHEL) have really moved by about 30-40%, and this stock has moved about 15-16%. It is going to do a catch up kind of a move with the larger ones and would be our pick for the month.
Q: How about pharmaceuticals? Pillai: Pharma is an interesting sector. When the market topped out in January that is exactly the time pharma broke out. If you take Sun Pharma, Cipla, Ranbaxy everything is holding up much above that January level as of now. So, we have again gone for a midcap with a parent company being Sun Pharma. We like Sun Pharma Advanced Research Center (SPARC). This stock has put in lot of work on the downside between Rs 75 and Rs 90 band. It is trying to break out its Friday’s close, which was Rs 94 and if one can buy between Rs 94 and about Rs 80 with Rs 75 as a stoploss. We should get a target upwards of Rs 108-115. It has consolidated at the lower level and now the momentum should come in and it should give 20% upside from here.
Q: What is a good way to play IT right now for you? Manghnani: If you see from the most recent highs, Infosys has corrected from Rs 2,000 and Satyam has corrected from Rs 450. If you compare from January till today, it is still one of the most outperforming sectors in the market. This sector as a whole can be bought from an investment point of view if you are not invested in trading the sector. The sector has majorly bottomed out in the last six months or so and now you do not see it correcting heavily even on down days in the market.
I have gone for an odd stock where probably people do not follow too much nowadays, Mphasis. Maybe over the last few months or years the volumes have dried up but in the last couple of months or down weeks the volumes are not so heavy but when the stock starts to move up on upper weeks, you are getting more and more volume. Maybe little bit of news based with stake sell is there but the volume has interestingly build up over the last two-three weeks. I am looking at it more as a breakout stock not as a stock that has actually bottomed out. The low was Rs 150 or so and now it is still Rs 240. So it is more of a breakout kind of stock, one should buy between Rs 240 and Rs 220. This stock will really move up now. Its monthly target maybe Rs 267 to Rs 277 but even from an investment point of view probably in the long-term, it could give you an excess of more than Rs 300.
Disclosure:
It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.
The 50% retracement from 3,790 which was this year’s low, right up to 4,650 comes to around 4,220 and similarly from 12,500 odd-level, we rallied to 15,600 - that 50% is around 14,047. On any fall, if we are held within 4,200 or 14,000, this rally still maintains strength to go back and retest 4,650-4,700 levels and about 15,600 to 15,800 on the Sensex. So the fall can be bought into with money stop loss below 4,200 on the Nifty and 14,000 on the Sensex, with a view that this market although rangebound and thin on volumes and movement, may still go and retest 4,650-15,600 levels again.
Q: You are saying that there is a short at doing that within this series for the market - to break its range at 4,400-4,450 and get all the way to 4,600? Manghnani: It has a chance. I do not think the world markets are all behaving in the same manner, maybe the trend is similar but the percentage gain or loss is not comparable - it is not on a day-to-day basis and that is visible. If you see what is happening worldwide, it is one day up and one day down with Dow struggling to cross the 11,600-11,700 area and keeps falling from there. If this GDP (Gross Domestic Product) number is not a one off and Dow starts breaking above 11,700-11,800 and get some sort of move, it helps Asia as a whole.
I hope that 4,200 will hold and if you are buying within 4,300 to 4,200 sort of Nifty levels, your stoploss is only about a percent and a half. That is fair enough if you are a Nifty trader and with the way stocks are moving up 4-5% and coming back to where you originally purchased them, the Nifty is an easier option right now as stocks are not doing too much.
Q3: Interesting that we talk about autos today and Ashok Leyland is your pick from there, what do you see for it in this series? Pillai: Auto sector as a whole is an underperforming sector. After a long time - maybe after two years, the sectoral chart is trying to breakout. So far we have been saying that one should trade four-wheelers and invest in the two-wheelers and that has come true. Now one can start looking at four-wheeler side, Maruti’s, Tata Motors and Mahindra & Mahindra have moved but the momentum seems to be within Ashok Leyland. If one can pick this stock between Rs 33 and Rs 31, it should go to about Rs 37 to Rs 38 kind of levels. It is the smallest stock and there will be larger trading interest going forward once the momentum picks up further. So that would be our pick, one should keep Rs 30 stoploss to protect one’s positions.
Q: What about banking. How is that looking and what would be your pick there if you had to pick one? Pillai: Banking has been the star sector within the bear market rally. That’s one sector, which rallied about 50% majorly because for the last two months they have been sitting on the major downtrend line. They have maintained the uptrend and have given that kind of move on the upside with all the largecap stocks within the banking sector. There are many small midcaps, which have not moved up. Our pick for this month will be Yes Bank; within a band of Rs 132-121 for a target of about Rs 152-162. We can keep a stop of about Rs 120 and trade that on the long side.
Q: How is oil looking as a sector looking for September and what’s the horse you are backing there? Manghnani: It’s still one of the outperforming sectors given the way some of the other sectors even the largecaps from the January highs have corrected in excess of 50-60%. This is one sector where the heavyweights like ONGC and Reliance Industries are still not down. That’s why the sector although down from January is still outperforming on the downside from the rest whether its banking, realty or capital goods.
I picked a smaller stock; it’s probably just retracement move. The stock fell from about Rs 78 in the most recent rally last month to about Rs 59. The range to buy MRPL is between Rs 62 to Rs 56 purely for a trading retracement bounce back of the recent fall back up to Rs 67-71 levels. One can keep a small stop around Rs 55. It’s a nice trading stock maybe doesn’t do too much on a regular basis but when it does move it will give 7-10% move that one is looking for.
Q: There seems to be some interest in capital goods and infrastructure on Friday, anything that is looking strong from that pack to you? Pillai: With the theory holding up that capital goods and banking would be the leading sectors even the stocks from that sector have rallied well. One stock, which has not done much with the bottom of about Rs 738 is ABB. It is still at about the Rs 880 level. We would like to slightly buy it lower at Rs 860 to about Rs 815. We have a target of about Rs 947 to about Rs 1,040 kind of levels. With the stop of Rs 800 that should do well because other stocks like Larsen & Toubro (L&T) and Bharat Heavy Electricals Ltd (BHEL) have really moved by about 30-40%, and this stock has moved about 15-16%. It is going to do a catch up kind of a move with the larger ones and would be our pick for the month.
Q: How about pharmaceuticals? Pillai: Pharma is an interesting sector. When the market topped out in January that is exactly the time pharma broke out. If you take Sun Pharma, Cipla, Ranbaxy everything is holding up much above that January level as of now. So, we have again gone for a midcap with a parent company being Sun Pharma. We like Sun Pharma Advanced Research Center (SPARC). This stock has put in lot of work on the downside between Rs 75 and Rs 90 band. It is trying to break out its Friday’s close, which was Rs 94 and if one can buy between Rs 94 and about Rs 80 with Rs 75 as a stoploss. We should get a target upwards of Rs 108-115. It has consolidated at the lower level and now the momentum should come in and it should give 20% upside from here.
Q: What is a good way to play IT right now for you? Manghnani: If you see from the most recent highs, Infosys has corrected from Rs 2,000 and Satyam has corrected from Rs 450. If you compare from January till today, it is still one of the most outperforming sectors in the market. This sector as a whole can be bought from an investment point of view if you are not invested in trading the sector. The sector has majorly bottomed out in the last six months or so and now you do not see it correcting heavily even on down days in the market.
I have gone for an odd stock where probably people do not follow too much nowadays, Mphasis. Maybe over the last few months or years the volumes have dried up but in the last couple of months or down weeks the volumes are not so heavy but when the stock starts to move up on upper weeks, you are getting more and more volume. Maybe little bit of news based with stake sell is there but the volume has interestingly build up over the last two-three weeks. I am looking at it more as a breakout stock not as a stock that has actually bottomed out. The low was Rs 150 or so and now it is still Rs 240. So it is more of a breakout kind of stock, one should buy between Rs 240 and Rs 220. This stock will really move up now. Its monthly target maybe Rs 267 to Rs 277 but even from an investment point of view probably in the long-term, it could give you an excess of more than Rs 300.
Disclosure:
It is safe to assume that my clients & I may have an investment interest in the stocks/sectors discussed.
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