Short covering anticipated next week; bullish on 4 pharma & defence stocks: CA Rudramurthy BV
CA Rudramurthy BV, MD, Vachana Investments, sees a buying opportunity in Nifty around 24,800, targeting 25,600. Bank Nifty has broken above 54,500, with 55,900-56,000 as strong support. Dips to these levels are buying opportunities, targeting 58,000 and 60,000. Despite Thursday's weakness due to geopolitical concerns, 25,000 is expected to hold. Short covering is anticipated next week, given high FII net short positions.
Rudramurthu is bullish on pharma and defence sectors and highlights Divi's Lab, Laurus Lab, HAL, and BEL as top picks. Attractive opportunities also exist in chemicals with Navin Fluro and Tata Chemical, insurance with HDFC Life and SBI Life, and mid-sized banks like RBL Bank and Federal Bank.
ADVERTISEMENT How do you see the trade happening on Nifty as well as Bank Nifty?
CA Rudramurthy BV: First of all, for today's expiry, the Iran-Israel issue has been a hangover and because of that reason we are seeing the dip in market but I am very clear that the 25,000 level on Nifty is a very strong support. In fact, positional traders should use this opportunity and buy the dip. For me till 24,800 holds, this market is a buy on every dip.
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So, for me, at the current market price and on dips to 24,800 is a buying opportunity in Nifty. I am looking at targets of 25,600 to come. When it comes to Bank Nifty, we have already seen a breakout above 54,500. Now that level of around 55,900-56,000 is acting as a very strong support. Any dips to 56,000-55,900 is a great buying opportunity and I am looking at targets of 58,000 and then 60,000 to come on Bank Nifty. Fresh triggers could take Nifty to 25,300–25,500: Analysts
Yes, for Thursday's expiry, the market looks weak because of that Iran-Israel issue. However, I feel 25,000 will be strongly held even for today and for a positional trader, it is a godsend opportunity to buy this dip and I am looking at targets of 25,600 to come very soon in Nifty. More short covering will come. FII net short position is currently at around 78-80% and from here on, I expect more short covering to come in next week.Similarly, the volatility index now is below 14, India VIX is comfortable, and more short covering will come from the current level. We are at a strong support of 25,000, all good fundamentally, and even the RBI policy was spectacular with a reported 50 basis point repo rate cut as well as a 100 bps CRR cut. What more do you want? This market is a buy on dip and definitely no shorting whatsoever.
What about the broader end of the market because we have seen them tip into the red yesterday but today for the first time in a very long time, the broader markets are underperforming the benchmark. What is your take on the broader end of the market – the midcap and smallcap both trading with cuts of about eight-tenth of a percent as we speak?
CA Rudramurthy BV: After a correction in the longer term bull market, the October to March correction was done and then, we saw from April this year largecaps participating till May mid or even till close of May. But now from May 15th onwards, we have seen the broader market participating and in general yes, the broader market overall will do good from current market price. We have to be very sector specific and stock specific in this market.
ADVERTISEMENT Yes, we first saw the private banks rallying. Later on, the move has started in mid-sized banks and PSUs have also started rallying. We are seeing even good moves in defence, railway and shipping stocks. So, one has to be very sector specific and stock specific and at current market price I am very bullish on two sectors – pharma and defence.
To name some of the stocks in pharma, both Divi's Lab and Laurus Lab are trading close to all-time highs of their price and for me they are very bullish. So, yes, one can look at buying Divi's and Laurus Lab. Two more attractive pharma stocks are Glenmark and Biocon. So, for me, from now on, pharma will do very good and you have a long way to go from current market price. For me defence as a theme is also very good. HAL and BEL are my top picks.
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Even at current market prices, buy into HAL and BEL. Use opportunities like dips to buy into pharma as well as the defence stocks. But I am still bullish on chemicals. Look at stocks like Navin Fluro, Tata Chemical, they are all looking good, SRF. From insurance, HDFC Life and SBI Life look very good. LIC is also another stock which you can look for. Mid-sized banks will do very good. RBL Bank, Bandhan Bank looks very attractive. Even Federal Bank for that matter. For me, PSU banks also look very attractive whether it is Canara Bank or Punjab National Bank or even State Bank of India and it has also started a move from Wednesday. For me Coforge, Tech Mahindra, and Persistent Systems look very strong. You have to be very specific in your stocks and pick the right sectors. So, for me pharma, defence, chemicals, and then mid-sized banks are all stocks which will do very well from current market price. So, these sectors and stocks look very attractive to me.
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