Upside for Nifty likely to remain capped at 12,100; 5 stocks ripe for cherry picking

The upside seems limited, whereas the downside is more apparent, with the broader range for the Nifty might be at 11,700 on the downside while being at 12,100 on the upside, Jayant Manglik, President, Retail Distribution, Religare Broking, said in an interview with Moneycontrol’s Kshitij Anand.

Q: The Nifty50 closed the month of May on a strong note above 11,900 levels. Strong rollovers for the June series suggests that the rally is likely to continue. What are your expectations for the month of June? Will it be as hot as the climate would be?

A: Since the advent of the weekly Nifty option expiry from February 11 this year, the implications of the rollover data seems less judgmental. This data seems prudent for no more than a fortnight generally.

Banking stocks had staged this bullish run in the markets in the month of May. However, this might not be the case in June. The upside seems limited, whereas the downside is more apparent. The broader range for the Nifty might be 11,700 on the downside and 12,100 on the upside.

Q: Any events which investors should watch out for which could dictate the trend for the markets in the near term? (Like RBI policy etc., any other macro data to watch)

A: Firstly, investors would keep a close watch on the upcoming Reserve Bank of India (RBI) monetary policy meeting scheduled on June 6. After a thumping victory by the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government, the hopes among participants has definitely increased for a rate cut in the upcoming policy meet.

However, we believe that the RBI would await more data on the monsoon’s progress and inflation before tinkering with the rates. Meanwhile, we believe that the focus of the Monetary Policy Committee (MPC) would be to ensure that the recent rate cuts are passed on by the banks.

Further, the progress of monsoons would also be crucial for the markets as any major deficit would hurt the already muted consumption demand in the Indian economy.

Additionally, now that the main election event is behind us, the focus would shift back to global cues, which has been volatile due to US-China trade war and the political uncertainty in the United Kingdom over Brexit.

The movement in currency and crude oil price would also be actively tracked by market participants.

Q: The concerns of high valuations have now come forth as earnings from India Inc. have failed to cheer investors’ community. Do you think we could possibly make a top and then tread in a range till the Budget in July?

A: We feel the market enthusiasm over the NDA Government’s majority win in the central elections is nearly over and the focus has shifted back to fundamentals.

Coming to the corporate earnings, the March quarter results, like in the previous quarters, have reflected a muted picture with a few hits and more disappointments.

During the quarter, top-line growth for many companies was impacted due to demand slowdown, which resulted in poor volume offtake.

Further, profitability also remained disappointing due to weak operating leverage and increased cost pressures, which has impacted the margins.

While we expect the earnings to revive over the long term, the recent downgrades along with other factors like uncertain global cues (especially the prolonged concerns over US-China trade relations) and the volatile trend of crude oil prices could keep the markets jittery and range bound in the near-term until budget.

Q: What is your view on Modi 2.0 team? Your first reaction.

A: The NDA’s thumping victory with a clear majority for the second straight term is certainly encouraging news for the Indian markets.

We believe that the Modi 2.0 team would increase its focus on its pending policies and reforms and revive the economic growth, which has been below par.

Another crucial event would be the Union Budget in which the Government will have to keep a balance between maintaining growth and fiscal prudence.

The key priority would be to take steps to revive the consumption, promote agriculture growth and increase infrastructure spending.

This should be beneficial for domestic-centric themes and for sectors like real estate, cement and capital goods as well. Apart from this, the government, along with the RBI, would jointly work towards resolving the NBFC liquidity crisis, which we feel could help in bringing stability to the financial system and the equity markets over the medium to long term.

To conclude, the successful implementation of reforms and a revival in earnings and growth could keep the domestic and foreign institutional investors’ inflows intact over medium to long term.

Q: Your top five stocks, which on technical grounds, witnessed a breakout and are right for cherry picking?

A: Since the markets are exhibiting high volatility, we feel maintaining both long and short positions would be a prudent approach. Hence, in the below-given list of top five stocks, we have also given a short call on two stocks:

Can Fin Homes Limited: Buy | LTP: Rs 352.40 | Target: Rs 385 | Stop Loss: Rs 340 | Upside 9.3 percent

Can Fin Homes has been consolidating in a range after a sharp rebound from the support zone of major moving averages on multiple time frame charts.

The chart pattern and the positioning of trend confirmation indicators are pointing towards a fresh breakout ahead. We advise traders to initiate fresh long positions.

Raymond Ltd: Buy | LTP: Rs 828 | Target: Rs 900 | Stop Loss: Rs 815 | Upside 9 percent

After the breakout from its consolidation range, Raymond has taken a pause and is offering a fresh buying opportunity for those who had missed an earlier chance.

Further, the current chart pattern and positioning of the confirmation indicators are also in sync with our positive view. We advise initiating fresh longs as per the mentioned levels.

Hindustan Unilever Ltd: Buy | LTP: Rs 1,785 | Target: Rs 1,860 | Stop Loss: Rs 1,725 | Upside 4 percent

Mostly FMCG counters are witnessing consolidation and Hindustan Unilever (HUL) is no different. After hovering in a range for nearly two months, it’s likely to resume the uptrend in the near future.

The existence of multiple moving averages, combined with a favourable market trend is adding to the positivity. We advise accumulating in the given range.

Oil & Natural Gas Corporation Ltd: Sell | LTP: Rs 171 | Target: Rs 165 | Stop Loss: Rs 180 | Downside 3.5 percent

ONGC is likely to see a fresh decline, after its failed attempt to cross the resistance hurdle around Rs 180.

It looks slightly overbought too, which further adding to the confirmation. We advise creating fresh shorts in the given range.

Hindalco Industries Ltd: Sell | LTP: Rs 196 | Target: Rs 184 | Stop Loss: Rs 202 | Downside 6 percent

Mostly metal counters are reeling under pressure and Hindalco is no different. After a marginal bounce, it has again posted a sharp plunge and is now trading on the verge of a breakdown. We advise initiating fresh shorts as per the mentioned zone

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