2 top stock recommendations from Rahul Sharma

“Looking at today’s data the good thing is yesterday’s low with the very close margin has somehow been honoured and that puts us into a perspective where the second half of the session could see some bit of a bounce back,” says Rahul Sharma, JM Financial Services.

Yesterday, we thought oh! there is some respite actually coming in there in the markets but that is not the case. Again we are seeing a bit of a down tick coming in for the Nifty, what should we be expecting from the Nifty now, will it be in these levels that we have seen it going around, will it be in those range or will we see a fall furthermore?
Market is at a very crucial inflection point where we have been heavily oversold. Yesterday, we saw a bit of a recovery. If you talk of a green shoot coming in and the bounce back is taking a brief pause today. My sense is this bounce back still continues as long as we are above the Tuesday’s lows which is 17255 odd and my sense is maybe a bit of consolidation here and there and eventually the bounce back should continue. Looking at today’s data the good thing is yesterday’s low with the very close margin has somehow been honoured and that puts us into a perspective where the second half of the session could see some bit of a bounce back. Now looking at a slightly macro picture this it seems like this bounce back can mature somewhere up to the 17700 to 17800 mark. So we are bullish on the index as long as 17250 is maintained and we expect 17800 to be tested anytime soon and once that is done I think we will have to take a review as to how other global markets are and what kind of data are we building in.

So as far as Bank Nifty is concerned we are expecting 41000 to be tested anytime soon and as far as Nifty is concerned we are optimistic that somewhere around 17700 to 17800 is where the Nifty can test in this bounce back. So we advise traders to stay long especially in sectors where we feel there is inherent strength, so in terms of inherent strength the public sector enterprises look good, in terms of reversal the PSU Bank Index is one index which looks good for a reversal and there is a significant bit of headroom on the upside to play catch up.

And one more sector which is high on momentum is capital goods, so we are focusing our trading strategy on these three sectors primarily which is where we feel that there could be relative outperformance in the short term.

Give us your views on specific picks, what are your top picks?
It is best to have a long and a short approach at this point in time. So NTPC is something that we like a lot. The stock has been trading above its short term moving averages. Secondly in the last five to six sessions there has been a significant built up in open interest integrating long accumulation and along with the strength in the PSE index we feel that this stock could very well head towards Rs 182 in the very short term and up to Rs 200 in the next one month or so. So one can look to buy NTPC with the stop loss placed around Rs 160.

Now coming to the second trading idea which is on the short side Bharti Airtel is one stock which has broken its 200 day EMA last week and post that it has sustained below the same. There is a bearish pole and flag pattern being formed here and the targets of which are coming to somewhere around Rs 700. So one can look to short Bharti Airtel with the stop loss placed at Rs 760 one can easily expect 5% to 6% kind of on-going correction in the same. So it is best to have a long short strategy because of the broader sentiment which has not turned outright bullish. It is best to have a long short approach and secondly we feel that once Nifty crosses 17500 which is where the maximum call writers are I think shorts can further get challenged and we may see the higher levels that we just spoke of.