Jay Thakkar on 2 stocks to buy in short term

What are you expecting in terms of the Nifty and Sensex now?
As far as the Nifty is concerned, obviously on the upside now with yesterday’s reversal, it seems that 18,900 will act as a very crucial resistance going forward and of course above those levels as well. At each 100 points, there is a resistance until the 19,200-19,300 range. Right now, we are at 18,700.

We missed the lifetime high by a couple of points and we saw a reversal coming in from those levels and a kind of reversal which now appears to be quite away from the all-time highs. I would say that 18,900, 19,000, 19,100, 19,200 are all the resistances which the market will face. If you join all the highs of 21, 22 and 23, you will come to a range wherein 19,200-19,300 is the resistance out there on Nifty which eventually will be taken off.

The base is also shifting higher from 15,200 to 16,800. So more or less in the short term, 18,400 to 19,000 is the range for Nifty. As far as Bank Nifty is concerned, we have seen a good amount of or for a long time we have seen a negative divergence coming in. Out there on a Bank Nifty, I believe 44,000 on the upside will act as a very crucial resistance. If at all Bank Nifty has to take any reversal or gain some momentum on the upside it has to take off and close about 44,000 unless that happens, 42,500 to 44,000 is going to be a sideways to negative trend for Bank Nifty. Relatively, Nifty is better as of now.

What is your view when it comes to the Nifty Bank Index because we have been seeing some kind of weakness when it comes to specifically the private banking space. Also, the Nifty Bank Index is at its worst to slip below the 200 DMA. What is your outlook when it comes to the Nifty Bank?
Nifty Bank is really showing signs of weakness and relatively underperforming Nifty as well. We have seen Bank Nifty continuing or underperforming since the past almost one-one and a half months. Earlier, Bank Nifty was trading within a range of 43,500 to 44,000. It took off that range on the upside but then it could not take it forward. Thereafter, the range on Bank Nifty was 44,000 to 44,500 just for a few days and then 44,000 was broken.

All I mean to say is that since the 43,500-44,000 range happened in 30-45 days, since then, Bank Nifty has not seen that kind of an upside wherein Nifty has moved quite a lot. It has cleared a distance from almost 18,000, 18,100 to 18,800. Nifty has travelled sideways quite a lot. That relative underperformance of Bank Nifty to Nifty we have seen in the last 30-45 days.

Finally the range has broken on the lower side. Hence the trend has shifted from up to sideways which it was a few days ago, to sideways to negative. I believe that 44,000 on the upside is a very near term cap or resistance on the upside of Bank Nifty until those levels are not taken off. There is a risk of Bank Nifty slipping to 42,500. The short term trend would be sideways to negative on Bank Nifty.
When it comes to the broader market, we are seeing an outperformance in the Nifty Midcap and the Nifty Smallcap Index. In the last 22 sessions, they have been negative only in two of the sessions. Do you expect outperformance to sustain going forward?
You are absolutely correct. These two indices are definitely outperforming the benchmark indices like Nifty and Bank Nifty. In the short term, these two can correct. When the overall market reverses, then these will also reverse. But one thing which I would like to say is that the Nifty Midcap Index has definitely entered into a very long term bull market and because it has entered into a very long term bull market, this relative outperformance that we are seeing right now is because of that.

In Nifty, at each 100 points, you got a resistance until 19,200-19,300. Once that gets taken off, Nifty will move into a long term uptrend. It will confirm the long term uptrend from this consolidation which started in 2021 until now that will provide a breakout on the upside. And then it would just be moving up with whatever negative news if at all there are in markets it will absorb all those news and just move a trend higher.

The Bank Nifty Midcap has entered into that zone above the levels of 33,000. Now, 33,000 is approximately 2,000 points below the current market levels. That is less than even 10%. It is approximately 5-6%. So 5-6% is the maximum correction which you can see on Nifty Midcap if at all there is a correction; else whatever take you see will definitely get absorbed and you will see buying interest coming at lower levels.

What would be your top picks there?
For the short term, I have got two buy recommendations. The first buy recommendation is on Metropolis. This stock has provided a breakout from multiples showing resistance. It has formed a good rectangular or a good consolidation base formation at the lower end after falling quite a lot. We have seen a substantial fall in Metropolis.

We have seen that on Dr Lal Path Lab also but these stocks have also shown a good positive divergence on the daily weekly charts and the indicators have turned bullish. The breakout has come with increasing volumes. With all of these technical parameters or evidence, in the short term, it is likely to reach towards 1460, 1490. Now, it is at 1,420. One should definitely buy this with a stop loss of 1,380. We have seen metal stocks now bouncing back quite well from the oversold territory.

So markets are underperforming but the stock specific underperformers are now outperforming the markets. They are seeing short covering whereas the market is seeing a long unwinding.

NMDC is one such candidate which is seeing short covering in this sideways or downtrend market. Trading on the level of Rs 107.5 is likely to reach 115 level, which is its short term target and the stop loss will be Rs 104.5.