Edited excerpts from a chat with James on the market outlook in the near term
and which stocks to buy:
Both Nifty and Nifty Bank hit fresh peaks in the week and now the earnings season will be the biggest driver in the near term. How cautious are the charts looking like for the week ahead, which will also be a holiday-shortened one?
HDFC Bank, ICICI Bank, SBI, and Axis Bank which constitute the bulk of the banking sector in Nifty 50 look exhausted hinting at profit booking in the near term. Incidentally, 70% of the time in the last 10 years, Bank Nifty has given an average 5% return during the Q4 earnings season. This gives us the hope that profit-booking efforts could be short-lived.
Chart-wise, Nifty has just turned lower from the upper extremity of a rising parallel trendline channel which has been holding prices since the start of 2023. We have had prices testing the lower extremities of this channel twice in 2023, but this year so far, the lowest it has come is till the midline of the channel. This suggests plenty of room downside.
Realty and metal stocks were among the top gainers on positive news flow. Do you see more upside in the coming week?
Realty has had a good week, with 30% of the stocks seeing fresh 52-week highs last week. Meanwhile, the heavyweight DLF, which didn’t participate in this week’s rally, looks to have formed a bearish MACD breakout on the weekly timeframe.
Metal index biggies like Adani Enterprises, JSW Steel, and Tata Steel, which form 47% of the Nifty Metal index, didn’t participate in this week’s upside. Major contributions came in from Hindustan Zinc, Vedanta, and Hindalco which together form 27% of the Nifty Metal index.
How do you see the trajectory of the smallcaps? Has the dust settled down and is it time to go long once again?
The Midcap150 and Smallcap250 indices look to be gearing up for fresh upside, a trend we had confirmed last week too. 41% of the Smallcap250 stocks have moved into the RSI range of 50-60 this week giving strength to the ongoing pullback.
Hindustan Zinc and Vedanta saw double-digit gains in the week. Do you see the two stocks on an overbought trajectory?
There has been an RSI breakout on both stocks, suggesting that they are both on a strong directional upside with momentum that can continue through overbought conditions. We see 397-450 for Vedanta and 510 as the objectives for Vedanta and Hindustan Zinc respectively, with a few weeks’ horizon.
Give us your top ideas for the week.
AEGISCHEM (CMP: 480)
View: Buy
Targets: 510 – 535
Stoploss: 459
The stock has been on an upside trajectory for a long and continues to maintain the same. It has recently broken above the horizontal resistance and moved into uncharted territory hinting at more positivity. In the weekly charts, it has formed a Bullish Marubozu candlestick hinting at further upside in the near term. We expect the stock to move towards 510 and 535 in the near term. All longs may be protected with stoploss placed below 459.
IRCTC (CMP: 1057)
View: Buy
Targets: 1100 – 1140
Stoploss: 1008
The stock has continued to maintain the positivity since listing and continues to display strength. Recently it has broken above the wedge pattern resistance along with an MACD signal break in the weekly time frame indicating positivity in the near term. We expect the stock to move towards 1100 and 1140 in the next few weeks. All longs may be protected with a stoploss placed below 1008 levels.