What are you reading of this kind of dancing alone in the ballroom by Bank Nifty, everybody else is tired and sitting on the side?
No, I think it is the return of banking. We have seen a lot of participation only by PSU banks over the last year, but it is about time that private banks start playing a bigger role. And you cannot have economic cycles which are without banking. So, we have seen underperformance by the banking sector. Now I think it is time to see outperformance, specifically I am saying when we look at Bank Nifty that has underperformed even though PSU stocks did pretty well.
But I think the time has come for them to really take charge or take lead or join the overall bullish camp and that is what is sort of happening. A lot of people have started to relook at HDFC Bank. When we actually look at the Strike Valuation Charts that we have on our platform, it shows the stock at minus two standard deviations, so that is an extreme in terms of the long-term valuation graph and when you are at that kind of level, definitely at some point of time interest had to get generated and you are starting to see that, now that is only one item and slowly you are seeing the momentum build up in the other private banks as well.
While obviously private banks will take the lead, what do you think is going to be taking a bit of a setback now in the markets and where do you think we will not see much of a move right now?
So, frankly speaking, I think if there is somewhere where you need more consolidation, it is actually the PSU stocks in general, I am not talking of banks, I am talking of the other lot where we have seen a very big move in the run up to the election. A lot of buying, a lot of anticipation of a win by the ongoing government. Now that that is behind us, there is a case for them to consolidate for a while.
Because if we look at things like the RSI indicator on individual stocks also, some of them had hit as high as 90, 92, 93 on weekly or monthly charts and that needs to cool off.
A lot of our weekly momentum indicators also are in sell mode with negative divergences across this segment. So, I would say that is the sector in which I would take a slight backseat for a while, get back into it after some time.
We are not writing it off. We are just saying that it had the best run. It is probably time to shift our focus to other sectors and other parts of the market which have become slightly undervalued in the time being.What are your thoughts on fertiliser, Coromandels of the world rallying good, FACT, Chambal, all of them. There is talk that some rationalisation of GST in fertiliser may happen generally. There is talk that the new Agri Minister, Shri Chouhan, will actually do a lot of reform here. Do you like this space?
Yes, it is a very strong segment. They are showing up on our momentum scanners when I actually look at stocks that are able to hold above, say, the 50-week average over a one to two-year time horizon, then many of the fertiliser stocks are there on that list, including the ones you mentioned. So, very interesting space. They have been trending for a while. There is no sign of a loss of momentum on the weekly or monthly charts and I think these trends are likely to continue.
If you look at anything in terms of a sector from the defensive side, what is the thought on that, whether a pharma or an FMCG? Would you be looking at anything interesting there?
Both have actually picked up. But if I have to take a preference, I would actually put it on pharmaceutical stocks because of simply the return possibilities. FMCG plays along with the market, we saw a correction between I think February and May, which is probably over.
But the pharma sector is showing strength very-very bottom up. Even if you go to smaller names in the midcap, smallcap area, which were not participating and even some of the larger stocks which were not participating, they are all starting to show positive momentum on higher timeframes, weekly and monthly.
Biocon if we see last two years or two-and-a-half years was in a declining trend, now all of a sudden over the last two quarters, it has a rising trend, though the pace may be very-very slow.
But what I am trying to highlight that there has been at least a change in trend which is happening across the pharma space and it is looking broad based, it is not like a few stocks now leading the pharma pack, but pretty much a lot of things.
So, I think there is a good value opportunity there because stocks that have been beaten down over this period are essentially in the value zone and one should really look at that from a long-term perspective.
I want to talk to you about certain defence stocks as well, one of them have rallied very hard, PTC Industries and one of them have just not moved in comparison to many other shipyard type of companies, I am talking about Swan Energy. Can you check the charts of these two kind of defence names or anything else in defence which you like?
I have historically liked and held for the longest period Hindustan Aeronautics, but that is a front name, which everybody knows. I have not really gone down the line to the next and the next. There are a couple of companies, but I thought to have a singular focus, if you have one name in the space, then it is probably sufficient rather than having a basket. So, my focus was there alone. I have looked at a couple of the others like a BDL, but yes, I just thought I will stick to one.