21K in January a possibility once Nifty crosses 19,470; 2 PSU stocks to buy: Rahul Sharma

Rahul Sharma, Director & Head - Technical & Derivatives Research, JM Financial Services, says “once we cross 19,470, that is the time to add leveraged positions in the market on the long side. So unless 19,470 is taken out, a day trader can at max take positions with a very short term timeframe and with strict stop losses. Once that level is taken out, we will be out of the woods and we can very well march on towards the 21,000 target, possibly by January. We can see that level going ahead from these levels.”


What do you make of the market mood right now? We have been fairly range bound and 19,850-19,150 thereabouts has been the working range so far. Do you see us getting out of this range anytime soon? Today, of course, is the weekly expiry as well.
Markets definitely have become choppy of late. But the good thing is the downside seems to be navigable once we cross the 19,000 mark. My sense is with the US markets turning around on the daily timeframe, S&P 500 index hitting a panic low and seeing a meaningful recovery over the last few sessions, Nifty should eventually take inspiration and challenge the current resistance of 19,225.


So once 19,225 is taken out, we believe that at least the very short-term trend should be positive because that is exactly where the breakdown happened on the way down. And once that happens, there should be short covering, especially from the FIIs. Now, the absolute reversal in the market may happen if we cross 19,470, which is quite some distance away at this point in time.

But as and when it happens, that would call for a proper new round of up move, which can begin in the coming days. So as of now, my fingers are crossed. We have not really taken out the first resistance. Neither are we breaking down the downside with the 19,000 mark. So range-bound for sure. But there are some green shoots, like some sectors which are exhibiting strength or bouncing back much sooner than the rest of the market.

One sector that comes to my mind is the PSU banking space. We have seen private banks, but it is the PSU banking index which has seen the sharpest recovery in the previous week. Now there is a follow-up bout of buying that is expected. So PSU banks look good. PSEs, which are public sector enterprises also continue to look good. Along with that, last one month's biggest breakout has been the realty indexTthat continues to do well on the back of stronger earnings numbers. And we feel there is a lot of upside to be had at the real estate space in the stocks as well.

So these are the three areas of the market which look pretty robust. Still the markets are not out of the woods. Unless and until any of these levels that we spoke of, it is best to take these relatively stronger sectors from the long side. Unless and until we break 19,000, it does not call for a shorting idea or shorting opportunity at these levels.

You had triggered quite a lot of curiosity with your Nifty, quite bold calls in the previous series. It also triggered almost a 1000 point move on the Nifty, I would say. Are you holding on to those calls because I think Diwali around 21,000 or year-end 21,000 or something like that or you are revisiting those targets once again?
The macro trend of the market is still positive, still bullish. On one side, we had the US markets, which were a pain point, which does not seem to be anymore. My sense is, going ahead in the next three months time frame, or if you take a slightly broader pre-election kind of a rally kind of a setup, there is a very good possibility that from here we will see a proper up move. Why am I saying levels is because on one side, we have FIIs which are at historical short levels. Nifty has rallied about 400 points, they have not covered their shorts. So maybe it is a geopolitical thing. Maybe it is something that we do not know.

But unless and until they go completely wrong, which is once these levels are taken out or if they exit their short positions at a favourable level, I would be a little bit cautious. Once that is done, we can definitely press on the accelerator. Once we cross 19,470, that is the time to add leveraged positions in the market on the long side. So unless 19,470 is taken out, a day trader can at max take positions with a very short term timeframe and with strict stop losses. Once that level is taken out, we will be out of the woods and we can very well march on towards the 21,000 target, possibly by January. We can see that level going ahead from these levels.

Give us your stock recommendations as well.
We are bullish on the PSE space, Gas Authority of India or GAIL looks pretty formidable at these levels after the recent correction. The results are done, the stock has formed a base around the 116-120 mark. And at these prices, I think risk reward is favourable for a bounce back. So, one can look to buy GAIL for a target of 132-135 on the upside, stop loss placed at 114. And this stock and sector continues to look positive.

Apart from that, the PSU banks pack looks good but noteworthy is a setup in the Bank of Maharashtra. One can look to buy for an immediate upside of around 12% from these levels. So, around 46 is where we are targeting in the short term, one can look to buy at these levels, and have a very small stock loss at 41. In the last five sessions, the stock has been consolidating. Today, we saw green shoots of buying happening in the PSU banking space. Both the picks are from the sectors that we like. We feel GAIL and Bank of Maharashtra should do well in the coming days.