stock picks: 2 top stock recommendations from Rahul Sharma

“So, net-net, overall, things are getting better incrementally for the market and we are seeing that once this pullback is done, we should see another round of rally coming up in the market,” says Rahul Sharma, JM Financial Services.

Give us a sense of the kind of levels that you are spotting for the Nifty as well as the Nifty Bank going ahead because we understand that we do have a catalyst event tomorrow where a rate cut of 25 bps is being expected. But other than that, if you are purely looking at these charts from a technical perspective, what are the next resistance and support level that you are seeing for both the Nifty as well as Nifty Bank?
Rahul Sharma: So, we have seen a 1000-point rally on the Nifty post which we are pulling back on the key indices in today’s session. This was something which was expected. And what this gives is an opportunity to re-enter into long positions. Now, the key support levels for the Nifty or rather entry points for the Nifty are at 23,400, 23,450. This drop may extend up to that level. But the positional setup or the structural setup of the Nifty has improved by a big margin over the last 8-10 trading sessions. And we feel that this dip will get bought into. Now, once the dip gets bought into, we feel the turnaround could take us to 24,000, 24,200 over the next 8 to 10 trading sessions and we feel that there is more upside to be had than the 1000-point rally that we have seen. So, net-net, we are advising clients to be buyers on dip.

Yes, it is a major event. Even today, we have Delhi elections outcome. Tomorrow, we have the RBI policy. So, a bit of volatility will be there. But we feel that positionally the setup of the market is pretty robust and this is also backed by the fact that FIIs have covered their shorts in a significant way in this rally and at the same time, we did see a green shoot of a buy figure in the cash segment in a day before yesterday’s session.

So, net-net, overall, things are getting better incrementally for the market and we are seeing that once this pullback is done, we should see another round of rally coming up in the market.
What exactly to go ahead and buy, some of those beaten down capex-related counters or would you advise to buy some of those pharma stocks that are doing pretty well today?
Rahul Sharma: So, there are two sectors where we feel the traction could be immediate. So, one is on the auto space. So, Maruti remains our top pick in this space, although two-wheeler auto stocks have also reversed on the long-term charts. Now, Maruti looks good for a target of 13,600, even 14,000 is very much on the cards. So, one can look to buy Maruti at current levels and maybe on dips down to 13,000 with the stop loss placed at 12,600 and we feel that the big move that we saw on the budget day is something that could continue in the next 8 to 10 trading sessions.Second stock which looks good is from the private banking pack. Axis Bank looks pretty solid at these levels. The stock has also given a reversal and we feel that the stock could extend it gains up to 1080, 1100 on the upside. So, look to buy Axis Bank at current levels with the stop loss placed at 970 and this is another stock which has been relatively beaten down pretty much in the private banking space where relatively stocks have done well and the risk-reward at current levels is pretty favourable. So, these are the top two picks from the largecap space where we feel stocks can do well over the next few days.
Also, give us a sense on what you are making of the entire Nifty FMCG space, the consumption basket, because after the initial run-up that we saw on budget day, this index has not been doing all that well. Do you believe this further drop that we keep seeing on this index now is making the stocks from this basket more attractive?
Rahul Sharma: On the FMCG space, A) it was one of those sectors which ended their correction pretty soon in November itself and post that, the sector has been sideways. We did see a big flare-up around the budget and what we are seeing right now in the last three-four trading sessions is merely a pullback. So, structurally, we have not changed the view and we feel that once this pullback is done, the sector would reverse and from a three to six-month perspective we feel that this is one space which could outperform the market and generate returns from here.

So, if you are an investor, there is nothing to be worried about. But if you are a trader, probably the short-term levels of the individual stock set-up matters a lot, but in the overall scheme of things we feel that the risk-reward continues to be favourable for fresh long addition on the FMCG side.