stock picks: Buy on Dips: Rahul Sharma sees favorable risk-reward for long positions

“Our view is to buy on dips, Nifty is looking good for 24,000 from a positional perspective. At 23,200, 23,300 the risk-reward is favourable for longs so keep a stop loss place around 22,000 on the closing basis and the view is to go long,” says Rahul Sharma, JM Financial Services.

Look at the recovery that is coming in now after the Trump tariff announcement. It is a strong recovery, it is a good sign as far as Indian markets are concerned. Tell us on the benchmarks and also Nifty Bank the kind of outperformance that Nifty Bank is showing right now, really are we out of the woods and now from here on do you see an up move coming in?
Rahul Sharma: One thing is for sure that the way markets have reacted today it seems like the markets had already discounted the kind of tariffs that were expected.

Point number one is markets were very light going into the series or from a derivative perspective the short aggression from FIIs or whether the retail positions in index they were on a relatively smaller scale.

What that puts us is on a relative scale tariffs are something which will impact a lot in the long run, but in the short run India is relatively better place which is a reason why we are seeing outperformance happening in the Indian markets today.

Nifty in the last two or three weeks has definitely come out of the woods which means that incrementally things may get better from here.

Now, there was a period of time where India underperformed the US markets. So, in the last six-seven months where US markets were hitting new highs, it was India which was under pressure and was seeing outflows regularly from the FIIs and which is why we had this six-seven-month kind of a bear market, I think that should sort of see a reversal of sorts where we outperformed the US markets, US markets sort of remain under pressure and Nifty sort of spend some time, may not fall as much as the US markets and then eventually once there is stability emerging in the global markets we may see a possible rally from here as well.

So, our view is to buy on dips, Nifty is looking good for 24,000 from a positional perspective. At 23,200, 23,300 the risk-reward is favourable for longs so keep a stop loss place around 22,000 on the closing basis and the view is to go long.
Even banking index for that matter is relatively on the lighter side and we feel that this index is also due for a fresh up move, the working targets are coming close to around 53,500, 54,000 on the banking index.
I see pharma that is the sector that we have been talking since morning, but after opening a lot of these domestic plays and especially some of the pharma counters are seem to be doing well. So, give us some sense that which are the sectors that are likely to participate even more in this sort of a recovery, what you are anticipating?
Rahul Sharma: So, tariff-related moves seem to have happened today. We have seen the pharma index open by a big margin and post that it is seeing a bit of profit booking at higher levels, but overall the positional setup of the pharma index still continues to be positive.

It sort of hovered its way around the 200-day Ema and now it seems like sooner than later it should begin its uptrend from here.

But the better trade or the better risk-reward is in the Nifty next 50 space which is one index which we are tracking very closely. There is one index which has stocks from the market cap of 50,000 crores all the way up to around two-and-a-half lakh crores.

Nifty next 50 or the Junior Nifty which is the ETF which is stated on the exchange is one instrument which we are liking particularly which gives you a blend of largecaps and midcaps to a wide extent.

People look to invest in this ETF, we feel that the Nifty next 50 index has got long legs. So if Nifty goes to 24,000 which is around 2% to 3% kind of an up move, this index should be outperform by 2x kind of a margin, so the index may go up around 6% to 7% as well.

So, from a medium-term perspective Nifty next 50 is something that we are recommending to clients. We feel there is a big upside to be had in this. We have already seen a 10% up move over the last couple of weeks in this index, but we feel that another 7-8% up move can be had over the next few weeks.

Besides Nifty next 50, I mean we have spoken about Nifty IT, we have spoken about Nifty pharma and of course the impact of the tariffs on those two sectors, but talk to us about what are the other pockets of value that you see, now that we have understood that one should look at to the domestic facing sector, the domestic facing counters, so within that where do you see value and what are the sectors that you are looking at now, now that the dust for the tariff has settled?
Rahul Sharma: Yes, so banking and financials is one space which continues to look good. We have been bullish about the NBFCs in particular since a long time now and we continue to remain so, but I think the next leg of rally could happening in the insurance stocks, so SBI Life is one stock that we like at current levels.

SBI Life looks good not only from a short-term trading perspective, but even from a 6- to 12-month kind of a time frame we feel that the stock can re-attain its previous highs of around 1900.

So, if you are an investor or trader you can look to go along on the insurance space. Apart from that private banks continue to look robust. You have ICICI Bank, HDFC Bank, the blue-eyed boys have relatively weathered the storm very well and now once Bank Nifty goes into over mode which is a target of say 54,000 we feel private banks can come in a big way.

So, the entire BFSI space along with insurance is something that we are looking to add longs into and we feel that this is one area where even if there is volatility in the short term, the downsides will be relatively limited and that puts this sector into a very good risk-reward kind of a situation where we feel that money can be made over the next few weeks or months.