By Shrikant Chouhan
Technically, currently the market is following the rally pattern between 2001 and 2008. It could be 10 times over the next 7-8 years. The Nifty was at 7,500 during the Covid19 crisis and the Sensex was at 25,700. Nifty has the potential to jump to 75,000 and Sensex to 2.57,000 points. In the next 3-6 months, we expect the Nifty to hit 15,500 and the Sensex to 53,000 levels.
During the pandemic (2020), markets fell to extreme fear levels across the world. Now, the time has come for the markets to move to extreme “greedy levels”. The “sector rotation activity” started which was lacking between 2008 and 2020 The IFIs have been investing significantly since June 2020 which would encourage the rise of the rupee. Cement stocks have performed extremely well, which has never happened in the past 10 years, indicating that the core economy data is improving or will improve.
Between 1992 and 2001, Sensex went from 2000 (lowest) to 6000 (highest) levels, which posted decent returns, however, the recovery was completely gradual and very volatile. It was the most difficult task for every participant (from fund managers to retail) to capture the major moves.
However, between 2001 and 2008 it was booming for everyone. Every individual and company made enormous amounts of money because the rally was consistent and less volatile. BSE Sensex went from 2,000 to 20,000 (10 times). While Nifty 50 ran from 850 to 6350 (8 times) levels. Likewise, from 2008 to 2020, the Nifty 50 went from 2,250 to 12,000 (6 times) levels and Sensex from 7700 to 42,000 (6 times) levels. It was once again gradual and very volatile. It was the most difficult task for each market player to assess the mood.
Based on the above correlation, our position we should buy at every major low. Market support exists at the 14000 and 13000 levels.
AMBUJA CEMENT (PURCHASE): The stock forms higher, higher, lower series on a weekly and monthly basis. It recently broke the formation of the consolidation triangle at 225 and rallied sharply. Technically, the stock is poised to break above the 291.50 level, which is the stock’s all-time high. Buy in slices with a stop loss at 225. On the upper side we could see the levels of 290 and 300.
JINDAL STEEL AND ELECTRICITY (BUY): The stock was formed and validated with the formation of a double bottom. Based on this, we could see the levels of 350 minimum and 550 maximum. The metals index at 700 points from the highest levels of all time, which it formed in January 2018. We believe the index is poised to break through the highest levels of all time and that this would generate more fuel in high beta stocks like JSPL. Buy at current levels and above on lows with a final stop loss at 270.
BHARTI AIRTEL (BUY): The stock is out of stock long term. It broke multi-year resistance at 500. Although the stock declined in the second half, it recovered and regained the 500 plus level. We believe the stock is heading towards 700 in the medium term. It’s an informed buy and more on troughs with a final stop loss at 530.
BALRAMPUR CHINI (BUY): He spent 14 years in the trading range of 202 and 29. Currently the stock is trading at 183 levels and is in the process of breaking through the 202 level based on its rounded bottom formation on the monthly chart. Technically, a multi-year break in the trading range helps the stock rise even higher. Even if we go through stocks linked to agricultural activity, then we can notice that most of them have already entered the long term breakout, which is positive for the stock. The strategy should be to buy at current levels and above on lows to 170 with a final stop loss at 160. On the high side, 200 and 225 seem achievable.
TATA ENGINES (BUY): On a daily basis, the stock is trending strongly upwards, while it is in pullback mode on a monthly chart. It was at 605 levels in 2016 and rose to 63.50 levels during the Covid19 period. After breaking through the 200 level, we saw an upward vertical movement in the stock. He gave a breakout based on price and volume which is significant and with positive news feed for the stock on a national and international basis. Even if we consider a 50% retracement from the lower levels, it could reach 330 levels. The strategy should be to buy at current levels and more on lows to 225 levels in anticipation of support for the EV industry. Keep a stop loss at 200 for the same.
(Shrikant Chouhan is Executive Vice President – Equity Technical Research at Kotak Securities. Opinions expressed are personal. Please consult your financial advisor before investing)