“We have to be careful if these levels persist, then we could see a short-term uptick in the market, but what is more worrying is weakness in the small and mid-cap equity markets,” said Aditya Arora, Adlytick.
What does the graph suggest? When will this market decline stop?
Aditya Arora: Look, the texture is weak and we have also highlighted in our last interaction that Nifty looks weak at 25,900. Since then, we’re down 1000 points. But 24,700 to 24,800 is important support for the market. We have to be careful if these levels hold, then we could see a short term bounce in the market, but what is more worrying is the weakness in the small and mid cap space. I think the space has more room on the downside as many stocks are breaking below their lows, so look at the PSU banking space, down 2.8%. So, the weakness is in the smallcap, midcap space. We have to wait until the dust settles in the bag. And when we talk about large-cap stocks, they have a better risk to reward ratio. So, I would watch out for the 24,700 to 24,800 mark for Nifty to bounce back. I was very optimistic and played for a short-term bounce in Nifty, had a stop loss of 100 to 150 points in Nifty and hoped for a recovery of around 200 to 400 points in Nifty.
In all these setups, there are select names from IT and pharma that survive. Do you see outperformance from these two segments and any stocks there?
Aditya Arora: Very. Whenever there is tension in the street, there is worry in the street, FMCG and pharma are a safe place to hide and the stock that stands out right now is ITC which often performs better in falling markets, so I like a candidate at 513.60, one should place stop loss at 495, target should be 527 to 545.
What about your recommendations, what names do you like?
Aditya Arora: So, I have ITC on my recommendation list and I’ve shared it, so that’s the only stock I’m watching today.
When it comes to PSU stocks, what is your view? The downside becomes more specific to PSUs and the PSU Bank Index.
Aditya Arora: I think the decline is a little concerning on this basket of PSUs because they broke previous lows, so technically it’s negative. I will wait till things settle down if there is a bounce back in Nifty. This space could also bounce back, but I don’t expect it to perform any better. I just hope they bounce back along with the market, but this is not a pocket where great wealth can be created. I’m actually looking at the large cap space, which I think is expected to perform well, and I’m also looking at the Nifty Metal space which has consistently outperformed the market and the outperformance may continue.
Just wanted to know some other big buzzers from the wider market. You have Macrotech Developers doing quite well, AU Small Finance Bank, LTIMindtree is something to be excited about as well, and Finolex Industries is no different. Is there anything that catches your eye among these buzzers?
Aditya Arora: I think Lodha is actually starting to rise to the occasion of its important support. So, we can hope for more than 5% recovery from here. But the important thing to note is that internationally IT is also doing well and you mentioned LTIMindtree, so I will follow a levels based approach here.
I would be bullish on LTIMindtree above 6400. Currently the stock is at 6217 and the stop loss is at 6150 and the target is 6550 to 6650.
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