A confident NDA can propel Nifty towards 26,300: Rupak De of LKP Securities

A confident NDA could propel the Nifty towards 26,300 and beyond in the medium to long term, says Rupak De, Senior Technical Analyst at LKP Securities. Edited excerpts from a chat in which the analysts also shares two stock ideas for the week.

In the post-election result week, do you see some signs of more volatility ahead as Modi 3.0 takes charge? What are the key levels to watch out for?
Volatility may persist in the equity market in the short term as the new government allocates ministries. However, market direction and sentiment could stabilize post-allocation, especially with the unveiling of policies and the union budget. Last week, the Nifty established a significant range of 2000 points, with support at 21300 and resistance at 23300. It's probable that Nifty will remain within this range for the rest of the current month. Nonetheless, a breakout on either side could lead to a strong directional move in the index.

In the midst of a tumultuous political scenario, the market may find reason to correct back to recent lows or even lower in the medium to long term. Conversely, a confident NDA could propel the Nifty towards 26300 and beyond in the medium to long term.

IT and FMCG stocks worked well as a defensive play in the week. As the momentum returns, do you see underperformance ahead?
Amidst the market turmoil last week, investors opted to allocate their funds to defensive stocks such as IT and FMCG, as they typically do during such times. This influx into these sectors propelled the Nifty FMCG index 7% higher, while the Nifty IT index saw an 8.50% increase during that period.

How do things look like for PSU stocks? Any buying ideas at lower levels?
Both the Nifty PSE and Nifty CPSE indices formed an Outside Day bar on the weekly chart, marking the first significant reversal seen in many months. Following a strong rally, prices in the PSU space appeared somewhat overextended, yet no reversal pattern was evident on their charts until now. This marks the first instance where investors have booked substantial profits in PSU stocks. While the long-term charts still indicate an ascending trend, the emergence of trend reversal patterns suggests that investors should exercise caution before initiating momentum buying in this space. A strategy of buying on dips seems prudent, as stocks in this sector present opportunities for buying at significant downturns.

Do you think Nifty PSU bank will outperform Nifty Bank in the week?
The Nifty PSU bank index has formed an outside day bar, indicating a reversal in the prevailing trend or at least a pause in the ongoing trend. Additionally, it has experienced a breakdown from several weeks of consolidation. A decline from the current level could further bolster the likelihood of a significant bearish reversal. Furthermore, upon comparing the chart with the Bank Nifty, it appears that the PSU Bank Index is poised to underperform the Bank Nifty in the medium term, as the comparative strength index suggests a possible topping out for the PSU Bank Index.

Give us your top ideas for the week

1) Buy GRANULES IND Above 485 TGT 540 SL 465

The stock has recently broken out of a falling trendline on the daily chart and is approaching a strong resistance level at 480. It is trading above its crucial short-term moving average, indicating strength. Additionally, the RSI is showing bullish momentum. Given these positive technical indicators, one can consider buying the stock above 485, with a stop loss at 465 and a target price of 540.


2) Buy TATAMOTORS 970 TGT 1020 SL 949

The stock has given a consolidation pattern breakout on the daily chart, suggesting a rise in optimism. Additionally, the stock has moved above the critical moving average. The RSI is in a bullish crossover and rising. In the short term, the trend might remain positive with the potential to reach 1020. On the lower end, support is placed at 950.