Want to play on the long side? Go for bank and logistics stocks: Jai Bala

“The PSU stocks on a broad scale have been beaten down from a medium term perspective and so they are picking up a medium term correction to the upside or probably even medium term uptrend. So far, the rally has been stellar like you have pointed out but in the short term, outside the frontline names, we are coming to an important cycle top. We should not get too exuberant now,” says Jai Bala, Chief Market Technician, Cashthechaos.com

What is your perspective on the market, especially the way we are seeing volatility? The US has recovered, India has been stable, China is recovering. What is your view on the market?
The Indian market is outperforming clearly and it is very obvious but to me, this still looks like a corrective trend and within that, the market is trying to push towards an all-time high. The market is alright as long as it stays above 17,969 as below that, things start to get weakish for the Indian market. But as long as that is happening, the short term is higher for the Indian market.

Day after day, Nifty Bank is scaling record high levels but the one that is leaving everyone stunned is the rally that we are seeing in the PSU Bank index. Where do you see this one headed now?
It is not just second rung PSU stocks that are outperforming, even SBI has got unfinished upside to work. The recent high at about Rs 621 for SBI looks like an incomplete move and probably one more higher high is coming for SBI.

The PSU stocks on a broad scale have been beaten down from a medium term perspective and so they are picking up a medium term correction to the upside or probably even medium term uptrend. So far, the rally has been stellar like you have pointed out but in the short term, outside the frontline names, we are coming to an important cycle top. We should not get too exuberant now. We want to see a short-term correction after that. It may have a little more upside to work with but in the short term, it is going to see some resistance.

Could you also talk to us about any sectors that are looking interesting for an upside? Besides SBI, any other interesting names?
Banks have got a little more upside to work. The frontline sector that was leading the market so far is the auto sector and the FMCG space which are coming to exhaustion. We want to exercise a bit of caution there but if you want to play on the long side, you should be on the banking names and a little bit on the logistics side.

Logistics also have had a good run but there is still upside to work with. We are all very close to the all-time high and I am a little bit careful about what to do. Once the all-time high is taken out, maybe some more higher highs will come through. I am not sure the all-time high market has got the acumen and the gunpowder to take out the all-time highs.