“Throughout the most part of 2022 as well as 2023, the sector had been going through a period of correction as well as consolidation, before starting the reversal moves late 2023. A pause in the last few days augurs well for the trend to breach the 2022’s peak on the Nifty IT index,” says Anand James, Chief Market Strategist at Geojit Financial Services. Edited excerpts from a chat:
How cautious have market participants turned after the unexpected crash on Wednesday? Given the holiday-shortened week and New Year mood, do you think we are in for a consolidation in the last week of 2023?Anand James: We had entered last week under heavy overbought conditions, and if Wednesday’s crash has done anything, it has served to embolden the bulls and improved the risk appetite, having recovered much of what we last had on Wednesday. Friday also succeeded in keeping the bears at bay, that should help Nifty enter the last week on a positive frame. The shortened week could however weigh on the minds, and put a cap on upside attempts as the week progresses.
What is the outlook ahead for IT stocks? Nifty IT has managed to outperform both Nifty as well as Nifty Bank.
Anand James: IT sector has been a long term laggard, and has been among our favourites among turnaround plays.
We are once again seeing sectoral churning with laggards like pharma and IT inching up and the high flying realty and auto stocks taking a break. What are your thoughts on how this sectoral rotation is playing out?
Anand James: Indeed, auto and realty appears to be slowing down, having taken the baton much early, but my sense is that they are not fully done yet. Meanwhile laggards are catching up, like IT and pharma. But along this theme, the metal index has the lowest YTD gains of 13.82%, but our bets are on FMCG, which has so far gained 24.74% this year.
Hindustan Copper gave impressive double-digit gains in the week. What is the outlook ahead?
Anand James: A bullish engulfing candle on Friday papered over the cracks that was beginning to show when a broad market crash unfolded, serving to signal a continuation in the uptrend that shows several signs of a strong rally. Major among them is the abundance of bullish continuation patterns, which encourages us to aim for Rs 273 as the extended upside target, with downside marker placed at Rs 210.
After the recent run-up, do you think Santa rally has already played out? Santa rally is usually associated with the upside seen in the final five trading sessions of December and the first two days of January.
Anand James: During the last two years, we had entered the last week of the year on low when compared with that of early December or late November. Unfortunately, we do not have that low base this year, being very close to record peaks. And despite Wednesday’s sharp falls, stocks and indices still carry the burden of being overbought, which should weigh on hopes of a Santa rally.
Give us your top picks for the last week of 2023?
RADICO (CMP: 1602)
View : Buy
Targets : 1660 – 1730
Stoploss : 1528
The stock has been moving within a downward sloping trend channel and a bounce back is underway. The MACD histogram has also shown signs of reversal in the daily time frame. We expect this reversal attempt to move towards 1660 and 1730 in coming weeks. All longs may be protected with stoploss placed below 1528.
MFSL (CMP: 939)
View : Buy
Targets : 970 – 1015
Stoploss : 897
The stock has been on a profit booking mode since the second half of this month and is attempting a reversal from the rising trendline support of 922 forming a Doji candle in the daily time frame. Also, we have seen MACD forest signaling exhaustion at lower levels supporting our assumption of a continued pull back. We expect the stock to move towards 970 and 1015 in the next few weeks. All longs may be protected with stoploss placed below 897 levels.
