DAILY VOICE | As Nifty Heads Towards 13,500, Mid & Smallcaps To Play Catch Up: Sacchitanand Uttekar Of Tradebulls Securities

Sectoral rotation would remain the key for the ongoing major up move to progress well while the focus stays on quality & mega-caps to support from the back while their mid-cap peers catch up on their left out rally, Sacchitanand Uttekar, DVP – Technical (Equity), Tradebulls Securities said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts:

Q) Historical week for Indian markets when Nifty50 broke above 13200 for the first time and Sensex surpassed 45000. What led to the price action on D-Street?

A) Indian markets are on a record-breaking spree as the bourses continued to scale towards new highs with record-high FPI inflow into the economy.

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A fresh burst of optimism has been triggered by the emergence of several credible, effective coronavirus vaccine updates.

Expectations are high that the global economy is poised for a powerful rebound in 2021, as the pandemic would recede soon and with easy liquidity available thanks to extraordinarily aggressive stimulus measures by central banks, markets world over are scaling towards fresh life high.

All the major US indices have already surpassed their previous closing highs on the back of stimulus hopes as they have been betting hard that it will get a further relief package soon.

Q) Any important factors which investors should track in the coming week?

A) With the RBI’s monetary policy done this week now there are no major events lined up for the upcoming week but the important factor for the market would be the continuity in FIIs inflows as the dollar index continued to slip below its multi-year lows.

As long as FII inflows continue to remain strong, we may see the market holding on to its gain and making new highs. Any other potential vaccine development news will also give an extra boost to the market.

Q) Which are the important levels that one should keep in mind on Nifty?

A) Base seems firm now around 12,800 on the Nifty while the higher bounds keep gradually increasing towards 13,500.

Overall we continue to see headwinds only occurring at around the 13590 marks, and nothing before that. For the week the band continues to rest at 13040-13440.

Q) The big outperformance came from the small & midcaps. What led to the price action and outlook for December? What does the chart suggest?

A) Large-cap stocks seem to have taken a back seat as the action has now shifted towards mid-caps and small-cap stocks.

The vaccine is the game changer and the market is expecting a strong rebound in 2021 which is why those underperformers and cyclical stocks that were related to economic recovery have started grabbing investor’s attention.Moreover, with most of the large-cap stocks trading near their respective life high or 52-week highs, investors have now shifted their focus to those stocks which seem to be catching up with their large peers and are still available at a relatively decent valuation.

Q) Which are the top Vaccine play according to you that may get benefit the most and why?

A) Pharma is getting ready for yet another round of action as most of its constituents have resumed from their near term consolidation. Even the Nifty Pharma index saw a firm breakout from its 4months of consolidation.

Especially specialty chemical stocks from its midcap space are attracting another round of interest from fund houses as volume action seems prominent in the last few days now.

Infrastructure is another space along with the PSE basket which is looking interesting for this year’s finale.

The Nifty PSE index has confirmed a Double Bottom formation on its weekly scale & could race its way towards its 200 WEMA zone which is placed nearly 13-15% far from the current price action.

Q) Top 3-5 trading ideas for the next 3-5 weeks?

A) Here is a list of stocks for the next 3-5 weeks which could give 11-30% returns:

Lupin: Buy| LTP: Rs 932| Stop Loss: Rs 905| Target: Rs 1035| Upside 11%

We have seen a strong sectoral performance. Formation of fresh longs during the week as price confirms the Bullish Harami formation on its weekly scale while the convergence of its short-term averages on its daily scale too warrants a fresh bullish momentum.

Sudarshan Chemicals: Buy| LTP: Rs 508| Stop Loss: Rs 475| Target: Rs 620| Upside 22%

The stock witnessed a breakout from its Cup & Handle formation on its weekly scale and is well supported with significant volumes.

Advanced Enzyme Technologies: Buy| LTP: Rs 349| Stop Loss: Rs 320| Target: Rs 455| Upside 30%

Its recently evolved secular uptrend should continue as the probable target of its latest breakout from its weekly Bullish Pennant formation is complimenting well with its life high zone.

Coal India: Buy| LTP: Rs 133| Stop Loss: Rs 124| Target: Rs 155| Upside 16%

We have a positive outlook on the sector. Weekly RSI has confidently scaled above 50 while the ADX line (from its ADX indicator) seems to in pursuit with its +DI line which has already scaled into its positive territory.

A similar setup was last seen in MAY 2015 when its short term averages also complimented the indicators with a convergence leading into fresh momentum.

 Q) What should be the trading strategy as Sensex climbs 45000 and Nity500 above 13200 – does it make sense to sit on some cash and book profits?

A) We have been vocal about expectations of some firm headwinds around the 13590 to 13756 zone since the beginning of its journey above 12000. This is where we may have to re-evaluate the ongoing trend performance.

Hence, we believe that the elevated support band now rests at 12800 & could shift rapidly higher once the final push towards 13590-13756 begins.

The sectoral rotation would remain the key for the ongoing major up move to progress well while the focus stays on quality & mega-caps to support from the back while their mid-cap peers catch up on their left out rally.

The only caution data set could be the global numbers of COVID-19 especially from the US & European nations which have again started to spike up dramatically.

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