India ideas (Mar 29, 2021)

The market seemed ready to rollover just before the budget on Feb 1. But as the budget was being announced, there was a huge rally that spread across almost all sectors. #Nifty was up +4.7% and 2.6% on Feb 1 and Feb 2 respectively and made a recent high on Feb 16. Since then, it has been struggling to move back up and looks ready to roll over again.

Chart sourced from investing.com

Portfolio Allocation: Looking at the setups of some current leaders, I have a few test trades with small allocation right now. These will guide me whether to increase my exposure over the coming days and weeks.

Here is what I am seeing currently on the sector level:
Secular trends (leadership in 3m+ period) continue to persist in Software and Trading companies (eg, Indiamart). Most of the stocks in these sectors have been rangebound/declining for the past 3 months or so. Whether it is a time correction or a sign of an impending downtrend in overall market, time will tell.
New leaders have started emerging in Retail (eg. Vmart), Professional Services (eg. Quess, Teamlease etc.) and lot of re-opening related plays.
Financials drove the whole market up since November last year and are taking a breather right now.
Chemicals participated on the upside post Covid upto September/October and then lost leadership for 5-6months. They have started moving again in the last one month or so. So that’s another area to keep an eye on for the next run up.
Metals is another area which is grabbing global attention. Stocks (Hindustan Copper, Vedanta, Tata Steel etc) have a nice tailwind with the global inflation narrative. Some allocation in this sector with right risk reward would be advisable.
Cement companies seem to have a consistent bid as well. With re-opening, this sector is expected to contribute to growth in this fiscal.

Few names that look interesting right now for Long exposurein no particular order of preference:

Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This is not investment advice, please do your research before committing capital.

India – weekly insights (Oct 2, 2020)

What a week this was! Just when it felt that the market will collapse, Nifty posted +3.32% WoW performance, led primarily by Banks (+6.02%).

Sector performance:
#Auto +3.87%
#IT +2.45%
#Pharma +1.96%
#Media +6.02%
#Banks +6.02%
#Metals +4.08%

On an index level, while the performance on the surface looks great, the buying has been on declining volume, very typical of a bear market bounce. Nifty is still around the 50DMA. Before the news about POTUS catching Covid, it would have been reasonable to assume that Nifty would dance around the 11300-11400 for a couple of days before potentially rolling over. Might not take that long now specially given how US indices reacted last night..

Nifty Index

Another factor that is weighing heavy on the outlook for India (and Emerging Markets in general): Dollar. It seems to have reversed from the downtrend that began around Jun-end and is making higher lows. Certainly something to keep an eye on.

DXY chart
USD/INR chart

Coming to specific names, IF the market doesn’t fall apart, the following names can have a place in one’s long portfolio as they have been acting well in price action compared to peers:

TVS Motor Company: It has been one of the best auto stocks, consolidating since Aug-end and closed above Aug high.

Hero MotoCorp: Another 2-wheeler company which started its consolidation back in end of August. Challenging highs but general market weakness keep it in check.

Godrej Consumer Products: Coming out of a 2 month base on good volume

Dabur India: Another FMCG name coming out of a one month base. It is choppier than I like, but depends on one’s risk appetite (long term trend is up).

Tech Mahindra: Strong price action last week, came up like a rubber band from 20D VWAP line.

Mindtree: one of the best IT names, consistently being accumulated by investors:

On the #Pharma theme, one could throw a dart at any company and have made a killing in last few months due to the covid related tailwind. Following 2 names look interesting to me given the growing revenues and earnings:

Laurus Labs: consolidating right now after more than tripling since March

Granules: Been consolidating in 370-400 area, with earnings season approaching, this should be on your radar because if it works, it can pay very well.

Now comes the fun part.. What to short and when??

HDFC Life Insurance: Short on bounce to 580-585 area with a Stop loss @ 592. Target 540.

ICICI Prudential Life Insurance: Short on bounce to 426-430 with a Stop @ 450. Target 380.

ICICI Bank: Short @ 369 with stop @ 380. Target 324. Last week’s rally in banks and financial services companies is providing some good opportunities for hedging the portfolio.

Do note that shorting is specially risky as the beaten down stocks tend to bounce very violently. So have to manage the risk with stops appropriately.

All the best!

Charts sourced from investing.com

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This is not investment advice, please do your research before committing capital. Stop loss levels mentioned are indicative for the risk I would be willing to commit on these trades with my trading style. Everyone’s different, commit what you can stomach losing.