2 top stock recommendations from Foram M Chheda

"So, on an intraday basis, we may see a lower level; however, it is very important for us to close above 19,600 to witness a bit of a bullish momentum or even a sideward range," says Foram M Chheda.

Firstly, the index that saw a decent rebound on the Friday session after scaring everybody on the expiry day, that is Thursday, but for the upcoming week how are you placing yourself on to the benchmark indices for Nifty as well as Bank Nifty, the rebound is expected to continue going ahead as well?
To begin with, we have just closed marginally up above 19,600 level. It is basically a benchmark that we were eyeing at as well as it is a psychological mark as well. So, it is just closed there. So, it is more like a very consolidated move. Lately, we have seen a lot of volatility overall in the index itself, that maybe in the first half we may see a bit of a rebound but in the second half we see a bit of a sell-off or a profit booking coming in.So, what I expect in the truncated week also, that is the next week, it is going to be more of a consolidated move and at the same time with a very cautious approach, one should be maintaining very strict tight stop losses.

As far as the levels are concerned, now the yesterday’s low, that is closer to around 19,500, becomes a support on an intraday basis; however, from a weekly perspective around 19,600 yet continues to remain a very important level on a closing basis.

On an intraday basis, we may see a lower level; however, it is very important for us to close above 19,600 to witness a bit of a bullish momentum or even a sideward range.

Next week is going to be a cautious approach. As far as Bank Nifty is concerned, again, a very same thing, it has actually underperformed compared to even Nifty and we have seen technically it is breaching a 100-day moving average.

The support levels for Bank Nifty are placed at closer to 44,200 and on the higher side it is closer to around 44,900. So, it is in a 700-point range, very tight range. So, not much, but the next week is just about to see a bit of a consolidation.

Let me ask you about the auto counters because coming week we are going to be reacting to all these auto names on the back of the September auto sales data wherein we are expecting a good jump across the key categories from the likes of passenger vehicles sales which are expected to be steady, two-wheelers are also expected to show a decent rebound in the range of 7% to 9% uptake on a month-on-month basis. Commercial vehicles are also expected to perform well with Ashok Leyland expected to show a jump of 16%. So, across the board, we are factoring in good sales data as well as a positive commentary expected from the companies going ahead as well. So, all these auto counters have done well for themselves. So, any auto stock, as well as any view on the index that you have at this point in time?
Well, to begin with, on the CNX Auto Index itself, we have seen a very good rally overall, so the overall trend continues to remain bullish. Technically, it is seeing forming higher tops and higher bottoms. Now, in the past two months, that is in the month of July as well as August, we have seen some momentum that continued and in the last, say, this month and probably currently what we are seeing at the end of this month it is more of a quietish move.

So, it is indicating that we may see a bit of a retracement coming down overall in the index. So, currently, the index is at 16,184, so it can come down closer to around 15,600 to around 15,700, and then see a bit of a rebound. Currently, there is no negative divergence on the index. So basically, the trend remains good. So, the lower level should be considered for buying opportunities.

What is your take on the banking space because next week is the RBI MPC policy meeting wherein the expectation this time is that the RBI will keep the repo rate unchanged. But keeping that in view, what we are seeing is that all these PSU banking stocks have been on the roll while no such push coming in from the largecap private names, especially from the likes of HDFC Bank. So, what is your take on the banking space? Which part of the banking business do you expect to perform better? Are you placing yourself on the private side or the PSU sides and specifically, what is your take on HDFC Bank, when is that expected to perform in a good manner?
Well, I am banking more on the PSU banks. They have been outperforming compared to the private sector banks and they may continue to see some momentum. Overall, we have seen a very good start since the beginning of this year. There has been an excellent rally in the index by closer to around 20 odd percent and after that also we are seeing that it is just nearly consolidating in the past few trading sessions.

In fact, today it has seen a very good momentum again. So, in the PSU space, I would expect more of a continuation of an up move. Some of the stocks that look attractive are like PNB or even Bank of India, so these are some of the stocks that look good in the PSU space.

Now, particularly in HDFC Bank, technically on the charts we have what we can see it is a major sell-off, but now in the past few trading sessions that is four to five trading sessions, it is just trying to hold up to those 1500 levels.

So, as far as the 1500 levels are holding up, it is fine but that does not mean it becomes a buy. I would expect the stock to close above the levels of closer to 1550 on a weekly closing basis where we can expect more of a turnaround in the stock on a very short-term basis but the trend yet continues to be under pressure. So, I would expect that on a weekly basis, if one is looking at it from a trading perspective, wait for around 1550 levels, then can look at going long on it. Otherwise, it is better right now to just stay away from it.

But the star of Friday's session was the Nifty Pharma Index which was around 3% up. So, how do you see the Nifty Pharma Index trending and what are the picks from that index?
Well, in the Nifty Pharma space, again today the index has really outperformed well and the closing also has been excellent. So, if we look at it, today has been a weekly closing as well as a monthly closing. So, on a monthly closing basis also, it is a very strong closing which indicates that we can expect some further upside momentum from a longer-term perspective.

Now, when I break it down to a weekly chart also, it is a decent closing but on a short-term basis it may face a bit of a resistance.

If I look at the Nifty Pharma Index itself, which is currently at 15,422, it can move up higher to close around 15,700. The moment it takes off on a weekly closing basis, we may expect a continuation of an up move, but since it is consolidating, it gives us opportunities to get into some of the pharma names also. So, I would look into Sun Pharma. So, Sun Pharma is a stock which has gone up well today. It is already up by closer to around 2.3%.

In fact, even in spite of being up, it is a good buy at current levels also. So, maybe if on Tuesday, if these levels continue to hold up, they turn out to be a good buy. And now, technically speaking, it is merely consolidating in a broad range, so lower levels are around 1120 and on the higher side it is closer to around 1160. So, it is giving an opportunity to buy and once we see a move in the index, Sun Pharma is something which is very much in sync with the Nifty Pharma Index, so we may see a very parallel movement on the upside. So, one can look at buying at current levels, just maintain a stop loss below 1125 and look for a higher target of closer to 1200.

But other than that, which will be your top recommendations for the upcoming week?
Well, the first recommendation is JK Paper. Paper industry did well in the month of August and after that we have seen a bit of a consolidation this month. So, overall, what it is saying is that it is just an accumulation happening. Now, technically speaking, it did give a breakout from an inverted head and shoulder at around 385 levels and since then it has been boiling or I would say it is just consolidating in a symmetrical triangle.

Now, when the stock made a breakout, it saw a good increase in volume and after that we see that accumulation is happening gradually. So, one can look at buying the stock at current levels and adding more at 397, that is the breakout level for the symmetrical triangle stop loss below the levels of 381 and can look for a higher target of close to 420.

And my next pick is on Astra Microwave Products, that stock has, in fact, now picking up some movement. In fact, last if we check in the last year of August the stock was around 374 and even till now that is this last month, that is till around 25th or the 31st of August, the stock was closer to around 380 levels. It gave a recent breakout this month, at the beginning of this month and now it has been consolidating in a very narrow range.

So, it is giving an opportunity to enter into the stock market. Now it has been in a clearly an uptrend, forming higher tops and higher bottoms, good increase in volume and now consolidating, we see average volume increase, so one can look at buying at around 427 levels, maintain a stop loss below 440 and can look for a higher target of closer to 464.