Bank of Baroda: 2 top stock recommendations from Vinay Rajani

“Asian markets are also supporting. So, I do not find any logic or rationale behind going short here. The trend is clearly into uptrend. Right now, after rising for last three consecutive sessions, it is just a profit booking in intraday. I see a strong uptrend in the market,” says Vinay Rajani, HDFC Securities.

It is monthly options expiry week. The volatility is on the higher side but where do you expect it to happen? Is it expected to happen above the 26,000 mark, one would ask?
Vinay Rajani: So, definitely the trend is on the upside and today itself Nifty has hit at an all-time high of 25,981. So, the trend is clearly positive and the various sectors are rotating today. Metal sector has done well. Yesterday, PSU banks and previously we witnessed NBFCs gaining strength and private banking participating in the market. And the way data is coming, the way derivative data is suggesting that long build-up is there in Nifty and Bank Nifty both sides. So, going by the world market also, right now the Dow Futures are muted and European Futures are also trading on the positive side.

Asian markets are also supporting. So, I do not find any logic or rationale behind going short here. The trend is clearly into uptrend. Right now, after rising for last three consecutive sessions, it is just a profit booking in intraday. I see a strong uptrend in the market.

Right now, Nifty is trading at 25,900 odd level. There could be an intraday dip, a profit booking kind of zone in intraday but I think dip should be bought into and ultimately I am expecting that 26,500 should be the next week’s target. So, expiry should remain on the bullish side only. But if I were to take one week view, then I am expecting Nifty to touch 26,500. There is one short-term resistance around 26,000 where Nifty is facing a hurdle, which is nothing but the call writing is happening and some extension, Fibonacci extension, levels are placed. But I think this is just a short-lived correction and I think overall market should remain bullish only and I am expecting this 26,000 resistance to get surpassed in the coming session. So, with a stop loss of 25,800 I would suggest that one should continue to remain on the long side and market should remain firm in the coming sessions.
Sectorally, if we see, PSUs seem to have been bouncing back from their recent lows. Any trends that you are looking on that counter, on that side, on the PSUs?
Vinay Rajani: So, particularly in PSU, PSU Bank seems to have reversed the way Bank of Baroda and Canara Bank and SBI have yesterday bounced back and they bounced from the very strong support. So, I see strength there. Though today there is not a follow-up buying the way we were expecting, but it might be because today Metal Index has taken the lead and sectoral rotation is happening.

But overall, I feel that PSU Bank Index, because entire financial sector started performing and PSU banks were the only stocks which were not performing and yesterday, they started doing. So, I think PSU bank should be on radar on the positive side.

Stocks like Bank of Baroda, Canara Bank, SBI can perform very well from here.

So, I am particularly bullish on PSU banks. Yes, there is some recovery in other PSUs as well, but they are too early to call it a reversal. So, I am waiting for PSU stocks to give more confirmation on the upside. But yes, PSU banks can be looked at on the long side.

What about metals as a pack? Do you see more rally to that one and which individual names would you recommend from the metals pack?
Vinay Rajani: Yes, so technically Nifty Metal Index has broken out. It is trading above its 50 days average now. Previous stock resistance has also been taken out. So, there is a clear-cut bullish reversal case and I think metal is here to stay and for the positional uptrend and I think the largecap stock like JSW Steel which has taken the lead and hit an all-time high first, so JSW Steel followed by Jindal Steel, Hindalco, Nalco, these are the four stocks which I like and relative strength is there.

So, this Metal Index is going to perform very well. And as we all know that metal is having a negative correlation with the Dollar Index. So, Dollar Index is sustaining below 101, that is also a good sign. Today is also positive news from China which is also going to support the metal as a sector.

So, till now we did not see any aggression in the metal, but now, in today’s session, we can see some clear-cut breakouts on the charts and I see this technical setup to hold in the coming session. And if I were to go by these stocks, then first preference would be given to JSW Steel followed by Jindal Steel and Power.

And in the aluminium sector, I like the Hindalco and Nalco. So, these are the four stocks which I like from the metal sector and I am expecting this entire sector to sustain for the next couple of weeks also and good alpha can be generated from this particular space.

How is the FMCG Index looking like? Today, it is one of the top losers, but it has been gaining for the last four consecutive months. How is the chart looking like on long-term basis?
Vinay Rajani: Yes, so long-term chart is intact. The trend is intact. But the way rotation is happening in the last couple of weeks, we can see that one sector is doing good and another sector is facing some profit booking, so same is expected.

The FMCG in last two-three months have been an outperformer and participated very well. But rate sensitive sectors have started participating in this market. So, I feel that the defensive like IT, pharma, and FMCG, especially pharma and FMCG could see some profit booking from here and that particular money can be allocated to the rate sensitive sectors as well as the metal sector also.

So because of the sector rotation, my profit booking we may expect from the FMCG space. So, I do not see any short-term momentum in the FMCG after today’s fall. There could be another profit booking which can be extended from the downside. So, if somebody wants to take a momentum play, then I would rather go for the rate sensitive sector than metal sector.

Which are your own recommendations? Any stock that is catching your attention?
Vinay Rajani: So, as I said, PSU banks, I like. So, from the PSU banking space, I like Bank of Baroda, which has reversed from a very strong support. There were multiple bottom, which is placed at 230-232. So, after reversing from that level, it has given some indication of momentum on the upside. So, Bank of Baroda can be bought here around 246.

For the traders, I would suggest a stop loss of 242. On the upside I am expecting a short-term target of 253, so Bank of Baroda is my pick from the PSU banking space.

And from the metal space, Hindustan Copper. So, copper as a commodity has started doing well and higher top, higher bottom formation is there in London Metal Stock Exchange, the international copper prices have given a bullish signal on the chart.

So, Hindustan Copper is going to benefit from that. So, Hindustan Copper, which is placed at 337-336, can be traded long with a stop loss of 332, on the upside I am expecting a target of 347.