24,200 on the screen, are you guys riding the rally or are you asking your clients to keep taking profits wherever it is getting way beyond your expectations?
Gautam Shah: Well, I think that is the beauty of having some experience, having seen the 2003-2007 bull market and I think with what is happening currently, something similar happened in 2007, which was also a rally of disbelief and the market just carried on to a point where everybody just gave up and felt that the market cannot fall.
We are in some sense in that period. But domestic liquidity has really changed the game, the point that I keep making and it has changed the way we look at technical analysis. Honestly, we have been riding the rally right from 5th of June because post the political mandate, it was very clear that the bulls will be back, liquidity will keep pumping in and will keep taking this market higher.
And look at the kind of leadership we have got in the last 20 days. IT is doing well. Reliance is past 3000. Banks have made a good comeback with HDFC Bank going close to lifetime highs.
So, honestly, it is a sweet spot. It is a great place to be in. You do not need to overanalyse. You do not need to do much in today’s market. Just ride it, keeping support levels in mind. Now, as a technician, you will ask me what are your levels? Honestly, the trajectory is more important than the magnitude. But I do believe that if somebody has a medium-term view, this market is readying for a level of 25,000 on the Nifty, a view that we did give a few weeks back and that is where the market is headed.
Global markets are quite solid. India VIX is relaxed. Momentum, participation, smallcaps coming back yesterday. So, it is a kind of an environment where one should participate, just stick to quality and have risk management in place.
And to that point, quality as well has seen quite a bit of rotation. So, let us start off with Nifty Bank because that is where the needle started moving for the largecaps at least. The Nifty Bank, what levels do you foresee there and then, of course, the individual movers as well? You talked about HDFC Bank. Is that where you see leadership as opposed to ICICI Bank, which has sort of shouldered the Nifty Bank for quite some time now?
Gautam Shah: Well, since we follow the ratio charts very closely, a month back we got a sense that the underperformance of HDFC Bank is coming to an end and we got it based on the ratio charts of HDFC divided by the Bank Nifty and by the Nifty and thereafter, it has been a very classical move up, catch up rally that you have seen.
The stock has taken leadership and will continue to do well. And once the level of 1750 is taken out, the stock is headed for 2000 and possibly 2250, so that is our medium-term view on this particular stock. And if this stock does well, it will help the Bank Nifty and obviously it will help the Nifty as well. But coming to the Bank Nifty, six months of underperformance, there is a lot of catch up to do. We like the top three banks, HDFC, ICICI and SBI and all these three top banks can propel the Bank Nifty towards a level of 60,000 over the medium term.
Now, you might say that is quite far away, but honestly in today’s market it is important to have some sort of a vision for the larger indices. So, while there are smaller targets in the form of 53,500 and 55,800, I would say that investors should stay positioned for 60K.
For a moment, I want to go back to index components, the Nifty components. Reliance actually has lagged many of its larger peers, only woken up say in the last week or so, 200 bucks move coming in. What are the targets looking like now tariff hikes have happened? There are a lot of triggers building into the company. Are they getting captured or readying for a move in Reliance in the charts?
Gautam Shah: Well, since March 2020, sector rotation and segment rotation has been a part and parcel of this bull market. A couple of weeks back, people said largecaps are doing well but midcaps and smallcaps are not doing well. A month back, people said midcaps and smallcaps are doing well, but largecaps were not participating.
So, honestly, you can read this market half glass empty as well. But being optimistic by nature, you have to be in pockets that are showing relative strength.
And now with the comeback of Reliance and the fact that it took six months to clear that level of 3,000, I thought was a very important development because with HDFC Bank and Reliance firing at the same time, you cannot have a better market scenario.
And I do believe from a near term perspective, Reliance is headed towards 3,300, 3,350 and if you are taking a slightly medium-term view, 3,600 is intact.
Another point which I keep discussing with a lot of my influential clients is that unless you see a bubble or a froth in the largecaps, markets do not top out. And my experience of 20 years really taught me that and I think we are nowhere close to a bubble.
If you look at the valuations and the fact that some of these largecaps have only started to do well recently, I think there is a lot more headroom for this market.
Wanted to get in your perspective as well within the entire IT space. Given the kind of move that we have already witnessed in the last month, is there still opportunity to look at an upside potential within technology?
Gautam Shah: I think so. I think it went through a very bad phase of underperformance for four months where just about everybody complained about it. Now, we have seen a good turnaround. This looks like a very solid turnaround and it does seem as if it will take the IT index towards the previous high. So, there is momentum and it could do well in the short term. But is it one of our preferred picks? The answer is no. I would still go with banks, pharma, FMCG, selective auto, NBFCs, metals. I would rather go with all of those pockets than IT. I know it has done well, but there are too many issues globally and locally. And with this AI theme and how it is going to impact the industry in India and globally, nobody has so much clarity and they are all very richly valued. So, while short term, we are all okay with it, medium term, there are better bets in the market.
What are your thoughts on the way Bharti has come to 1500 odd? Even Vodafone, for the time being, did surprise and go to 19 mark. Any thoughts on these two?
Gautam Shah: See, you do not have too many names to play telecom. Bharti has been a brilliant structural story for us for the last couple of years. It has been a part of our long-term picks all along. And honestly, if you just put a simple moving average and plot this chart, you will realise that you never got an exit in the last one-and-a-half years. It has been that easy because it just consistently made higher highs. And even now I would say that it is not very richly valued because in some sense the kind of market share this company has, it can do bigger things going forward.
So, it is a definite hold in your long-term portfolio. On the other hand, Vodafone is more like a speculative name. Honestly, I would like to stay away from it. There is a lot of talk and chatter around it. If it does clear the level of 18.5, 19, you could see a bit of a rally. But at today’s market, at a 24,000 index, I am more looking at top quality stocks than going to grade B and grade C.
