Gautam Shah’s Best Bets As He Sees Nifty Laying Foundation For 18,500
Nifty's ongoing sideways consolidation is laying a foundation to scale 18,500 in the next year, according to technical analyst Gautam Shah.
“If I was in a closed room, just looking at the charts and not knowing what’s happening around the world, there’s no reason to be not bullish," Shah, founder of Goldilocks Premium Research, said in an interview with BloombergQuint's Niraj Shah. "There’s a saying that a known devil is better than an unknown devil, and it pretty much sums up the context of what’s happening in the markets in the last one year."
The silver lining, said Shah, is that the "sideways consolidation in the last three months is a textbook-style bull trend”. Liquidity is being provided through retail participation, he said.
Charts suggest Nifty 50 could test 15,350 in the near term, he said. “But looking at the way global markets are, how India VIX has behaved, and [given the] sectoral standing, I think we have laid the foundation for a move to 16,000 at least and there are immense opportunities even at these levels,” Shah said. He sees Nifty moving towards the 18,500 target in the next one year.
There’s been frenetic rotation among sectors that are driving markets higher, and currently it's banks, according to Shah. "In the last six weeks, Bank Nifty underperformed and therefore Nifty found it difficult to cross resistance levels; every time we got to the 14,800-900 mark, it faltered. But now with Bank Nifty seeing a 2,000-point rally in a matter of one week, clearly this is the index that will lead it.”
Banks and Reliance Industries Ltd. put together are helping the Nifty, aided by Larsen and Toubro Ltd. and ITC Ltd., he said. His top three sectoral bets are banks, autos and pharmaceuticals.
- The key takeaway from the last few months is that HDFC Bank Ltd. could have lost its leadership.
- ICICI Bank Ltd., Kotak Mahindra Ltd., Axis Bank Ltd. or even State Bank of India can do exceedingly well and propel Nifty higher.
- Among PSU banks, Shah said he would only go for SBI or Canara Bank.
Auto And Ancillaries
- Shah expects it to be one of the better performers in the next three to six.
- The sector has been impacted significantly by Covid-19 but now that the Nifty Auto Index has gone past 10,000, it could revisit the February high of 11,100 and eventually move to 12,000.
- Monthly charts for Motherson Sumi Systems Ltd. and the basket look great; Bajaj Auto Ltd. could surprise the market in the next six to eight months.
- Pharma is a structural story.
- Near-term target is Nifty Pharma is 14,700 and 17,500 for the medium term.
- Many topline pharma stocks have only made a comeback in the recent past. Glenmark Pharmaceuticals Ltd. languished for almost six months, and Sun Pharmaceutical Industries Ltd. was in a bear market for three years.
- Downside is limited and pharma exposure provides insurance to the portfolio besides offering capital appreciation because of the pandemic.
- Diagnostics space with stocks such as Metropolis Healthcare Ltd., Dr. Lal Pathlabs Ltd. and Apollo Hospitals Enterprises Ltd. remains a dark horse even at these prices.
- Best bets in pharma are Lupin Ltd., Sun Pharma and Glenmark.
Watch the full interview here: