Anu Jain, senior partner and head of the equity brokerage at IIFL Wealth Management on Friday said she is positive on Tata Power, ABB Power, Bajaj Finance and HDFC Bank.
She advised investors to buy Tata Power and ABB Power on dips for a 10-20 percent upside over the next three months, "The entire power index has been doing well and we have been tracking both Tata Power and ABB Power. Both these stocks have the potential to give a minimum of 10 percent and if you hold on for a slightly longer period even 20 percent is on the cards. So probably a swing trade on this on any dip in the market makes sense. Tata Power looks poised for Rs 180-185 whereas ABB Power is poised for about Rs 3,000 and the time period could be about 1-3 months but for that kind of returns any kind of correction in the market of 3-5 percent seems to be a good place to enter."
"If you look at the DAX and Dow index, they are both testing and breaking their 50-day moving averages. It can get steeper downwards if they were to break that and the Indian markets are still testing their 20-day moving averages on the lower side. So if we were to break 17,300, that is when it can get murkier because then you open the doors for 16,600 to 16,800. So till we are holding 17,300-17400, we are in a zone where you are just consolidating at the 20-day moving average," she said.
"Next week onwards you are also entering the results season where IT should post decent results but the main key is the bank index because it has underperformed previously, then have the first signal of breaking out, tested its previous highs and then has gone into consolidation again with a slight amount of weakness. If the bank Nifty plays the hero then we could outperform other markets for another month or so," Jain added.
Harsha Upadhyaya, a chief investment officer of Equity at Kotak Mutual Fund said at current market valuations, investors need to be a little cautious. He said any disappointment on the earnings front could result in increased volatility.
"There is some choppiness that is coming into stock markets. As we head into the quarterly earnings season, it will be very crucial for stocks to deliver the kind of expected growth rates in terms of earnings and if there are disappointments, then we could see increased and heightened volatility in our opinion. So at these valuations, one needs to be a little cautious," Upadhyaya said
He expects the economy facing cyclical sectors such as financials, industrials, cement and manufacturing to be rerated over the next 3 years.
"Going forward over the next 2-3 years, some of the economy facing sectors which are more cyclical such as financials, industrials, cement and many other manufacturing areas will likely provide earnings upside more than what the market has baked in and also there is a possibility of rerating in some of those sectors," he said.
"However, when you look at the sectors which have done very well over the last 4 or 6 quarters, for example, IT or FMCG, we believe that the valuations are at the upper end and there is not much of an expectation in terms of further rerating from these levels. Also, there are some headwinds that are developing for the IT sector. So the sectors which have done very well over the last 12-18 months both on an absolute basis as well as on a relative basis are at a valuation where there could be more volatility on the downside," he added.
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