Stock picks by Sameet Chavan: Buy Muthoot Finance, sell Bharti Airtel

With last week's smart rally, the daily chart now exhibits a 'Range Breakout' in Muthoot Finance

Nifty outlook 

The week starting February 1 was fabulous for our markets after an excellent Union Budget, like never before, as promised by the Finance Minister. Before anyone could realize, markets were considerably off pre-budget lows. In the last week's first trading session, trading started with the similar kind of optimism to clock fresh record highs. However, there was no real momentum in the move. In fact, the index kept oscillating within a slender range throughout the remaining part of the week. Despite some intraday volatility, the index managed to maintain its positive posture and eventually ended the week by adding another 1.60 per cent to the previous weekly close.  

As far as the last week’s price action is concerned, it can be construed as a breather after the previous week’s marathon rally. Although, the bears tried to take the charge, all attempts turned unsuccessful. So, despite having some fatigue around highs, market was not willing to surrender at all and hence, slipped into a consolidation mode. Now, taking a glance at all time frame charts, we are unable to see any key observation. Hence, 15,300 – 15,000 will be seen as crucial range and a breakout on either side should ideally dictate the direction. But, in case of an upside breakout, we would avoid aggressive participation; because as of now we do not see Nifty going beyond 15,450 – 15,600 in the same leg of the rally.  So, we would continue to advise booking profits if Nifty enters this mentioned zone. On the flipside, the action below 15,000 would be an interesting one to participate in. In this scenario, a healthy profit booking towards 14,600 – 14,400 cannot be ruled out.  

Ideally, the next couple of sessions would be quite crucial and probably we should be able to get an idea where market is heading in the near-term. This week, there was only stock-specific activity seen in the market; but, honestly, nothing was convincing enough. So, the pragmatic strategy would be to wait for some sort of trend deciding action and then one should be looking to place aggressive bets. 

Stock recommendations: 

NSE Scrip Code – MUTHOOTFIN 

View  –  Bullish 

Last Close  – Rs. 1315 

Justification – This gold financing giant has been one of the rank outperformers over the past few years. It is very rare to see any kind of significant correction in the counter and even if it happens, investors just pounce on it to add to their portfolios. After a smart V-shaped recovery from March fiasco, the stock prices went into a consolidation mode, and the range was very much confined. With last week’s smart rally, the daily chart now exhibits a ‘Range Breakout’ and since the move is accompanied by decent volumes, we expect the rally to extend in coming days. Traders are advised to buy on a decline towards 1,290 – 1,270 for a target of Rs1,445 in coming weeks. The stop loss can be placed at Rs.1,210.  

NSE Scrip Code – BHARTI AIRTEL 

View  –  Bearish 

Last Close –  Rs. 586.25 

Justification – This stock managed to find strong support around 400 and the recovery mode started in late October itself. This recovery eventually turned into a strong upward rally to post new highs beyond 600 after its recent quarterly numbers. Due to lack of follow-up buying, the momentum fizzled out and hence, stock prices vacillated in a small range throughout last week. Now, if we meticulously observe the intraday time frame chart, we can see a breakdown from the upward sloping trend line around 588. Although the major trend remains strongly bullish, we are advising a contradictory sell in this stock purely as a trading punt. One can look to sell for a target of Rs 563 in the coming days. The strict stop loss can be placed at Rs.604. 

Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.