IGL among Kunal Bothra’s two stock picks for next week

and are two stocks on which independent market analyst Kunal Bothra is bullish for the week ahead.


What are you taking from Friday’s close?

There are two points which we’re seeing for the previous week. The start of the week was on an extremely volatile note, and the India VIX jumped up to 21.50 and 22 odd levels. The Nifty was also on the verge of breaking below the 16,800 mark, and we sort of briefly tested those levels. But during the second half, we saw a good recovery panning out for the indices on the back of so much oversold nature of indicators put call ratios, the RSIs, technical indicators etc, which warranted some sort of a bounce.

The bounce shaped up quite well for the indices, but then the Nifty struggled to break past above the 17,500 mark. I mentioned this region because of two important levels of technicals.

On 26th November, when the markets opened with the gap down, the gap created on the index was at the 17,400 to 17,530 on the spot levels. This is a 130 point band which typically acts as a resistance band for the indices.

The other important point is that from 18,200, when the correction intensified, we have now retraced back towards an exact 50% of that rally from 18,200 to 16,800 and managed to recover towards 50% of that retracement. This means the 17,500 mark becomes an extremely critical resistance point for the index.

During Friday’s session, the Nifty tried to break past above those levels, but then you saw the selling pressure coming back again. So net-net we are dealing with the market, which is still unable to break past those resistances.

The bull power, which is more important to break past above all of these resistances, is still missing. When you are in such a phase, whether the bullish momentum is not strong enough and the markets are susceptible towards correction, we would probably call this a market that is still unable to find any major trend and could probably come back into some selling pressure.

Individually, stocks can see some decent upside. Market breadth can remain a bit more buoyant than what we have seen this week. Net-net indices consolidating 16,800 to 17,500 should be now the fresh range for the index from the near to medium-term view.

What are your top stock picks for the new week?

Initiating a couple of Buy calls, the first is a Buy on IGL. A very interesting chart because after drubbing the stock has seen in the last 6-7 months. The stock went below its 200-day moving average.

The stock closed above its 50-day moving average after Friday’s trading session. The stock is now performing a classic cup and handling kind of a technical pattern, and it’s a very important pattern and shaping up pretty well for IGL, so a breakout over the near term is expected. A target of Rs.550, and a stop loss at Rs.480 mark. Even RBL Bank is looking attractive after a breach breakout over the 200-day moving average.

The stock has consolidated yet again but is now showing signs of strength. In fact, on Friday, when the Bank Nifty was down some 250-300 odd points, RBL Bank managed to come back and close almost at the highest point of the day. In that sense as well looks attractive, and momentum could continue for the stock over the near term. Buy at a target price of Rs.220 with a stop loss at Rs.185.