There could be more weakness ahead for NBFC stocks: Kunal Bothra

What are the charts indicating for the frontline index given the fact that now we are staring at 16400 levels? Does this mean that there is going to be more volatility going ahead?
Yes, since the last two months there have been no major sectors which have tried to act as strong outliers or outperformers even as the markets have headed towards a small rally or bouts.

One day, we see the auto index moving up higher and then the next day it is witnessing selling pressure. It has been the same case with the banking stocks and this trend was also seen with IT, FMCG and pharma index as well.

So it is not that there are any major sectors which are starting to show kind of recovery but as the global market texture has deteriorated significantly it has brought in a lot of doubts in the minds of the traders because now we are at a point on the indices where the major part of the trend gets decided by what is happening across the globe specifically the US markets. If there is any major correction which we see into the US indices that trickles into directly in our markets as well.

So till the time the global volatility does not ebb off it is likely that our markets also would remain very choppy and volatile. 16,800 mark is the latest support level that can be seen. So till the time we trade below that on the Nifty, we could be trading with a slight negative bias.

What is the outlook for names like Apollo Hospitals, Bajaj Finance, Bajaj Finserv,Titan as they have all seen double digit cuts?
I was not surprised with the price reaction for Bajaj Finance and Bajaj Finserv. When the RBI showed signs of signalling the hike of interest rates many of these NBFC stocks started to get into a sharp corrective phase.

In fact many of these other NBFC stocks as well like Chola Finance, Can Fin Home etc. have gone through sharp selling in the last three or four trading sessions. I believe there could be bit of more weakness in line for these stocks.

There has to be a credible amount of data which should indicate that these stocks have shown signs of bottoming out.

There are couple of important patterns which traders can look out for. Either the prices get to a point where it coincides with the previous 2 years of important support points for these stocks or else they should reach some sort of a point where the indicators come back into deep oversold territories that could lead to some bit of relief rally into these names.

But I still believe that for either of the situation investors would just see a very short term nominal bounce into these kind of stocks.

So if investors want to play for a bounce then they can look at may be Bajaj Finance as a good entry point closer to 5500 levels. But purely in terms of trends till the time these stocks do not reverse their patterns and do not show signs of higher highs and higher lows in terms of price points investors should have a negative outlook for these kind of stocks. So I would not initiate buy call on these stocks but would expect more short term correction into both of these Bajaj Finance stocks.