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Rudramurthy further says: “ Pick up stocks like Tata Chemicals, Tata Power, HDFC Bank, IndiGo and avoid mid and smallcap and I see some more correction possible in mid and smallcap and only someone who can understand shorting well can even look at opportunity to short this market.”
Looking at the markets in the last couple of days just not understanding what trend one should watch out for because in the morning, we saw a bit of a redness, then the Nifty again managed to jump up to the green 22,450 levels. We saw a fall, trading flattish and a jump again. . What is the view on the markets? What is it looking like?
CA Rudramurthy BV: I am very clear that both in terms of Nifty and Bank Nifty, we have to see some more consolidation time-wise and also we will see some price-wise correction. So, the whole broad market correction what we are seeing in mid and smallcap will slowly spread even to larger cap but then if someone wants to buy this dip, please stay with only largecap stocks and good quality names, it can be HDFC Bank, it can be IndiGo stock which is very strong, so you have to be very stock specific and choosy.
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However, the froth in mid and smallcap should still continue and I feel some more downside is definitely there in mid and smallcaps, especially after yesterday’s verdict from the SEBI chairperson as well as the froth which was already there in terms of valuation is getting corrected now, so do not try to buy something because it is down 10-15% in broader market, in fact smallcap as such index level you have seen a correction close to 10% this month when Nifty and Bank Nifty has seen a positive performance.
For me it is very clear one has to be in largecaps and use this dip to buy only quality stocks, stay away from mid and smallcaps for some more time. Let this leverage effect and all the unsecured loan book issues which are all happening fundamentally, correct for some time and then look into quality mid and smallcap or else do to avoid them very much.
Currently what are you looking at in terms of any individual stocks that you are watching out for? What should you keep on your radar because in the last couple of days, we have seen Tata Group stocks also see a bit of a fall except for Trent. Are you finding anything attractive on those lines?
CA Rudramurthy BV: I am really bullish on the Tata Group of stocks especially stocks like Tata Power, Tata Chemical having seen that huge up move in Tata Chemicals on the Tata Sons IPO buzz. Even on the chart, this move started all the way from 1020 where it saw a breakout and from there non-stop move happened till 1350 and now having seen this correction for last two days. For me, Tata Chemicals on a current level or on any dips to levels closer to 1100 offers a great buying opportunity.
I will be using this dip in the last two days in Tata Chemicals to buy the stock. I will keep a very strict stop loss of around Rs 1050 at current market price and on dips to Rs 1100, I will be a buyer there. It offers a great risk-reward ratio with hardly Rs 30-50 downside and on the upside it can go back to those levels of 1350 to 1500. So, for me Tata Chemicals is a buy. Similarly Tata Power is another stock which looks very strong to me on chart and having seen this correction for last two days any dip in Tata Power to levels closer to let us say 380 to 375 I will be a buyer and this stock can again go towards 450-500 zone, so having a strict stop loss of around 350 a dip to 370-380 will be a buying opportunity in Tata Power for a target of 450 to 500. So, pick up stocks like Tata Chemicals, Tata Power, HDFC Bank, IndiGo and avoid mid and smallcap and I see some more correction possible in mid and smallcap and only someone who can understand shorting well can even look at opportunity to short this market. I am very clear the fall which has just started, it has still not ended and you have to wait out or else at least wait for some more time, let market correct and at attractive levels you can buy, stay on sidelines do not start buying into mid and smallcap right now, be only in largecap and only in stock specific names which I just mentioned.
What are your top picks other than the ones you mentioned on the Tata space as well?
CA Rudramurthy BV: I, in fact, like even stocks something like BEL, I like even stocks like a Power Grid, even in fact SBI, Canara Bank, PNB these PSU banks especially offers a very-very good buying opportunity. In fact, I very well remember during Diwali time when I recommended at ET Now only Canara Bank, PNB, SBI, even BHEL, BEL they were all very-very attractive. Even in my wildest dream I never thought they will all do like this movement in three-four months but they have already done but I still see value in PSU banks, might be yes, SBI at levels closer to 730-750 offers a great buying opportunity, similarly Canara Bank at levels closer to 520-530 and PNB at levels closer to 115 offers a great buying opportunity. These are all stocks which are on my radar, surely I will not buy at current level, I will wait for a dip to those levels which I just mentioned and look at buying stocks like SBI, Canara Bank, PNB, BEL, BHEL and the PFC, REC, these are all still good stocks from PSU, wait for a dip and look at buying these good stocks.
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