Nifty had a sharp breakout from its eight-week range with upswing in the past five trading sessions on back of stimulus from government in form of tax brackets and positive global markets.
Interest rate sensitive sectors like Auto, Realty and private banks had a strong pull back with gains of 6 percent average and would continue to gain as the domestic credit policy is being lined up in the first week of October.
The manufacturing theme has also being well played out with sharp gains in capital goods, metals and energy sectors bucking the trend to gain by 9 percent, 5.7 percent and 5.5 percent respectively for month-to-date.
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Defensive sectors like IT and Pharma have witnessed some pullback from lower levels.
We continue to remain positive with higher target of 11,850-12,000 levels over the next two months. But, as the up move is being very sharp, some consolidation at current level cannot be ruled out.
Bank Nifty could retest its 52-week high as the set up looks very strong with supports placed at 29,500 levels. The second quarter results will start from the middle of October which will provide further clarity in terms of movement in individual sectors and stocks.
Among sectors, we remain positive on autos, banks and pharma while consumer sector could witness some profit booking after a sharp up move from current level.
Among stocks, we will buy Hero MotoCorp and L&T Finance and would sell Marico.
Below are the top three stocks which can return 9-17 percent:
Hero MotoCorp: Buy | CMP: Rs 2,743 | Target: Rs 3,075 | Stop loss: Rs 2,525 Return: 12 percent
L&T Finance Holdings: Buy | CMP: Rs 95 | Target: Rs 112| Stop loss: Rs 85 | Return: 17 percent
Marico: Sell | CMP: Rs 387 | Target: Rs 355 | Stop loss: Rs 405 | Return: 9 percent
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