Can private banks propel the market to new heights? Gautam Shah explains
, Founder,
Goldilocks Premium Research
, suggests financial services are leading the market recovery, particularly private banks, with
Bank Nifty
targeting 60,000. He notes
Reliance
's comeback and IT's rebound as positive signs for Nifty. While cautious on smaller PSU banks, SBI remains favored. Opportunities abound in metals, real estate, and autos, making strategic allocation crucial.
Are we on course to make a new high in the market this time?
Gautam Shah
: I do not think we are close to the top. We have just come out of a very difficult phase and yesterday was a thumping verdict by the market that all is well internally and structurally. And I continue to believe that the market is the best judge of geopolitical developments. I have seen this over the years. In fact, even last year when we had a couple of events in the Middle East, the world thought that stock markets would collapse and we are going to get into a downtrend, but actually the markets were quite resilient and the US markets came back strongly.
In the last 10 to 12 days, while all of this played out, the markets were quite resilient and that was in a way an indication that all was well because support levels were safe, the moving averages were safe, the bar quality was excellent. As a technician, if I was in a closed room, I would not even know that there is something happening at the borders. That is the beauty of charts and technical analysis.
But talking about today, yesterday's move is extremely important because we have cleared some very important resistances and if you do a sum of part analysis, look at Bank Nifty, look at Reliance, and look at IT – the three major heavyweights of the market. You want to believe that this market has further upside. Yes, yesterday was a big day. You could see a bit of a pullback for a day or two, but the bullish momentum is intact. Momentum is great. Participation is great. I believe slowly the
Nifty
is headed towards 25,500 and eventually even the previous high of 26,200. So, yes, we look set for that. It might take a little bit of time but that is the trajectory.
Let us analyse what is happening globally first and then we will come to India. What are you making of the dollar index because that continues to move up another percent and a half overnight as well?
Gautam Shah:
Well, the dollar index to be honest has got into a downtrend and once this level of 9900 were to get taken out on a closing basis, we could see a much bigger fall of about 5% to 7%. Our view on the dollar index is bearish and that is positive for global markets on an overall basis. The three major external factors for our market the dollar index – the rupee, INR; and crude – all seem to have got into a space which is actually supporting the Indian market thesis and look at the comeback in the US markets yesterday despite all the Trump talk and the tariffs and the fact that all of that got discounted in the last couple of months, we now see the S&P 500 take out that very important resistance of 5700 and even the US markets are actually headed towards lifetime highs.
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So, I really do not see any concern globally. Look at Europe, look at most of Asia, look at India, and look at the US markets. I feel that the markets have digested enough negative news flow. They have the momentum globally to do well over the next many weeks.
Since all is pointing upwards for India and the world, tell me where is it that you are seeing leadership signs when it comes to our markets? Let us first talk about largecaps because all through the April recovery, there have been very few leadership names – Bharti, M&M, HDFC Bank, ICICI Bank. Reliance saw an uptick of 15% but it has lagged also for the better part of the year. Where will the churn happen and what will lead the markets further from here?
Gautam Shah:
Well, the churn has already happened, and the leadership is clearly with financial services. Every time I have spoken about it, we have always had a bullish stance and the way the Bank Nifty has come back to test levels of 56,000 to test new lifetime highs and to sustain there and the way some of the top banking stocks have behaved in the recent past, it is amazing because it tells us that the banks can single-handedly take this entire market higher.
I still feel that the leadership is with the Bank Nifty and my eventual medium-term working target for that index is about 60,000. There is another 10% to play for. If the index moves 10%, you can expect stocks to do anywhere between 12% and 20%. That is where you need to be seriously committed. For now, go for the private banks. We can move to the PSU banks once there is a pickup of momentum. But as you rightly mentioned, this comeback of Reliance is very good because it is a big heavyweight. It formed a bottom at the recent low and can get more constructive from here, not to forget the lovely rebound in IT index in the last couple of weeks.
It looks like the bottom is finally in place. So, if these three pockets of the market do well, there is no way the Nifty is going to see any major dip.
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Where are PSU banks headed because they have not participated in this uptick at all?
Gautam Shah:
Yes, that is right. In this market you do not touch anything that has bad ratio charts, which means they do not have relative strength and most of the smaller PSU banks have not really done anything special. However, SBI remains a favourite and it is a stock that we have been liking for a while now. No recommendation, just an observation.
I feel that if you have to play the PSU banking basket, you just stick to the top two names. The other names will follow suit. Give it time. Do not overcommit in this market because the opportunity cost is huge and many sectors are breaking out. I love the setup for the metals index which is heading towards lifetime highs. The worst is over for real estate. That is an index that can appreciate 12% to 15% from here. Autos have had a very big bear market in the last six months. They have come back and the India-UK treaty has only helped. Given all of these factors, there are just too many opportunities as we speak.
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