Zomato and Paytm emerge as strong picks, but market volatility looms: Rahul Sharma

"So, the best thing to do at this point in time is to look for put options on the Nifty or create a bear spread using these two levels and participate on the downside," says Rahul Sharma, JM Financial Services.

Definitely, a gap up start for the Indian markets and good part is we are sustaining those levels but where do you see the markets headed? Are we in for a pre-budget rally maybe or the market can halt a bit before continuing the leg up?
Rahul Sharma: So, this seems like a dead cat bounce of sort because the volumes especially if you simply track the Nifty volumes they have not been increasing in the last three trading sessions, that goes to show that the stronger hands are not really buying in this bounce back.

So, we are waiting for the absolute capitulation to happen. Once that happens, that would be a strong case for a turnaround. So, as of now the view is sell on rise.

23,500, 23,300 these are the two resistance levels for the Nifty. As we speak, we are very close to the 23,300 mark. There is a very strong chance that Nifty slides down towards the 22,800 mark which is around 500 points on the downside.

So, the best thing to do at this point in time is to look for put options on the Nifty or create a bear spread using these two levels and participate on the downside.

As far as the banking index is concerned, relatively the bounce back has been slightly more healthier over here in terms of percentage move in the last three trading sessions, but here as well the volumes are not really picking up and that remains to be a cause of concern.

We have key results coming up today, tomorrow, and Monday we have the swearing in of the US president as well, so big ticket events lined up. The best thing to do is either be a day trader in such kind of a market or focus on hedged positions which is do not take anything without creating an offsetting position using options.

So, the biggest is the Reliance result that is expected today. Some interesting bits happening over here. One is Reliance has clearly outperformed the Nifty in the last one month.

So, since 13 December till date Nifty is down about 6%, but Reliance is only down by less than 1%. So, a lot of that can be attributed to the strong outperformance seen in Brent oil over these last few trading sessions.

But I think overall the structure or the texture of Reliance is still not changed as long as it does not cross 1300 on the upside. So, having said that, there are still a lot of shorts present in Reliance.
Although the open interest has come down by 10% in these last four weeks or so, but still the stock is having a lot of positions on the short side.

So, last three months have been tough for Reliance. The base formation is very much in place. As far as results are concerned, we do not expect any big ticket move in the stock. But in case if it does come close to 1180 on the downside, that would be a good level to bottom fish the stock for a medium-term perspective. And alternatively, if the shorts have to get challenged, 1300 has to get crossed decisively because that is where the maximum call writers for the stock are also present. So, this is our take on Reliance which is definitely on everybody's radar and we feel that there is a strong chance that the result may not be like a big mover and we may see Nifty sliding downwards as we head into these big events.


What about some of these platform companies? Paytm is up 5%, Delhivery is something which is in focus, Naukri as well as Policybazaar. These are some of the stocks which are holding up in the green. Would you like any or any recommendation on these names?
Rahul Sharma: So, we are seeing select pockets doing well. Some of these stocks have done well in these last three days of pullback that we have seen in the Nifty. One stock which clearly has a good risk-reward is Zomato. The stock did test its 200-day exponential moving average just three days back and good bounce back is seen.

The current move can be extended up to 275-280 on the upside. So, from a trading perspective, one can look to buy these stocks. As far as Paytm is concerned, this stock has also given a very good bounce back from oversold territory and the major trend of the stock is still intact. So, if you are an investor in this, stay put. From a trading perspective, probably the juice is done. The juice is already out. But from an investment perspective, you could look to continue holding on to the shares of Paytm.