Stocks to buy | Varun Beverages | CAMS: Don’t be a blind bull in this market; 2 FMCG stocks to buy now: Aditya Arora

Aditya Arora, adliticsays the recovery in the Nifty Midcap In the derivatives space as well, the recovery is about 50% of the decline. So, the recovery is not very strong and it is not widespread because many sectors are still down by 10% to 20%. One should treat this as a retracement of the decline and should not be a blind bull at this point.

What is your opinion on benchmarks and levels to consider?
Aditya Arora: The markets have recovered quite well from those levels but the recovery is quite moderate. If you look at the Nifty Mid Cap segment which is also in derivatives, the recovery is just 50% of the fall. So the recovery is not very strong and it is not across the board because many sectors are still down by 10-20%. You have to treat this as a retracement of the fall and you should not be a blind bull at this point because we are not seeing any further breakouts in many sectors. I think we are recovering from the losses and you have to be very specific about the stocks in this kind of market because some sectors will outperform and most of the stocks are actually in an overvalued zone and those stocks might see a temporary correction and price correction.

The automotive sector has been in the spotlight from a negative perspective. If you look at the fact that the sector has fallen by around 1%, it is clear that there are fundamental reasons for this. From a technical point of view, do you think that the weakness in the automotive sector will continue for some time or is it just a kind of profit-taking in the medium term?
Aditya Arora: Absolutely, I completely agree with you. There was a sell-off report and a markdown report in the auto sector. When I talk to people who work in the auto sector, they also tell me that inventory is piling up and sales are not very encouraging. Auto companies are offering discounts. And when we go back to the technical charts, the auto index fell from levels like 26,900 to 24,500, and from there the recovery has been quite weak, not so strong.

So yes, the sector looks a bit weak at the moment and there is scope for profit-taking even from now on. If I compare at the index level, there is scope for a 5% correction from now on.

What other sector do you think is standing out? Which one should we pay attention to?
Aditya Arora: The FMCG basket stands out and many stocks in this sector are performing quite well. So, I would stick with this sector and I have a few stocks that stand out. The first one is Varun Beverages Limited. The stock was consolidating for a long time and today we are seeing good price action backed by good volumes. So, Varun Beverages Limited is a buy at Rs 1500, with stop loss at Rs 1,420 and target at Rs 1.60. The second stock is from the financial space, CAMS. BEDS It is a buy at Rs 4,520; Rs 4,300 is the stop loss and Rs 4,750 is the target.Public sector banking sector, on a monthly basis, has fallen by around 6 per cent. It is the worst sectoral index for August. But today we are seeing some positive traction. Is that a major sectoral gain or do you expect this positive momentum to continue for public sector banks?
Aditya Arora: Yes, there is some good action today. It is up 1.5%, but again we are seeing the decline that we have seen since the high on June 3, which was 8046, and right now the index is trading at 6950. So I don’t think the recovery is very encouraging and I think there is room for further decline in this regard.

Another sector-specific question is: TrentoThat stock has been on a tear. It is close to the all-time high of Rs 6,700, up around 3 per cent. Do you think this momentum will continue for Trent?
Aditya Arora: The stock has entered a very overbought zone from a technical point of view and it should also be noted that we have recently initiated a short-term view on this market. We are still quite bearish on this market and there is scope for a temporary and price correction in this market. Therefore, the view is not bullish at this time.