Be cautious on midcaps; capital goods, real estate best bets: Goldilocks Premium Research

“Our working target for the near-term is about 17,500 and long-term target which we have been maintaining since Diwali of last year is about 18,000,” he said.

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“In the last 15 months, we have more than doubled in value without a 10 percent correction. This is something unique that is happening, the markets are adjusting beautifully to the news flow and to the liquidity that is coming into the system. The fact that we are seeing market cap rotation and sector rotation from time to time is fuelling this rally,” he added.

According to Shah, capital goods and real estate are the best bets for the coming months.

Real estate is where metals was a year back. He believes real estate will be one of the star performers in the next six-twelve months, irrespective of the Nifty behaviour.

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“We have been liking real estate for the last couple of months, recommended every possible stock in the sector in the last two months and it is a breakout from a 10-year pattern. So, this is not going to end in a hurry. I do believe that the real estate index on the NSE could see a level of 475 even 510, which was last seen in 2010,” he explained.

The potential of the capital goods sector is underestimated, he further mentioned.

“We underestimate what Larsen and Toubro (L&T) can do, these are bellwether names, quality stocks, and India story is here to stay. Capital goods, after being in a range for 10 years, has seen a breakout. So there, I see a lot of stocks appreciating anywhere between 20 percent and 100 percent over the next six-twelve months timeframe,” Shah said.

Shah is recommending clients to be a little cautious on midcaps. “I am not saying that the fall is coming immediately but over the next two to two-and-a-half months, one big dip is coming into the midcaps and smallcaps. Therefore, at this point I would rather be positioned in the largecaps. We are also recommending deploying a significant amount of capital into gold and silver, where I feel a megatrend is starting off,” he said.

According to him, the IT index will now start to become a market performer, whereas the banks will start to take leadership.

Also Read: Indian equity market upbeat; bullish on IT, consumer stocks: Motilal Oswal Financial Services

“If I look at the Bank Nifty’s standalone chart and if I compare it with IT index, I think a wave of outperformance is coming in the Bank Nifty and you have seen stocks like ICICI Bank, Axis Bank and HDFC Bank lead in the recent past. The shift is coming, a lot of people are still overweight on IT but this might just be a good time to look into those pockets, which haven’t done so well in the last three months, I think the best opportunities are coming in there,” he explained.

On Reliance Industries Ltd (RIL), he said, “It is good that it is going through its consolidation patches from time-to-time. It remains a part of our model portfolio for almost 12 months now and we like the setup. I do believe that this stock could be moving towards Rs 2,750 and at some point of time, even Rs 3,000. It is here to outperform and there is far greater upside.”

His top pick in the auto sector is Bajaj Auto. “I think this stock can easily go back to lifetime highs and beyond,” Shah said.

He wants to stay away from metals, pharmaceuticals. “They are not going to do anything special and it is better look at the other names which are exhibiting relative strength,” he stated.