Broking firm ICICIdirect gave following rationale and strategy to go long on Bajaj Auto and short Nifty:

Parameters:

Current Price Ratio (Nifty /Bajaj Auto): 3.28
Target: 2.95
Stop loss: 3.44

Rationale:

The auto space, especially the two wheeler segment, has remained immune to the current market move. Stocks like Hero MotoCorp and Bajaj Auto outperformed the markets significantly in the recent market fall. Fresh buying interest has emerged in these stocks of late. Both Hero MotoCorp and Bajaj Auto are moving towards their life-time high levels gradually and have been witnessing buying momentum in the last few sessions. Looking at the formation of the long build up, we believe Bajaj Auto may witness further upsides in the near term.

Bajaj Auto futures witnessed addition of almost 10% open interest in the recent up move post its quarterly results. We believe the stock will remain buoyant in the days to come and may outperform the Nifty.

Moreover, the stock ATM and OTM Call options are witnessing closure of open interest with upsides in the underlying. The short covering trend among these positions is clearly evident as Bajaj Auto is heading towards its life-time high levels.

The recent declines in the Nifty have primarily been triggered by the technology and FMCG space while interest rate sensitive stocks belonging to the core economy have witnessed renewed buying interest. Despite the Bank Nifty trading at life-time high levels, the Nifty is still below 8000 levels. Hence, we believe stocks like Bajaj Auto may outperform the Nifty in the ongoing uptrend.

Since July 2014, the price ratio of the Nifty/Bajaj Auto has been finding support at the downward trending line. This trend line has been breached in the last couple of sessions and is likely to go down further towards 2.95 in favour of Bajaj Auto vis-à-vis the Nifty.

Strategy: Buy Bajaj Auto November future at Rs 2,420-2,440 and sell Nifty November future at 7,960-7,980.