There are definite signs of the markets taking a breather this week and we expect minor corrections across all sectors.
Just like last week, we would like to reiterate that valuations are quite stretched and investors would be wise to mitigate the risk of a correction by reducing allocation towards equities.
Nifty & Bank Nifty
Nifty could experience some weakness if it breaks its support at 17250, until it does it could remain sideways or mildly bullish.
We expect Bank Nifty on the other hand to really consolidate and remain mildly bearish on it in the coming week.
We continue to remain bullish on the FMCG index as all companies within this sector have always provided the much-needed cushion to the markets when valuations seem stretched. Year 2000 and 2008 are testimony to this fact. We wouldn’t be surprised if this index is the top performing one this financial year.
The technology sector seems very stretched while the burns of 2000-2001 have healed but the scars continue to remind me that, investing in technology is a double edged sword and as investors we should not overstay our welcome.
In the coming week, we expect some correction between 3-5 percent in this sector and would make a case to investors to reduce exposure towards this index.
Nifty Pharma & Auto
We continue to remain bearish on both the Pharma & Auto sectors and are waiting for some momentum to believe that bullish sentiment has returned.
We expect this index to retain a bullish sentiment in the coming week and are of the opinion that the current few weeks this sentiment shall remain.
Nifty current month future closed with a discount of 7 points to its spot. Next month's future is trading at a premium of around 30 points.
We saw open interest addition of nearly 4.6% in Nifty and considering the price action it clearly hints strong selling during the week.
Top five recommendations
M&MFIN is trading around its previous swing high. Previous swing high is important level of resistance and a good buying opportunity might present itself above this resistance
BALKRISIND is trading near its 20 day moving average & also it is taking support of previous resistance level which indicates bullishness in the stock. Above 2,570 level good opportunity to go long.
DLF is trading in the small range between 427 and 397 . After every good rally there are some consolidation or pull back & again there are chances of rally in the stock. Any sustainable move above 425 level will bring momentum.
DRREDDY is trading around its previous swing high level. On the daily chart above 4990 level a good buying opportunity could present itself
M&M had taken the support from the previous resistance level. Above 843 level good opportunity to go long.
(Gaurav Udani is Founder & CEO of Thincredblu Securities. He tweets @Udanii)
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