Short covering bounce, still lacks conviction

CNBC-TV18's, Head Market Research Analyst, Anuj Singhal :Thursday was definitely a positive more for the markets, albeit it came on not so convincing market breadth. What would give bulls heart is the positive tick by FIIs in both the cash and the futures market, the not so obscene inflation number and of course a further cool down in crude.

FIIs bought over USD 500 million in Nifty futures in a sure sign of short covering as the market looked terribly oversold. Now, it’s interesting to see till how far will this short covering take Nifty to. We are close to an immediate hump in terms of 4000 levels and once that’s crossed, traders would set next targets.

Market breadth wasn’t as strong as you would have hoped on a 500 point upmove day but then the sentiment on the mid and small cap side is absolutely bearish, so that’s explicable.

One needs to beware of taking large positions in some of the stocks, which give a technical bounce as most of these would be purely technical in nature and if the tide turns back, these stocks can make newer lows. IT stocks saw some short covering yesterday, led by TCS and that may well continue. On the other hand there was some buying in infra stocks but a follow up is needed in these stocks.

Stock to watch - LIC Hsg Fin. Good OI buildup backed by price move.

DISCLAIMER: The author is not allowed to trade in equity markets including Futures and Options. His only exposure to capital markets is via shares of TV18 and Network18 granted to him as ESOPs by the company and investments in some long-term mutual funds.