Experts guide on how to trade directionless markets

Excerpts from Closing Bell on CNBC-TV18 Watch the full show » RELATED NEWS Nifty closes flat with +ve bias; Infy, RIL, ICICI Bk lead Nifty may correct to 5186-5140 levels: Angel Securities Liquidity may take Nifty to 5400-5500: Quantum Sec Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

The markets consolidated after two days of gains. The Nifty ended the day at 5,245, up 14 points, while the Sensex shut shop at 17,519, up 29 points. The Midcap index closed flat. Volumes dipped in trade. The turnover for the day was a little less than Rs 93,000 crore while the advance-decline ratio was 4:5 in favour of declines.

 

Despite the benchmark indices chugging to past highs, experts are cautious with some even advising an exit at current levels.

 

Investors are turning cautious on concerns over valuations, said Sanjeev Prasad, Executive Director and Co-Head, Kotak Institutional Equities. "Investors are cutting down on the more aggressive positions in the portfolio. I don't think people are sitting on a lot of cash at this point of time. That's a risk over here. Unless you see earnings upgrades, I am not very comfortable about the valuations of this market. You have to have 200 bps hike as far as policy rates are concerned through the year. It is a pretty big number and that is going to have some implications on some sectors as far as growth is concerned."

 

Prasad advises investors to buy on dips and sell on rallies. "At this juncture, you got some more headwinds around, 5,280-5,350 levels. It is very difficult to say whether we got more room left. If you are invested, remain invested." He expects portfolio churning ahead. "Going forward, you would see some amount of sector/stock rotation taking place."

 

Technical Analyst Ashwani Gujral sees two crucial zones on the Nifty. "One is 4,650 to 4,800 on the downside and 5,150 to about 5,300 on the upside. This is a zone where you take some profits." He added that this band is very important right now. "We can either turn back from here or go further and break out of this trading range. This is a point where you take half your profits and keep positions light till the market decides which way it is going."

 

Amit Khurana, Head of Research at Mangal Keshav Securities, too feels the Nifty could correct a bit from here and then get to breakout of the 5,300 range or it could just breakout in the current move itself. "However, sustenance above 5,300 will be very challenging, considering that most valuations become stretched there. We are already seeing some of the stocks and sectors beginning to show signs of tiredness."

 

But Ambareesh Baliga of Karvy Stock Broking is not that perturbed. "We should slowly inch towards 5,300 levels and post that take a decisive move either ways."