Nifty ends above 5500: Where is it heading?

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Nifty ends above 5500: Where is it heading?

The benchmark Nifty closed at a 31-month high led by huge buying in private financial, cement and FMCG companies' shares.

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The benchmark Nifty closed at a 31-month high led by huge buying in private financial, cement and FMCG companies' shares and in stocks like Reliance Industries , L&T , JSPL and Hindalco . The index crossed another milestone of 5,500 and added more than 125 points in two days of trade. It had ended at 5705.30 on January 18, 2008.

The 30-share BSE Sensex closed at 18,454.94, up 197.82 points or 1.08% and the 50-share NSE Nifty rose 61.05 points or 1.11% to settle at 5,540.20. The broader indices like BSE Midcap and Smallcap indices gained 0.8-0.9%.

Where is it heading?

Sanjiv Patni, President and Head-Institutional Equities, Prabhudas Lilladher says that the Nifty is poised for another upmove. According to Patni, Nifty is likely to test 5500 to 5800 in the immediate term.

He explains, "I think once we have come out of the 5,400-5,500 kind of a range that it was moving in, 5,000 to 5,500 kind of range it was moving in we have not broken that. I would say it would stabilise at a higher range."

According to Ashwani Gujral, Technical Analyst 5,550 is the top of that channel that we have been moving in so reaching there will be a bit steep. However Gujral sees potential in the market as financials are in a momentum. So he has advised not to book profits now.

"Being with those financials is much better than betting on the entire market because the large heavyweights Reliance, ONGC etc are still not participating so while it would put a trailing stop of about 5,400-5,430," Gujral adds.

However, Patni thinks that we have to wait and watch if this is just a trap or is it really a breakout. "I think the overall flows continue to be very strong and that is what is driving this," Patni says.

Radhika Gupta, Director, Forefront Capital Management feels that though we are in the middle of a big bull run, we grind up slowly. "We grinded up to 5400, we grinded up to 5500 so I think we will see that over the next 3 to 6 months," he warns.

According to Gupta PSU banks, powers, autos which have had a very strong run and auto ancillaries which should benefit from the growth in autos and to a certain extent pharmaceuticals should carry it a little further. Beside she is also betting on consumer durables and FMCG from the midcap space.

On metal and cement sector

Patni says that the fundamental in the cement companies is not very great. However simultaneously there is also some increase in prices.

"We have seen today some increase in prices in western region. I think that has what has propelled some of the bulls to come out and take exposure to the sector. In general I think these were the two sectors you really had some values remaining. I think they are playing catch up now with the overall market," Patni explains further.

Maintaining underweight on cement sector, Patni says that the sector is going to be facing a lot of capacity creation and the demand is not actually going to grow as fast as the capacity would grow.

Patni elaborates that overall the situation on regional basis is different for different companies. He adds in the sector northern dynamics are much better than the southern or western dynamics.

His top pick in the sector is Shree Cement .