The Nifty 50 recorded a big bearish candle this week, which is a sign of market trading at overbought levels in the short-term and loss of control by the bulls.
With the US election day just being three weeks away, global markets have slipped into a wait and watch mode, and Indian bourses are likely to remain range-bound at least till the US elections, Umesh Mehta, Head of Research, Samco Group, said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:Q) Nifty breaks below 10-Day winning streak but then picked up momentum on Friday. What led to the price action on D-Street?
A) Market witnessed a sharp sell-off mid-week following global peers, renewed fear of rising COVID-19 cases, and higher restrictions in advanced countries.
With the US election Day just being three weeks away, global markets have slipped into a wait and watch mode.
India too followed other indices but on Friday it picked up momentum mainly because of traction in metal and realty indices. However, Indian bourses are likely to remain range-bound at least until the US elections.Q) At a time when Nifty50 was surpassing crucial resistance levels, small & midcaps underperformed in the week gone by. Are investors booking profits after the recent rally seen in the broader market?
A) Due to the lack of uncertainty in the strength of the economic recovery, market participants are staying safe and are preferring large companies with a higher certainty of earnings over small and midcaps.
In fact, domestic institutional investors (DIIs) continued their selling spree in the second week of October. The market is likely to be stock-specific and experience sector rotations.
Therefore, investors should adopt a buy-on-dips strategy only in quality names.Q) Sectorally, Banks and IT stocks hogged the limelight. What led to the price action in those sectors?
A) In the week gone by, banks hogged the limelight as the Street awaited Supreme Court’s hearing on petitions seeking interest waiver during the loan moratorium period.
The Supreme Court asked the central government to implement its decision to waive “interest on interest" at the earliest and this kept the financial space on the edge.
Meanwhile, IT was in focus because of their quarterly results. TCS kickstarted the tech pack with stellar guidance and performance. Other IT bigwigs followed suit and delivered strong margins.
Because of the upmove, IT stocks saw some correction near the end of the week with the Nifty IT index correcting by almost 2 percent.Q) Which are the important levels or events that investors should watch out for in the coming week?
A) The Nifty 50 recorded a big bearish candle this week, which is a sign of market trading at overbought levels in the short-term and loss of control by the bulls.
The index has been trading with heavy gains and is struggling to hold 11900 levels. Hence, 11850/11900 is likely to remain an important resistance zone in the short term.
However, on the downside 11200 is an important support as it coincides with the channel support on the weekly chart.Q) What would be your advise to Robinhood investors? D-St already touched highest Mcap of about Rs 161 lakh cr while Sensex, and Nifty are still short of hitting record highs. This might have created the environment of a pause or a fall in the near term?
A) Given that stock prices have already rallied in the recent past, selling pressure is likely to emerge in the struggling sectors.
The market may witness a sectoral rotation and is likely to remain range-bound. Profit booking may emerge at higher levels.
Overbought stocks should be completely avoided and oversold stocks can be considered for a medium-term upside by traders.
Investors on the other hand are advised to remain patient and wait for a serious correction before investing.Q) Your top ideas for the short term?
A) The Nifty Pharma has been consolidating for the past 2 months after a steady uptrend. We believe that Pharma stocks will resume their rally soon.
Some profit booking is expected in IT stocks in the short term, while there could be an inflow of money towards pharma players.
There can also be selling pressure in select pockets especially hotels, travel and tourism which are yet to recover because of their inherent disadvantage to operating in lockdowns, and hence their results are expected to be muted.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.