Traders should lighten up their long positions as well as the evidence from Nasdaq suggest that the tech bubble is busted and the peak is behind us, Umesh Mehta, Head of Research, Samco Group, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
A) The Nifty’s euphoria came to an end on Monday after the index fell 3.35 percent from its highs. Such wide-ranging days have been historically marked as turning points for the market.And, it was indeed the high levels of optimism, the extremely overbought market levels, and the heavy buying or herd mentality by FPIs which led to this turning point on D-Street -- although the week’s fall might have been attributed by certain media reports to the Indo-Sino stand-off the real reason is the excesses in the valuations.Indian markets have also largely mirrored US markets and Friday’s sell-off can be attributed to the weakness in the global peers.Q) Which are the important levels which one should track in the coming week? Any data point/meeting to watch out for?
A) The Nifty index along with global indices have started to weaken after remaining overbought for an extended period. The weakness could be confirmed with a break below the immediate support which is now placed at 11100.
A break below this immediate support will be very crucial. The Nifty’s immediate resistance is now placed at 11600.
The big drama is the US Presidential election campaign which will be the talk of the town for the next few weeks. The ups and downs in the Candidate’s fortune may impact stock markets to some extent.
Q) In terms of sectors some action was seen in IT index followed by Consumption. Selling pressure was seen in Banking as well as Realty space. What is weighing on these two sectors – is it just profit taking or moratorium overhang on the banking space?
A) Currently, the fight between borrowers and banks seems to be reaching its pinnacle. On the basis of media reports, it looks like the Supreme Court is inclined to give some relief to borrowers for the hardships they have faced due to the closure of businesses in lockdown.
Eventually, banks would be asked to pay the price which may create a cascading effect on the entire banking sector. This pressure could have caused the crack in the index. On the other hand, the Realty sector witnessed profit booking after there was a sharp rally last week due to the relief on stamp duty.
Q) What is your take on the margin requirement imposed by SEBI? What is the kind of responses you are seeing from investors?
A) Any new system will have its own set of resistances, that's natural, but given the current ongoing pandemic, things are a lot harder for brokers to implement the same.
However, tech-driven discount brokers like Samco have implemented such changes efficiently due to the fact that they have a large number of in-house IT professionals who not only take care of regulatory requirements but also drive constant innovation to deliver value-added services to customers at competitive costs.
Q) Top 3-5 short term trading ideas for the next 3-4 weeks?
A) We remain bullish on the Auto sector. With talks around potential GST cuts and scrappage policy if introduced, could be a big positive in the industry especially the commercial vehicle space.
However, Indian markets may have largely discounted all good factors given the economy has almost opened up. Investors are advised to book profits in general and increase cash in their portfolio.
Traders should lighten up their long positions as well as the evidence from Nasdaq suggest that the tech bubble is busted and the peak is behind us.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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